Commentary: Fed Chairman Bernanke and his fellow central bankers gave additional support to the near-term prospects for steady to lower mortgage interest rates by not only coming through with "Operation Twist" - but by announcing that they would use principal paydowns from their existing mortgage portfolio to reinvest in new agency eligible mortgage-backed securities. The Fed's move back into the mortgage securities market was not expected. Paydowns from the Fed's existing mortgage portfolio are estimated at approximately $20 billion per month at current interest rate levels. To put the Fed's new mortgage-backed security buying power into perspective -- the mortgage industry is creating new agency eligible securities at a pace of roughly $65 billion per month.
I personally can't help but wonder how long it will take before government "powers-that-be" notice that dramatically lower mortgage interest rates in an environment of super-tight underwriting guidelines, onerous government mandated compliance requirements, and an anemic job market is currently exerting about as much positive impact on housing sector growth as one would expect from an attempt to empty a swimming pool one teaspoon at a time. Lower mortgage interest rates are at least a positive start - but to be most effective -- much more meaningful and significant structural changes will be required.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
