How the Fed’s MBS Holdings Stimulate Housing

first_img Share 1Save Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Tagged with: Federal Reserve Homes HOUSING Loan MBS New York Fed Premium Prepayment in Daily Dose, Featured, News, Secondary Market Home / Daily Dose / How the Fed’s MBS Holdings Stimulate Housing How the Fed’s MBS Holdings Stimulate Housing  Print This Post Servicers Navigate the Post-Pandemic World 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days ago About Author: Krista Franks Brock August 13, 2018 3,066 Views Servicers Navigate the Post-Pandemic World 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Demand Propels Home Prices Upward 2 days agocenter_img Data Provider Black Knight to Acquire Top of Mind 2 days ago Demand Propels Home Prices Upward 2 days ago The economic impact of the Federal Reserve’s mortgage-backed securities (MBS) holdings are comparable to its Treasury securities holdings, except for one main difference. MBS, unlike Treasury securities, are subject to prepayment risk. For this reason, the Fed “can lower the amount of such risk that the market must hold, which could lower the cost of housing, favoring that sector of the economy,” according to a post on the Federal Reserve Bank of New York’s blog. Titled, “How Do the Fed’s MBS Holdings Affect the Economy,” the post said that in general, the Federal Reserve affects the economy by driving certain behaviors through interest rates. “Higher interest rates motivate more saving and less borrowing and consumption today, while lower interest rates have the opposite effect,” explained Antoine Martin, an SVP of research and statistics, and Sam Schulhover-Wohl, a Senior Economist and Research Advisor at the New York Fed. The authors pointed out that the housing sector is particularly susceptible to changes in interest rates, more so than much of the larger economy. “A cut in interest rates tends to shift the mix of aggregate spending toward housing, while a rise in rates tends to shift the mix of spending away from housing,” they wrote. When it comes to MBS purchases, the impact overall is often to lower longer-term interest rates, especially when short-term rates are already low. “This impact is generally like the impact of holding longer-term Treasury securities,” according to the blog post. However, the Fed did use MBS purchases specifically to support and stimulate the housing market after the housing crisis in 2008. Some may view the Fed’s actions in the market negatively, perhaps as “distortions away from an efficient, ‘laissez-faire’ allocation,” but Martin and Schulhofer-Wohl defended the Fed’s post-crisis actions saying, “But cross-sectional effects are not always bad; if the market is already distorted by liquidity constraints, information asymmetries, and other frictions, then the cross-sectional effects of policy could help remedy those distortions and improve overall outcomes.” MBS purchases offer a more direct stimulus to the housing market than the broader economy because of prepayment risk, the blog post explained. While investors, of course, “demand a risk premium” to compensate for prepayment risks, the Fed researchers explained that “when the Fed holds MBS, it removes some prepayment risk from the market, reducing the prepayment risk premium.” In other words, mortgage rates, and thus the cost of owning a home, will go down. The Best Markets For Residential Property Investors 2 days ago The Week Ahead: Nearing the Forbearance Exit 2 days ago The Best Markets For Residential Property Investors 2 days ago Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia. Previous: PHH Servicer Ratings Rise Next: Courts Address Condo Laws, But Questions Remain Subscribe Federal Reserve Homes HOUSING Loan MBS New York Fed Premium Prepayment 2018-08-13 Krista Franks Brock Sign up for DS News Daily Related Articleslast_img read more

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MBB : Living in limbo: Former SU players stuck waiting for NBA lockout to end

