Fed Will Continue to Support MBS Market If Needed

The Federal Reserve is prepared to act as a backstop for the mortgage market after it officially ends its MBS purchase program on March 31, according to New York Fed Bank President William Dudley. The Fed is on track to complete its planned purchases of $1.25 trillion of Fannie Mae, Freddie Mac and Ginnie Mae MBS at the end of this quarter. But Mr. Dudley told the Associated Press that the Fed is not on "automated pilot" and will restart MBS purchases if mortgage rates spike. "If there is a sharp turn in the road," Mr. Dudley said, the Fed will intervene. Wall Street mortgage experts seem divided on how the market will react when the Fed stops its MBS purchase program. The Fed bank president expects it will be orderly since the central bank has telegraphed its intentions well in advance of the March 31 cut off.