The Federal Reserve is on track to end its $1.25 trillion MBS purchase program by the end of this quarter, but a minority of Fed officials would be in favor of resuming buying if market conditions warrant.

It "might become desirable" in the future to expand the residential mortgage-backed securities purchase program "if mortgage market functioning were to deteriorate," according to the minutes of the December Federal Open Market Committee (FOMC) meeting.

The consensus view of the 10 FOMC members is that the improvement in home sales and stabilization in house prices will continue. But some members view the improvement as "quite tentative." And they are concerned "mortgage markets could come under pressure as the Federal Reserve's agency MBS purchases wind down," the FOMC minutes said.

The Fed started the MBS purchase program last January and it is due to end March 31. The New York Federal Reserve Bank is gradually slowing the pace of MBS purchases to "promote a smooth transition in markets."

The FOMC minutes also showed a "few members" would like to extend the Term Asset-Backed Securities Lending Facility or TALF past June 30 to help the CMBS market get back on its feet.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.