I have heard the story that the Obama administration wants to bring 30 year fixed mortgage rates down to 4%. But I have not heard how they will do it.
The only way they really have of lowering rates is by buying Mortgage Backed Securities (MBS). But the Fed is already buying MBS, and they just increased the amount earmarked to buy them from $600B to $1Trillion. So, the only other way that I can see to get to 4% is for the government to set aside a big chunk of money, outside of Fannie Mae or Freddie Mac, and loan directly from that.
Problem is, they would not be able to sell the notes on the secondary market except at a loss, because the market is currently offering 4.75%-5.5% rates. So the government would have to set up a huge servicing platform for those notes.
And I am sure that would run smoothly.
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