KEY POINTS
  • The Mortgage Bankers Association warned that the housing market could face a " large-scale disruption," due to actions by the Fed that were meant to help the mortgage market.
  • The Fed bought $183 billion of purchases last week of mortgage-backed securities, in an effort to drive down rates, and they did.
  • But the Fed's actions, amid a volatile market environment, helped add further strains that resulted in blowing up a widespread hedge that mortgage bankers use to protect themselves against rate increases, and now some lenders are facing margin calls that are eroding their working capital and threaten their ability to operate.

The Mortgage Bankers Association in a dire letter to regulators Sunday warned that the U.S. housing market is "in danger of large-scale disruption," due to efforts by the Federal Reserve that were intended to help rescue the mortgage market.

At issue are the Fed's unprecedented $183 billion of purchases last week of mortgage-backed securities. The purchases were meant to drive down rates, and they did.