As everyone knows, the national mortgage market is changing quite rapidly – more this past year than in the past decade.

Last week, the Federal Reserve recently announced a plan to augment its balance sheet by pumping another $750 billion into purchasing more mortgage-backed securities, the bonds that directly dictate 30-year and 15-year fixed rate government and conventional mortgage interest rates.

This is in addition to $500 billion currently being used between January and June to drive interest rates down and help stimulate the economy. The Fed also announced the purchase of $200 billion in additional agency debt, and an increase in long-term Treasury bond purchases of $300 billion to boost improvements in private credit markets.

This announcement had a tremendous impact on the mortgage business: interest rates dropped by .5% overnight, creating an immediate influx of interest for clients looking to refinance loans.

The Federal Government is hoping that financiers will buy investments that the Government is backing with cash.  And because the government is providing the financing that allows this section of the market to work, it’s our hope that potential homebuyers (who are currently “on the fence”) will jump in and take advantage of this unprecedented development, as the Fed works to engineer buzz and confidence in the American housing market.

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