The Fed made its announcement at 8:15 Tuesday  morning. Within 20 minutes, mortgage rates had fallen a quarter of a percentage point, and were headed even lower.

When I say this is the best mortgage-related news in years, I'm exaggerating just a tad. The federal takeover of Fannie and Freddie was even more beneficial to home borrowers, because the takeover meant that the mortgage business would continue functioning. Other than that, though, this truly is the best thing that's happened in the mortgage business in a long time.

This was an obvious move to make, and I'm glad the government has finally made it. Just last Friday, writing in this blog about widening bond spreads, I wrote: "What I don't understand is this: Why doesn't the Treasury buy a bunch of mortgage-backed securities? That would cause mortgage rates to fall, and might inject some confidence into the housing finance system."

Here's the answer. The Fed is buying these securities, not the Treasury. In addition to buying up to $500 billion of mortgage-backed securities, the Fed is ready to buy up to $100 billion in other debt held by Fannie, Freddie and the Federal Home Loan Banks.

The Fed explained thusly: "Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late. 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 conditions in financial markets more generally."

I hope the Fed is correct -- that this will increase the availability of mortgage credit, and support housing markets. I believe that it will have this effect. I could be wrong, the Fed could be wrong, and there might be unintended consequences.

The bottom line is that the Fed just announced a $600 billion bailout of mortgages. Six hundred billion dollars. We took a bold leap toward nationalization of the mortgage industry.

Courtesy of Holden Lewis