Treasury to try to lower Rates to boost economy

[BrianB_The_Loan_Professor]

Treasury may set mortgage rates at 4.5% to boost sales

 The Treasury Department is contemplating a proposal that would cut mortgage rates for new loans for homes, according to the Wall Street Journal.
The plan would employ Fannie Mae  and Freddie Mac  to offer mortgages with rates as low as 4.5%, roughly 1% lower than current rates.
The measure is under consideration as part of the Treasury Department's continued effort to limit foreclosures, which has been at the core of the financial crisis. The plan would seek to revitalize the financial market without bailing out homeowners and lenders, the Journal reported.
As part of the proposal under consideration, Treasury would buy mortgage securities backed by Fannie Mae and Freddie Mac, in addition to those guaranteed by the Federal Housing Administration.
Fannie Mae and Freddie Mac guarantee a significant chunk of all new mortgages in the United States.
It's unclear whether the proposal would create refinancing opportunities, which analysts said would be even more positive for the beleagured housing industry and battered home buyers.
See the full article at http://www.marketwatch.com/news/story/treasury-may-set-mortgage-rates/story.aspx?guid=%7B2997E462%2D...

I have been told for now this will ONLY impact purchases at this time although it would be nice to see those rates for refi's.

More to follow I am sure
Brian

Message Edited by BrianB_The_Loan_Professor on 12-03-2008 09:17 PM

[Anonymous]

I just saw this on the local news.... I wonder how long it will take for a decision to be made and if in favor, how long before it goes into affect.

[BrianB_The_Loan_Professor]

Who knows? They like to tease the market with these announcements then they drag their feet implementing them... I wouldnt hold out too long probably 3-6 months

[teton]

Great news, Brian. I see a blank space where the link to the full article should be?

[BrianB_The_Loan_Professor]

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@teton wrote:
Great news, Brian. I see a blank space where the link to the full article should be?

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Thanks I am not sure what happened I added it in

[Donna1966]

Hey Brian,

Do you think this would apply to an FHA Streamline?  In 4 months we'll be eligible for that.

Thanks!

[Anonymous]

I guess my question is how is lowering the rate going to jump the economy or help those in financial trouble? If a person has lates due to finace problems they get approved for the lower rate anyhow. Can someone make me smart about this? Thanks in advance.

[Lel]

Our local paper seemed to indicate that these new guidelines might be open to people who want to refinance, but because we live in a high-cost area it may not apply to a lot of homeowners, since the FNMA limits are going to drop slightly starting next year.

I'm guessing that there will be fairly strict lending requirements - no 100% financing, probably at least 20% down.

[ShanetheMortgageMan]

With rates that low I wonder if any private investors would want to buy mortgage backed securities at all, we've already seen the government try to push rates lower a couple times this year and they just come right back up soon after.  4.5% is really low for a 30-year fixed, not even back in 2004 did it reach that low, think it's been 50+ years.

[Lel]

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@ShanetheMortgageMan wrote:

With rates that low I wonder if any private investors would want to buy mortgage backed securities at all, we've already seen the government try to push rates lower a couple times this year and they just come right back up soon after.  4.5% is really low for a 30-year fixed, not even back in 2004 did it reach that low, think it's been 50+ years.

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That's a good point.  The margins for both the lender and the investor would be very thin.  4.5% split among the the various parties would barely keep pace with inflation.