Today, the Federal Reserve, in efforts to “reduce costs and increase the availability of credit for the purchases of houses” in the present market, announced the creation of a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs), including Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and mortgage-backed securities (MBS) that are backed by Fannie Mae, Freddie Mae and Ginnie Mac.

Under the purchase program, the Federal Reserve will purchase “up to $100 billion in GSE direct obligations” through a series of competitive auctions and up to $500 billion of MBS through asset managers (to be selected through a “competitive process”).

The Federal Reserve noted however, that “[p]urchases of both direct obligations and MBS are expected to take place over several quarters.” More information regarding the specific terms and conditions of the program will be released based on discussion and feedback received from market participants.

This program is separate from the Term Asset-Backed Securities Loan Facility (TALF) also announced today by the Federal Reserve and Treasury under which Federal Reserve Bank of New York (FRBNY) “will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans,” and Treasury “will provide $20 billion of credit protection to the FRBNY in connection with the TALF.”