Are Private Investors Ready to Buy Mortgages Again?


Now that the Federal Reserve has ended its mortgage-backed asset buying spree, will private investors take up the slack? That's the multi-trillion dollar question that anyone interested in the housing market needs to know.

The Fed bought $1.25 trillion of mortgage backed securities in the last 15 months and Fannie and Freddie plan to buy $200 billion more of delinquent loans to free up investor money. But without private investors stepping up, we could see mortgage interest rates back up at 6 percent or higher within six months to a year.

At least one private investor group signaled it is ready to test the waters, while others are using the occasion to press for reforms.

Redwood Trust plans to offer a $200 million sale of mortgage securities as early as next week. That would mark the first sale in more than two years of private-label securities comprised of new home mortgages underwritten without any government backing.