Under its plan to boost consumer lending markets, the Fed will buy up to $600bn of mortgage bonds issued or guaranteed by government-sponsored housing enterprises such as Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Banks. Another new programme – the term asset-backed securities loan facility, or Talf – would lend up to $200bn to holders of AAA-rated securities backed by student, auto, credit card and small business loans. The Treasury will use $20bn from its $700bn troubled asset relief programme, or Tarp, to provide credit protection for the Talf. Paulson said that the $200bn facility could expand to include commercial and non-agency residential mortgage-backed securities. In response, the yield on Fannie Mae’s 30-year mortgage bond fell as much as 60bp to 4.81%, its lowest since January. Rates on 30-year conforming mortgages – meaning they can be bought by Fannie and Freddie – fell to 5.77% from 6.06% on Monday. See Lex, below.
