Tag Archive for Mortgage-Backed Securities

Mortgage Shenanigans Returning

Image: Violette79

Image: Violette79

In another ominous sign of a returning housing bubble, Bank of America is introducing a new mortgage that requires only a three percent down payment. The reason for doing so is to get around Federal Housing Administration (FHA) backing for mortgage loans, as banks have been penalized in recent years for errors in originating those loans. This new 3%-down mortgage will be targeted toward lower-income households. On the high end, we’ve already seen no down payment jumbo loans.

A Taste of Things to Come?

The St. Louis Fed is out with a new working paper entitled “On the Theoretical Efficacy of Quantitative Easing at the Zero Lower Bound.” The paper’s conclusion is that when the central bank’s benchmark interest rate is at zero, quantitative easing can still be an effective means of conducting monetary policy. It also concludes that purchases of private debt might be better than purchases of government debt. Of course, this conclusion could only be helpful to a central bank whose interest rates are at or near zero and which wants to engage in further monetary easing. Does anyone out there know of any central banks that might be in need of such a policy prescription? How long until the Fed starts purchasing student loans, car loans, and credit card debt?