What is the GSE Mortgage Backed Securities Purchase Program?
The GSE Mortgage-Backed Securities Purchase Program is a government program that was enacted as a result of the financial crisis of 2008 in the United States. This program is designed to provide financial relief to mortgage industry and help the general public as a whole. The basic idea behind this program is that the United States Treasury will invest in mortgage-backed securities that are owned by government-sponsored enterprises. These enterprises could be Fannie Mae, Freddie Mac or other similar entities that were sponsored by the United States government. These mortgage-backed securities are a type of investment that use mortgages as their collateral. They pay a regular rate of return to the investor.
Under this program, the Treasury has the opportunity to purchase portfolios of these mortgage-backed securities from government-sponsored enterprises. The Treasury can then hold onto these securities until they mature. By doing this, the Treasury department will receive a return on investment from the mortgage-backed securities.
Benefits for GSE's
The government sponsored enterprises that participate in this program can benefit greatly from it. They will be able to get rid of some of the mortgage-backed securities that they have in their portfolios. By eliminating these debts from their portfolio and accumulating cash, they can increase the amount of mortgage funds that are available to the general public. This will help the company do more business and, the
economy will also benefit as a result.
Benefit for Public
The general public can also benefit from this government program. After the events of 2008, many people were unable to get the mortgages that they needed at reasonable interest rates. The mortgage lending industry tightened up and only those with the highest credit scores were able to secure a loan. Thanks to this program, more people will have access to the funds that they need to buy houses. When the housing industry picks back up, it will have a snowball effect on much of the rest of the economy. Consumer spending will increase and credit will be readily available for those who need it.
Benefit for Government
This program is designed to not only help the government sponsored enterprises and the general public, but also the government. By holding these securities until maturity, the government can realize a substantial return on their investment. This will allow them to make money on the capital that they have invested in these mortgage-backed securities, which will increase the amount of money that the government has. This money can then be used for other government programs or to go towards the national deficit. By increasing the amount of money that is generated from investment returns, the people can also benefit from the additional money that is available to the government.Source: m.finweb.com