The government said it would buy residential mortgage-backed securities at tighter spreads in an effort to kick-start recently stalled issuance and help smaller lenders better compete on home loan origination with the ever-growing big banks. Since late 2007 the government has bought more than $8bn of mortgage-backed securities from home loan lenders to keep the securitisation market open and provide funding for smaller operators.
The government said conditions in the RMBS market have now improved to the point where risk premiums demanded on primary issuance can be reduced, and said it is willing to invest at these tighter levels.