What result should we expect from the government’s withdrawal of mortgage backing?

The currently running program in which the Federal Reserve is backing mortgage-backed securities has been suppressing the interest rate on mortgages for the past year to help shore up the housing market so that it can also help the economy. to recover from the current economic turmoil that we have. been experimenting across the country.

The Fed’s program has helped many homebuyers purchase affordable mortgage rates, many of them entering the market for the first time; Other homeowners have benefited from the program by refinancing their home loans at rates much lower than previously available. Many homeowners who managed to refinance their homes at the lowest interest rate found that their financial situation became more manageable as a result of sticking with a reasonable and reasonable mortgage instead of the rates they had been paying.

It is fairly indisputable that the Fed’s program has helped the housing market tremendously over the past year, but what is in dispute is whether the program should end on March 31, as planned. The program is slated to end this spring because it is expensive and the government is concerned that using it to prop up the market for too long will ultimately be detrimental to the industry. The National Association of Realtors (NAR) asserts, along with some other industry groups, that the abrupt expiration of the program could result in an interest rate hike and a consequent halt to the recovery in the housing market.

While there is a number of speculations as to what the completion of this program will bring, as well as the other government program to help homeowners modify their mortgages, it is difficult to be sure what the results will be until the programs have ended. and the industry acclimates to change.

It seems quite likely that the weeks leading up to the end of the programs will show an increase in home sales as buyers rush to complete their closings before the programs end; But whether the market stagnates after that point or not, nobody knows. If the government has managed to convince investors that mortgage-backed securities are safe to buy back, then there may not be much rebound in the near future for the housing industry.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402996.html?wpisrc=nl_pmheadline