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re: Trump directs cash rich Fannie/Freddie to buy $200B in mortgage bonds to drive down rates
Posted on 1/8/26 at 5:17 pm to The Pirate King
Posted on 1/8/26 at 5:17 pm to The Pirate King
quote:
It accomplishes lowering prices without destroying equity.
Wrong. It lowers monthly notes, which actually raises prices as demand goes up.
Again, we have been doing this dance since 2008. This is just a creative way to do it without printing new money.
This post was edited on 1/8/26 at 5:19 pm
1
Posted on 1/8/26 at 5:30 pm to stout
He's serving literal shite on a shingle and he knows it. All this will do is drive up prices like what happened during Covid in 2020 when rates went down to 3.5% which unleashed a bidding war on existing SFH. Plus having Fannie or Freddie to buy up bonds even 200B isn't going to do it.
Posted on 1/8/26 at 5:32 pm to Kjnstkmn
quote:.
Trump directs cash rich Fannie/Freddie to buy $200B in mortgage bonds to drive down rates
In other news, heroin dealers have been on a tear lately giving out free bags
Posted on 1/8/26 at 5:33 pm to KiwiHead
quote:
Plus having Fannie or Freddie to buy up bonds even 200B isn't going to do it.
He understands this would only provide temporary downward pressure on rates. The intent is to buy time until Powell can be replaced by a Fed chair more willing to lower rates faster. Ultimately, though, none of it matters unless the 10-year yield moves in tandem with the Fed.
This post was edited on 1/8/26 at 5:34 pm
Posted on 1/8/26 at 6:03 pm to hawkeye007
quote:
Yeah we had the fed reserve do this for 10yrs. It got us into the mess we are in now.
This doesn’t increase the money supply and shouldn’t cause unnatural inflation.
Posted on 1/8/26 at 6:09 pm to Big Scrub TX
quote:
But it doesn't lower prices. It raises them.
I should have said "cost" instead of price. The prices of the houses should stay the same or go up, the amount people pay overall goes down with the interest rate. You'd be shocked at how much of your monthly mortgage payment is principal versus interest.
Posted on 1/8/26 at 6:11 pm to SDVTiger
Explain how Fannie’s/Freddie’s purchase of already issued mortgage bonds cause market interest rates to decrease.
As stout has correctly said above, the result of that purchase does not change the money supply.
So, why would rates decrease?
As stout has correctly said above, the result of that purchase does not change the money supply.
So, why would rates decrease?
Posted on 1/8/26 at 6:40 pm to hawkeye007
quote:
21yrs in the mortgage business taught me that. Qua-native easing. Started after the crash of 2008. It’s what kept rates from going to 10%. So what that did was artificially inflate the housing market with cheap rates for 10yrs. So what happened? Prices went up, fast forward to 25 and lowering interest rates will continue to raise home prices . Do we really need home prices higher in the current environment?
There is def a paradox that leads to back to supply and demand.
Lowering interest rates would increase the demand because more people will be looking to buy.
But when interest rates rise, you are also more reluctant to sell if you currently have a good rate. So you would have less people looking but not an increase in supply.
Posted on 1/8/26 at 6:45 pm to LSURussian
Bond prices go up due to demand, which lowers yields
Posted on 1/8/26 at 6:53 pm to stout
quote:Only on the bonds that are in demand to be purchased. Yields on existing fixed rate mortgage bonds don't change.
Bond prices go up due to demand, which lowers yields
F/F buying already issued mortgage bonds does not change the rates of 10 year treasuries which is what 30 year mortgages are priced off of.
And it sure won't change the Fed funds overnight rates.
Posted on 1/8/26 at 6:59 pm to LSURussian
quote:
Only on the bonds that are in demand to be purchased. Yields on existing fixed rate mortgage bonds don't change.
F/F buying already issued mortgage bonds does not change the rates of 10 year treasuries which is what 30 year mortgages are priced off of
The effect will probably be minimal, but the hope is that it tightens mortgage spreads and allows lenders to price new loans a bit lower.
Posted on 1/8/26 at 7:08 pm to stout
quote:Nah, if 10 year yields don't change there is no financial incentive for mortgage originators to price their loan yields lower.
allows lenders to price new loans a bit lower.
They could always just buy 10 year treasuries rather than accept lower mortgage rates on their new originations.
Posted on 1/8/26 at 7:09 pm to Kjnstkmn
My vote at work!!
Posted on 1/8/26 at 7:13 pm to LSURussian
quote:
They could always just buy 10 year treasuries rather than accept lower mortgage rates on their new originations.
Good point
Going to look silly if Fannie and Freddie spend $200 billion with no effect on rates
Posted on 1/8/26 at 7:13 pm to oldskule
Posted on 1/8/26 at 7:19 pm to Kjnstkmn
quote:
buy $200 BILLION in mortgage bonds, which is set to immediately lower mortgage rates.
Posted on 1/8/26 at 7:32 pm to LSURussian
quote:
Explain how Fannie’s/Freddie’s purchase of already issued mortgage bonds cause market interest rates to decrease.
It will increase the demand for bonds. Pushes the price up yields down
Frees up capital for more loans and creates a more liquid finance market
Bonds rallied by 28bps after the announcement so rates will be better tomorroww
We will see what the BLS does
Posted on 1/8/26 at 8:04 pm to SDVTiger
quote:Market interest rates don’t go down because existing bonds in the market get bought unless it’s the Fed doing the buying because that would increase the money supply.
Pushes the price up yields down
Freddie/Fannie swapping its cash on its balance sheet for bonds doesn’t change the money supply a single penny.
Your buzz word generator has failed you.
quote:
Frees up capital for more loans and creates a more liquid finance market
Total goobledegook. No “capital” is freed up. The market’s liquidity remains unchanged. No balance sheets get larger or smaller. More trite buzz words on your part.
Posted on 1/8/26 at 8:20 pm to LSURussian
Not shocking a moron who is never right disagrees
Posted on 1/8/26 at 8:30 pm to KosmoCramer
quote:
quote:
Yeah we had the fed reserve do this for 10yrs. It got us into the mess we are in now.
Wasnt the issue the quality of the bonds (sub-prime) and not the act itself?
After the subprime crisis we had 15 years of historically low rates that climaxed with the stupid low COVID era rates due to the treasury market.
People got the golden handcuffs (low rates) and for the most part have chosen not to move because their debt service will increase dramatically with a new mortgage, even if they borrow the same amount as their existing principal.
Cheap money has consequences.
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