Home Prices biggest drop ever..The Fed Steps in (finally)..TALF

If you are wondering why the sudden rush on housing and MBS, take a gander at the Case Schiller Housing Index this morning.

Low-lights of the report include: In the third quarter, the decline in the S&P/Case-Shiller U.S. National Home Price Index — which covers all nine U.S. census divisions — remained in double digits, posting a record 16.6 percent decline versus the third quarter of 2007. This has worsened from the annual declines of 15.1 percent and 14.0 percent, reported for the second and first quarters of the year, respectively.

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As of September 2008, the 10-City Composite is down 23.4 percent from its peak, the 20-City Composite is down 21.8 percent and the National Composite is down 21.0 percent.

Phoenix was the weakest market, reporting an annual decline of 31.9 percent, followed by Las Vegas, down 31.3 percent, and San Francisco, which was down 29.5 percent. Miami, Los Angeles, and San Diego did not fair much better with annual declines of 28.4 percent, 27.6 percent and 26.3 percent, respectively.

CNBC’s Steve Liesman breaks down the FEDs MBS purchase plan here

Via CNBC :

The U.S. central bank said it would buy up to $100 billion in debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks…The Fed also said it would buy up to $500 billion in mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

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“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved financial conditions more generally,” the Fed said in a statement.

The central bank also launched a $200 billion facility to back consumer loans, including student, auto, and credit card loans and loans backed by the federal Small Business Administration.

Specifically, the U.S. Treasury Department announced it will allocate $20 billion to back a lending facility for the consumer “asset backed securities” market established by the Federal Reserve Bank of New York. That market provides liquidity to financial institutions that provide small business loans and consumer lending such as auto loans, student loans, and credit cards.

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The department said the new program, called the Term Asset Backed Securities Loan Facility, is intended to assist the credit markets in accommodating the credit needs of consumers and small businesses by facilitating the issuance of asset backed securities.

How will it work?

• Beginning next week, the Fed will buy up to $100 billion in debt from Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks in a competitive bidding process through the central bank’s primary dealers.

• The Fed will contract asset managers to buy up to $500 billion in mortgage-backed securitiesThe Fed hopes to begin those purchases before the end of the year. (While Fannie Mae and Freddie Mac were seized by policy-makers in September, Ginnie Mae has always been in government hands)……

Wonder what ‘asset managers’ will be contracted…hmmmmm… LOL!! If you don’t know you haven’t been paying attention!

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