The Fed Acts to Push Mortgage Rates Lower

In it's first action to directly influence mortgage rates and the housing market, the Federal Reserve has announced that they "will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs)--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae."

There's more:

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.

This action is aimed directly at, and intended to narrow, the interest rate "spreads" between Mortgage related securities and treasury securities, which have been leaking wider ever since the Fed stopped short of affirming a "full faith and credit guarantee" for Fannie and Freddie's obligations.

If you read our post last week on why mortgage rates are higher than they should be, you'll have some great context as to why the Fed had to do this.

Prices of mortgage backed securities are sharply higher on this news.  Expect mortgage rates to see .25 in improvement immediately, (putting them in the sub 5.5% range for 30 year fixed paper) with further gains possible as the market sorts out the impact of this action.

11/25/08 at 09:35 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Breaking News, Fannie Mae, Freddie Mac, GSE's, Interest Rates, The Fed

In Which Mortgage Standards Continue to Tighten

Somewhat lost in the hubub over this past weekend's GSE takeover, and the subsequent drop in rates (did you know most mortgage rates improved by .5% after the takeover?  More on this here, or you could simply subscribe to our twitter feed for real time updates to rates) is that fact that mortgage guidelines continue to tighten.

For instance, this announcement [PDF!], from last Friday, released to little fanfare, tells us that:

• The minimum down payment for investment properties is going up, to 15%, from 10%.
• The price adjustment for the above mentioned scenario is 3.75% of the loan amount up front, (or 1% higher in rate, give or take) in additon to other adjustments based on credit score, and/or property type.

These changes, among others, don't go into effect until Dec 1st, but most lenders will implement them much sooner than that. So for aspiring property investors and landlords being lured back into the market by lower prices, it is time to get a move on.

Bottom line - though the takeover of Fannie and Freddie has helped baseline rates dramatically, availability of mortgage money continues to contract for many types of loans.

09/11/08 at 09:00 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Credit Crunch, Fannie Mae, Financing Options, GSE's, Interest Rates

Deathmatch: NYT vs. Freddie Mac

Interesting little dust-up between the New York Times and Freddie Mac.  The executive summary:

NYT reporter alleges Freddie Mac CEO Syron was warned, ignored these warnings and should have known about looming problems with riskier loans in their portfolio.

Freddie responds, stating that at best, this is revisionist history, sloppy reporting, and utter bunk.

Also worth reading is Tanta's take-down of the NYT article over at Calculated Risk, and Jeff Miller's analysis of over at A Dash of Insight.

This may seem like inside baseball to many, but it would be a mistake to ignore this.  Legislators are already wielding the housing correction like a cudgel (which can be good, so long as they are crushing the right skulls) so it will pay to understand the facts in the rush to assign blame somewhere.

08/06/08 at 07:58 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Freddie Mac, GSE's, Housing Market Politics