NEW YORK (Associated Press) – The Federal Reserve is taking steps to keep some distressed borrowers in their homes, but some say it may not make much of a dent in the nation’s housing crisis.
The new relief plan would apply to the billions of dollars of mortgage assets the Fed is holding on its books because of last year’s bailouts of Bear Stearns and insurer American International Group.
However, the amount of mortgage securities in question, valued at up to $74 billion, pales in comparison to the $1.75 trillion in outstanding risky loans, according to trade publication Inside Mortgage Finance.
The central bank is buying up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. It also has agreed to buy up to $100 billion of Fannie and Freddie debt.
The Fed action comes as President Barack Obama’s administration has pledged to devote between $50 billion and $100 billion of the second $350 billion in bailout money toward helping people avoid losing their homes.
Under the Fed’s new foreclosure prevention effort, homeowners may get a reduced interest rate, longer loan term or a lower total mortgage amount.