Project RESTART

I have been searching online today trying to find something positive to blog about. I finally found this article on CNN Money.

Project RESTART is a program in the works that its founders hope will help revive the mortgage market. When I see anything like this, I am all ears! Mortgage Backed Securities are the key component in todays market. These are formed when mortgages are packaged together and sold. If nobody is buying, we have big problems. Mortgage rates go up and this only causes more problems in a market that is already spiraling downward!
Well buyers are very sparse these days and this programs goal is to try and change this!
In the past lenders packaged loans as these securities and sold them. This allowed them to become more liquid. Due to many of these performing poorly, interest fell off and liquidity problems arose. Lately this power has mostly shifted to Fannie Mae and Freddie Mac. This is because they provide the majority of mortgage funding these days. Investors obviously feel more comfortable buying MBS's that are packaged through these 2 companies. Due to these factors, it is no wonder why they are under such a strain! This program hopes to shift some confidence back to solid lenders who package MBS's. This is necessary to get the market back to normal. The program plans to do this by making these investments more transparent and understandable for investors. To make it simple, in the past you just purchased an bundle of mortgages. With the new format, you can select the risk pool of mortgages you buy. Lower risk means a lower return and vice versa. It makes perfect sense. Will it work? Only time will tell. Whatever happens, it is refreshing see that people much smarter than I am are working hard to fix this mess!

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