AP

While a lot of attention is focused on the decision by the Federal Reserve to buy longer-dated Treasurys, it’s also important to pay attention to the other new policy: using the proceeds from maturing Fannie Mae and Freddie Mac debt to buy mortgage backed securities.

The Fed owns nearly $885 billion of mortgage backed securities, most of which it acquired in the immediate aftermath of the financial crisis. It’s more recent easing actions have focused on buying government bonds rather than mortgage debt.

But the housing market has shown renewed signs of weakness in recent months. This prompted many to call for a renewed program to buy mortgage-backed securities.

The Fed has said it will use the proceeds of maturing agency debt—meaning debt issued by Fannie or Freddie—or agency mortgage-backed securities—meaning bonds insured by Fannie or Freddie—to buy more mortgage-backed securities.

The Fed has $1.5 billion of agency debt maturing in the next two weeks. Another $2.4 billion matures in the next 90 days. So all told, the Fed will be stepping into the market looking to buy just $3.9 billion.

To put it differently, this is a very small move into the mortgage market compared to the Fed’s earlier programs.

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