Warm_Paw

What Does the Fed's Statement Mean for Mortgage Rates?

The Fed's pretty smart.
They realize the real danger to these MBS's is everyone selling at once and creating a fire sale where value falls like a stone.
The banks are afraid to unwind these mortgages because that fire sale will wipe them out. This way the Fed gives the banks a reasonable price for their MBS's and the banks take a hit, but one they can live with.
The Fed soon gets the banks where they can lend money and home prices stabilize and normalize. The fed then unwinds the toxic assets in an orderly way, slowly over time and mitigates the damage of this situation.
What's really interesting is the value something is worth when there is little of it and the value something is worth when people want to rid themselves of it. It's disturbing to know the financial system of a country could be destroyed from a human emotion known as fear. Once confidence returns, people become reasonable again and see the value in property.