The US Federal Reserve has chosen J.P. Morgan to provide custodial services for its program to purchase mortgage-backed securities (MBS) from now nationalised government-sponsored enterprises, Fannie Mae, Freddie Mac and Ginnie Mae.
The program, which began on January 5, will see investment managers selected by the Fed buy up to US$500 billion of fixed-rate agency MBS issued by the three financial institutions.
Four investment managers – BlackRock Financial Management, Goldman Sachs Asset Management, PIMCO and Wellington – were chosen to implement the program, and J.P. Morgan is the only custodian.
The firms will manage 30-year, 20-year and 15-year MBS issued by the institutions.
In alignment with investment guidelines set by the Fed, the managers will use a passive buy-and-hold strategy. It is expected the assets will be acquired before the close of the second quarter.
In a statement, the Fed stated that the program aimed to “reduce the cost and increase the availability of credit for the purchase of houses” in order to support housing markets, and to help improve the state of financial markets.
The program is separate from the US Treasury’s program to buy troubled mortgage-backed assets.
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