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The Fed went all in and is going to expand its balance sheet enormously. They will buy an additional $750 billion in mortgage backed debt. That will bring the total potential purchases to $1.25 trillion which would be almost 25% of all Fannie/Freddie mortgage backed debt outstanding, or 10% of all mortgage debt, agency or otherwise. They will also buy up to $300 billion of Treasury debt. This is a big surprise and yields will move sharply lower. The stuff eligible for the TALF program will also be modified so a range of collateral will be eligible which means less than AAA.
Figure that conforming 30 year mortgage interest rates will fall a lot, probably towards 4%. A lot of mortgages can be refinanced at that rate and new mortgages will be so much more affordable. The expansion of the TALF collateral will move that program forward and Nissan and Ford have already announced they will offer a total of some $4.5 billion of paper backed by auto loans. Credit availability is important. The American consumer can figure if they want to take on debt, but the chance to do so is required for economic growth.
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