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New Fed program may help CUs members says CUNA
WASHINGTON (11/26/08)—A new program unveiled by the Federal Reserve Board and U.S. Treasury Tuesday could be useful to credit unions by invigorating the market for mortgage-backed securities, according to Credit Union National Association President/CEO Dan Mica. The program, announced Tuesday by the Fed, would make up to $500 billion available for the purchase of mortgage-backed securities over a period of “several quarters.” A Fed release said the program would also make up to $100 billion available for purchase of the government-sponsored enterprises’ (GSE’s) direct obligations. CUNA’s Mica welcomed the Fed’s announcement, saying it would be important news to some credit unions seeking an invigorated market for these assets now on their books. “We urge the Fed to include credit unions in this program as soon as possible,” Mica said. In its statement, the Fed pointed out that purchase of GSE direct obligations under the program will be conducted with the agency’s primary dealers through a series of competitive auctions, beginning next week. Purchases of the MBSs will be conducted by asset managers selected via a competitive process. More operational details of this program, the Fed said, will be provided “after consultation with market participants.” CUNA Vice President of Economics and Statistics Mike Schenk noted that the potential overall impact of the MBS-purchase program on the mortgage market is important to credit unions and their members because it should make mortgages more affordable. “The 30-year, fixed-rate mortgage has been priced 250-300 basis points over the 10-year Treasury recently, but historically that spread is normally 150-200 basis points,” Schenk said. He added, “The Fed plan should result in reducing the spread from its current high level to more normal levels allowing credit unions and other financial institutions to make loans with lower rates and improving affordability for purchasers.”
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