Fed Looks to unwind $2.7 trillion Mortgage Backed Securities may crash Housing Market

If you took out a mortgage over the last couple of years, there’s a good chance the holder of that loan is America’s central bank — a consequence of its monetary stimulus efforts throughout the pandemic.

Why it matters: The Fed will face a series of political and economic headaches as it attempts to move away from subsidizing home lending by shrinking its portfolio of mortgage-backed securities.

• The problem: Extracting itself from this market risks crashing the housing industry and creating intense political blowback for incurring financial losses.

By the numbers: Back in February 2020, the Fed owned $1.4 trillion in mortgage-backed securities, and the number was falling rapidly. But when the pandemic took hold, the central bank began a new round of bond purchases (known as “quantitative easing”), swelling that number to $2.7 trillion.

• The policy contributed to ultra-low mortgage rates that stimulated home buying and refinancing activity until recently.

www.axios.com/2022/05/18/fed-mortgage-portfolio

h/t Nexus-9