Treasury MBS Plan's Goal: A 4.5% 30-year FRM

In an attempt to spark a housing recovery the Treasury Department is working on a plan that ultimately could lead to a 4.5% 30-year fixed rate loan for consumers. According to combined news reports breaking Thursday morning, Treasury would be the ultimate buyer of mortgage-backed securities that yield 4.5%. Over the past two days 30-year 'A' paper loans were yielding just over 6%. The bonds would be backed by newly originated loans that would be used by homebuyers to purchase new or existing homes. The Department would buy guaranteed MBS from Fannie Mae or Freddie Mac. The loans would meet underwriting criteria of the two GSEs and the Federal Housing Administration. The idea is still in the planning stages and at press time Treasury officials were not commenting about the idea.