Lacker: Fed should get out of MBS, avoid overstimulating housing

RICHMOND, Virginia (Reuters) - A recovery in the housing market means the Federal Reserve should think about how to reduce its holdings of mortgage-backed securities over time in order to avoid creating another bubble in real estate, a top central banker said on Friday.

"The housing market seems like it is recovering quite well at this point. At some point, I think the recovery we've seen in the housing market means we ought to be thinking about shifting our portfolio away from mortgage-backed securities," said Richmond Federal Reserve President Jeffrey Lacker.

He said the timeframe for this shift should be "a couple of years," and could involve using payments from maturing MBS to buy U.S. Treasury notes, rather than rolling them back into MBS, as well as reducing the pace of MBS buying.

"If we don't, I think there is a risk we are going to overdo it and overstimulate the housing market, and we've seen what a disaster that can be," Lacker, a longstanding opponent of the Fed's purchases of MBS, told reporters after giving a speech.

(Reporting By Alister Bull; Editing by Chizu Nomiyama)