The Federal Reserve should slow its purchases of agency MBS so that it can extend the buying program into next year, according to one MBS market expert.

Credit Suisse mortgage strategist Mahesh Swaminathan said the Federal Reserve Bank of New York is purchasing Fannie Mae, Freddie Mac and Ginnie Mae MBS at a rate of $25 billion a week.

"They are really racing," said Swaminathan. "At this pace they will be done with their purchase program by yearend. I don't think that is desirable," he added.

Recent statements by a couple of Federal Reserve Bank presidents indicate the $1.25 trillion MBS purchase program may be allowed to expire at the end of December.

The New York Fed has already purchased $790 billion of agency MBS. If they cut their weekly purchases by 50% or more, the Credit Suisse strategist said, the purchase program could be extended into the first and second quarters of 2010.

"It is much better to slow things down now and telegraph that they are ready to support the market for some more time," he said.

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