The Government’s Mortgage Bailout Plan

FHA home loans just got a booster shot in the arm… The US Fed has just announced that it will inject $600 Billion into Mortgage Backed Securities, and they will also use $200 billion to defrost the consumer credit market.

Today’s announcement by the fed that it will purchase was a move that I had been screaming for months, ever since the initial talk of the first $300 Billion Bailout plan.

This decision by the Feds should increase credit, while reducing FHA home loan rates. Rates has already dropped dramatically today… So far as Mortgage Bonds are up 128 basis points and it looks like it might continue to get better.

Transcipts of this video included below

Today the treasury and the Federal Reserve are announcing a facility to finance the issuance of non-mortgage asset backed paper in order to support lending to consumers and small businesses, which is vital to our economy.

The consumer asset backed securities market is a source of liquidity to financial institutions to provide federally guaranteed small-business loans and consumer lending such as auto loans student loans and credit cards.

Issuance of AVS in these areas reach 240 billion in 2007 our credit markets stresses led to a steep decline in the third quarter of 2008 in the market essentially came to a halt in October as a result millions of Americans cannot find affordable financing for the basic credit needs and credit card rates are climbing, making it more expensive for families to finance everyday purchases.

This lack of affordable consumer credit undermines consumer spending as a result weakens our economy to address this need and support the return of consumer lending. The treasury will provide 20 billion of credit protection to the Federal Reserve in connection with its $200 billion term asset backed securities loan facility.

By providing liquidity to issuers of consumer asset backed paper the Federal Reserve facility will enable a broad range of institutions to step up their lending and enabling borrowers to have access to lower-cost consumer finance and small-business loans.

The facility may be expanded over time, and eligible asset classes may be expanded later to include other assets such as commercial mortgage-backed securities non-agency residential mortgage-backed securities rather asset classes.

Throughout this financial market term oil our focus has been to stabilize the system and support the lending that is vital to our economy. Toward that and we’ve taken steps to strengthen the capital position of our financial institutions to stabilize a system to enable them to increase lending to American consumers and businesses.

Similarly we’ve enacted to stabilize a GSE’s and to purchase GSE mortgage-backed securities. In order to increase the availability of affordable mortgage credit throughout our nation today initiative is to support small business and consumer finance market is similarly aimed at increasing the availability of affordable lending.

Today’s announcement by the Fed that it will purchase direct debt obligations of Fannie Mae Freddie Mac and the Federal Home Loan Banks and also mortgage-backed securities guaranteed by Fannie Freddie and Ginnie Mae underscores our support for the housing market.

Nothing is more important to getting through this housing correction in the availability of affordable mortgage finance. It will take time to work through the difficulties in a market in our economy and new challenges will continue to arise I and my regulatory colleagues are committed to using all the tools of our disposal to preserve the strength of our financial institutions and stabilize our financial markets to minimize the spill over into the rest of the economy.