Analysts say they expect the Federal Reserve to stick to its plan to buy up $1.45 trillion in mortgage-backed securities, even though some of the Fed’s regional chiefs want to see the plan scrapped early. The bank’s Federal Open Market Committee meets Sept. 22 and 23 to set policy objectives, and the MBS stimulus is expected to be high on the agenda. According to the Wall Street Journal, “The central bank now accounts for all but a sliver of the market for mortgage-backed securities, crowding out private activity and raising doubts about how the market would function without government involvement.” Some Fed regulators are wary about that level of government intervention. Richmond Federal Reserve President Jeffrey Lacker recently told listeners in a speech that he would “be evaluating carefully whether we need or want the additional stimulus” that would come with buying the full amount of securities.

But most voices within the bank and beyond have expressed reservations about suddenly cutting off that government aid. The chief economist for government-sponsored mortgage securitizer Fannie Mae predicted this week, for example, that the Fed would ease its way out of the residential mortgage-backed asset market early next year in an attempt to prevent an abrupt spike in mortgage interest rates. Fannie analyst Doug Duncan told reporters he was concerned about the Dec. 31 expiration date for the Fed’s MBS purchase program, saying a sudden drop in buy-ups could drive up mortgage rates by as much as half a percent among jumbo loans of $650,000 or more, with smaller loans likely rising by a third of a percentage point. As a result, Duncan said he expected a gradual decline in the Fed’s purchases of Fannie, Freddie and Ginnie Mae securities, rather than a complete stop. “Incremental winding down of the Fed’s program may not be too disruptive of rates and spreads,” he said.