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The Feds Owns A lot Of Property

Fed property owner

To keep interest rates low the fed have been backing a lot of mortgages, with the desire to tighten monetary policy they are looking at unloading moany of these loans which could be a problem. This may also push the economy into a recession as housing prices drop and essentially give homeowners less less equity.

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, Axios’ Neil Irwin writes.

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.

Axios Markets By Matt Phillips and Emily Peck · May 18, 2022