January 24, 2005 News Archive

Federal Reserve Issues Report on GSEs, Mortgage Rates, and Secondary Market Activities
The Federal Reserve issued a report that concluded that Fannie Mae's and Freddie Mac's portfolio purchases and issuance of mortgage-backed securities have negligible effects on mortgage rate spreads. The study also said that the purchases are not any more effective than securitization at reducing mortgage interest rate spreads. The report examined the 1998 liquidity crisis and found that government-sponsored enterprise portfolio purchases did little to influence interest rates paid by borrowers. However, the report did note that the mortgages held by the GSEs clearly benefit shareholders and also may benefit lenders and some homeowners. (PDF)