LOS ANGELES, CA — Feb. 12 (FreeRateUpdate.com) - In a new twist, Fannie Mae (FNM) and Freddie Mac (FRE) said Wednesday they’ll purchase most of $70 billion in delinquent home loans from investors out of pools of mortgage-backed securities. This is going to take place over the next few months and could temporarily offset any rise in mortgage rates we may have seen from the end of the Fed MBS purchase program.
The money investors recieve from Fannie and Freddie could be used to purchase mortgage-backed securities. You can imagine this is a big lift for MBS markets.
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That being said, more importantly mortgage-backed securities prices drive mortgage rates in the opposite direction, consider this a big help to keep mortgage rates low. In this act of Fannie and Freddie to the rescue of low mortgage rates the feared overnight increases in mortgage rates once the Fed ends their MBS purchase program in March are unlikely.
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