Finally, Mortgage Interest Rates to Come Down!
Comment -- Finally - at Long Last - Mortgage Rates to Come Down! Everyone had thought that with the government bailing out Fannie and Freddy and guaranteeing those instruments - that rates would come down after that. But they only came down in the few days after that govt action - and then went back up again - and stayed up - until recently - when they have been trending down. Now - rates should trend down even more -- something that has been needed for a long long time to bring more buyers into the market for housing. In my opinion though - it will still take quite some time for an increased foreclosure rate to work itself out. Rates may have to drop into the 4 something percent area for things to really start being absorbed in greater quantity..
Excerpt from a Yahoo Finance Article --
Total bailout commitments, loans and pledges of backing has now neared a staggering $7 trillion. (almost half the US GDP)
(comment - unreal eh?)
Treasury Secretary Henry Paulson, who has been criticized for constantly revising the original $700 billion rescue program, said the administration was considering even more changes in its final two months in office.
Reports on the nation's economic health weren't getting any better. The Commerce Department said the overall economy, as measured by the gross domestic product, declined at an annual rate of 0.5 percent in the July-September quarter, even worse than the initial 0.3 percent estimated a month ago as consumer spending fell by the largest amount in 28 years.
The Federal Reserve will purchase $200 billion in securities backed by different types of debt including credit card loans, auto loans, student loans and loans to small businesses. That market essentially froze in October. These types of loans as a result have become harder to obtain and have carried higher interest rates
The Fed also announced that it would spend $500 billion to purchase mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks.
This would greatly expand an initial modest effort announced back in September in which Treasury spent $26 billion to purchase mortgage-backed securities. The current credit crisis was triggered by soaring losses on securities backed by subprime loans.
******Analysts predicted the program could send mortgage rates down by as much as one-half to a full percentage point in coming months, helping to spur demand in the beleaguered housing market, which is suffering its worst downturn in decades.
The programs to buy mortgage-related assets and securities backed by consumer debt have the same aim: to boost demand for those assets. In doing so, the government hopes to lower the costs being charged for consumer loans. That would make loans on everything from mortgages to cars more available.
This is one of the key actions we've been advocating," said Charles McMillan, president of the National Association of Realtors, referring to the purchase program for mortgage-backed assets.
As for Tuesday's actions, the mortgage-backed securities the Fed will buy will be investment-grade assets -- not the toxic mortgage-related assets that the administration initially had said the $700 billion financial rescue program would buy.
By focusing on investment-grade securities, the Fed will be able to help provide a functioning secondary market. It will pay the prices for these securities that are being set by the market. Had the Fed needed to buy bad assets, it would have had to develop a mechanism to properly price assets that weren't being traded.
The use of Fed resources also gets around another problem Treasury faced: a limited amount of money in the program. The $800 billion being committed to buy mortgage-related assets and other assets backed by consumer loans will come from the Federal Reserve's vast resources. It will not count against the $700 billion rescue program.
The Treasury Department also announced Tuesday that the rescue program had spent another $2.91 billion in direct purchases of stock from 23 regional banks around the country. These institutions ranged from HF Financial Corp. in Sioux Falls, S.D., to Centerstate Banks of Florida Inc. in Davenport, Fla.
The government has now injected $161.5 billion in 53 institutions. The goal is to spend $250 billion of the $700 billion bailout fund to buy bank stock as a way of encouraging banks to resume more normal lending to bolster the shaky economy.
Excerpt from a Yahoo Finance Article --
Total bailout commitments, loans and pledges of backing has now neared a staggering $7 trillion. (almost half the US GDP)
(comment - unreal eh?)
Treasury Secretary Henry Paulson, who has been criticized for constantly revising the original $700 billion rescue program, said the administration was considering even more changes in its final two months in office.
Reports on the nation's economic health weren't getting any better. The Commerce Department said the overall economy, as measured by the gross domestic product, declined at an annual rate of 0.5 percent in the July-September quarter, even worse than the initial 0.3 percent estimated a month ago as consumer spending fell by the largest amount in 28 years.
The Federal Reserve will purchase $200 billion in securities backed by different types of debt including credit card loans, auto loans, student loans and loans to small businesses. That market essentially froze in October. These types of loans as a result have become harder to obtain and have carried higher interest rates
The Fed also announced that it would spend $500 billion to purchase mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks.
This would greatly expand an initial modest effort announced back in September in which Treasury spent $26 billion to purchase mortgage-backed securities. The current credit crisis was triggered by soaring losses on securities backed by subprime loans.
******Analysts predicted the program could send mortgage rates down by as much as one-half to a full percentage point in coming months, helping to spur demand in the beleaguered housing market, which is suffering its worst downturn in decades.
The programs to buy mortgage-related assets and securities backed by consumer debt have the same aim: to boost demand for those assets. In doing so, the government hopes to lower the costs being charged for consumer loans. That would make loans on everything from mortgages to cars more available.
This is one of the key actions we've been advocating," said Charles McMillan, president of the National Association of Realtors, referring to the purchase program for mortgage-backed assets.
As for Tuesday's actions, the mortgage-backed securities the Fed will buy will be investment-grade assets -- not the toxic mortgage-related assets that the administration initially had said the $700 billion financial rescue program would buy.
By focusing on investment-grade securities, the Fed will be able to help provide a functioning secondary market. It will pay the prices for these securities that are being set by the market. Had the Fed needed to buy bad assets, it would have had to develop a mechanism to properly price assets that weren't being traded.
The use of Fed resources also gets around another problem Treasury faced: a limited amount of money in the program. The $800 billion being committed to buy mortgage-related assets and other assets backed by consumer loans will come from the Federal Reserve's vast resources. It will not count against the $700 billion rescue program.
The Treasury Department also announced Tuesday that the rescue program had spent another $2.91 billion in direct purchases of stock from 23 regional banks around the country. These institutions ranged from HF Financial Corp. in Sioux Falls, S.D., to Centerstate Banks of Florida Inc. in Davenport, Fla.
The government has now injected $161.5 billion in 53 institutions. The goal is to spend $250 billion of the $700 billion bailout fund to buy bank stock as a way of encouraging banks to resume more normal lending to bolster the shaky economy.
posted by Rick Hauser at
9:22 PM
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