first_img Comments On a typical game day, Andy Rautins woke up at around 8:30 a.m. and jumped on his elliptical in his New York City apartment. The New York Knicks guard then left his place in the afternoon to get to Madison Square Garden for shootaround and an intense pregame workout.After his workout, he jumped on a bike until it was game time. The Knicks played whatever team came to MSG that night in front of raucous crowd. Win or lose, the players earned their paycheck.‘That’s our life,’ Rautins said. ‘That’s what we enjoy doing. It is a long season of 82 games. It does get a little repetitious at times, but you know it’s what we love to do, and I don’t think we’d rather be doing anything else.’But with the NBA lockout still ongoing, Rautins and six other former Syracuse players have been forced to deviate from their everyday schedules. As of Tuesday, the NBA formally told all teams games were canceled through Dec. 15. The players union disbanded, and the players filed a class-action antitrust lawsuit against the league.Without a season at this point, the players have had to search for other options to play basketball. Some have traveled the country, playing in exhibitions games. Others who weren’t signed before the lockout have gone overseas. For many of them, the lockout even brought them back to their college roots to keep playing the game.AdvertisementThis is placeholder textRautins is currently in Los Angeles, working out with professional players like Blake Griffin, Landry Fields, Corey Maggette, O.J. Mayo and Darren Collison, among others.The former Syracuse guard said there is a hotbed of pros in LA at this time and scrimmaging against each other is something that takes place on a daily basis. And while the games are meaningless, everyone competes at a high level.‘These guys are all stars in their own right,’ Rautins said. ‘They’re great players. They’ve been in the league for a long time, so it’s a great learning experience and a great way to stay in shape and on top of your form.’Rautins said other Syracuse guys like Wes Johnson are traveling around the country and playing in pro-am or charity games.Former SU star Carmelo Anthony recently announced he plans to host an all-star charity event in the Meadowlands’ Izod Center, according to an Oct. 20 New York Post article. Some stars already committed to participate in the game include Lebron James, Amar’e Stoudemire, Dwyane Wade and Chris Paul, according to the article.Although most SU players are in different cities at this point, many of them were right in Syracuse, using the Carmelo K. Anthony Basketball Center as a home base for summer workouts.Rautins, along with former players Johnson, Jonny Flynn, Eric Devendorf, Demetris Nichols and Terrence Roberts, scrimmaged with current Syracuse players almost every day in the summer. Rather than training with their NBA teammates, they were training with the current Orange roster.Current SU forward James Southerland said it made him feel like he was a freshman again with those guys around playing pickup games. And although Southerland is now a junior, he knows he still picked things up from the former SU players.‘Even when we’re just playing pickup, they were always teaching us things,’ Southerland said. ‘Wes would always tell me how to cover man-to-man, Andy always telling me keep staying low, running through screens and just making sure you’re shot always falls. They always go hard, and that shows you they’re a difference between the level in college and the NBA.’Freshman Michael Carter-Williams said Johnson and Nichols gave him some advice while they were in Syracuse during the summer.After being a star in high school, he comes off the bench for teammates Scoop Jardine and Brandon Triche this season. He said he was better prepared for this year because of their tutelage.‘Every day I think of what they told me because they made it, and I just want to make it just like them,’ Carter-Williams said.For some former players competing in the NBA Development League or overseas, the lockout hasn’t affected their ability to continue to play professionally.Devendorf was recently drafted by the Idaho Stampede of the NBADL, which is not affected by the lockout. Devendorf is currently preparing for training camp and said though he might not be playing on the biggest stage, it is comforting to know he is playing in some organized league.‘It feels good,’ Devendorf said. ‘I’m ready to play. I’m ready to get going. I know those guys feel the same way, so I’m just happy that I have the opportunity to play somewhere.’For former players Arinze Onuaku, Roberts, Nichols and Darryl Watkins, that opportunity is overseas, associate head coach Bernie Fine said. Rick Jackson, who was not drafted by an NBA team in April, is also playing in Europe.Rautins doesn’t consider that a viable option just yet, though. He said to consider going overseas, the entire season would have to be canceled.And with how things are going, that outcome looks more and more likely.Michael Veley, chair of the SU sport management department, said on Monday that he doesn’t see the players or the owners budging in their demands. As a result, he said he wouldn’t be shocked to see the season canceled.Sport management professor Rick Burton agrees. Because the players union decertified, the time frame to get a deal done will be pushed back.‘Going with the most up-to-date information, if this says to me the players have rejected the deal, my sense is we’re not going to have basketball for a while,’ Burton said Monday.With each day the lockout continues — currently at 140 days — frustration grows among players who just want to get on the court.For Rautins, he just wants to get back to his routine from a year ago with the Knicks. Though he essentially keeps the same schedule out in LA, he said two major things are missing from those pickup games.There are no fans in the bleachers. And there is no paycheck waiting for him.‘It’s tough. It’s really frustrating,’ Rautins said. ‘Everybody’s really opinionated. Everybody got their views. Is it the owners’ fault, is it the players’ fault? Who’s being more stubborn? But at the end of the day, we just want to play.’[email protected] Published on November 16, 2011 at 12:00 pmcenter_img Facebook Twitter Google+last_img read more

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