To my understanding banks go to the Fed when they need money as in dollar notes instead of money as in credit balance. The Fed does not buy the house, it just takes it as security. Meaning it takes the right to physically get the house if the terms of the credit are not fulfilled but it won't actually do anything physical as long as the terms are ok.
This makes an interesting situation for the banks. When you have a house (or the rights to one) to use as security, you can give it to the Fed and get free money for it. Now you have more money and can do stuff.
If you don't have the house, you might actually want to get one in order to get the free money. This makes the money not so free because with a great house come great responsibilites.
If the Fed bought those houses outright it would have many houses but the Fed does not need many houses, so that wouldn't make much sense. It would work financially to some extend and increase the money supply and give incentive to build houses but it wouldn't actually directly create anything beneficial to anyone.
To my understanding banks go to the Fed when they need money as in dollar notes instead of money as in credit balance. The Fed does not buy the house, it just takes it as security. Meaning it takes the right to physically get the house if the terms of the credit are not fulfilled but it won't actually do anything physical as long as the terms are ok.
This makes an interesting situation for the banks. When you have a house (or the rights to one) to use as security, you can give it to the Fed and get free money for it. Now you have more money and can do stuff.
If you don't have the house, you might actually want to get one in order to get the free money. This makes the money not so free because with a great house come great responsibilites.
If the Fed bought those houses outright it would have many houses but the Fed does not need many houses, so that wouldn't make much sense. It would work financially to some extend and increase the money supply and give incentive to build houses but it wouldn't actually directly create anything beneficial to anyone.