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Speculation Surrounds the Fed Balance Sheet

As the Federal Reserve begins to normalize their balance sheet, speculators believe that the final product may be up to three times larger than it was before the financial crisis, if not bigger. The balance sheet refers to the portfolio of securities, such as various types of Treasury debt and mortgage-backed securities (MBS), that it has purchased. Rising interest rates are sure to drive up rates in the housing market, and the Fed’s decision to pullback from mortgage-backed securities will only add to the rising rates.

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Fed’s MBS Phaseout May Drive Up Rates

Many expect the Federal Reserve to begin pulling back from the MBS market later this year or early next. A new analysis delves into the options the Fed has for its pullback--as well as the impact each of those options may have on the market. Whichever the Fed choose, expert say it will impact mortgage rates either way.

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Morgan Stanley Announces $1.25B Settlement with FHFA

In a filing with the Securities and Exchange Commission (SEC) Tuesday, Morgan Stanley revealed it has reached a $1.25 billion agreement in principle with FHFA to resolve pending mortgage-backed securities (MBS)-related litigation. In connection with the settlement, the company announced it is recording a $150 million addition to its fourth-quarter legal reserves.

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FOMC Moves Forward on Tapering

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The Federal Open Market Committee (FOMC) voted on Wednesday to scale back the Federal Reserve's bond-buying program. The cut—the second one in as many months—will see total monthly asset purchases coming down to $65 billion. While December's weak employment report led some to believe there might be a pause in the taper, the committee waved it off in light of other, more positive indicators.

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