N.Y. Fed now buying mortgage securities

NEW YORK - The Federal Reserve Bank of New York said Monday it has begun purchasing mortgage-backed securities in an effort to bolster the battered housing market.

The program, announced Nov. 25, allows the Fed to spend $500 billion to buy mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks. The program is aimed at driving down the price of mortgages and making home loans more available.

"The actual action of starting to make purchases isn't really affecting prices," said Dan Green, loan officer with Mobium Mortgage in Cincinnati and author of TheMortgageReports.com. "It's already been priced in."

Green said when the program was announced, rates tumbled about one-half of one percentage point and helped touch off a jump in mortgage refinancing activity.

The New York Fed is overseeing the program for the Federal Reserve. The New York Fed is working with four investment managers -- BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Co. -- to purchase the securities.

Up to $500 billion in securities will be purchased by the end of the second quarter.