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What Will an Obama Administration Mean to Mortgage Rates?

November 6th, 2008

By far, the dominant news story this week was the election of Barack Obama as the 44th President of the United States. While people have different ideological views on what this means to the nation, it is also natural to view any news of this magnitude through a lens of personal self-interest. For anyone contemplating buying a home, the question of self-interest that comes to mind is: what will an Obama Administration mean to mortgage rates?

Specifically:

  • What will be the impact of Obama on the current financial crisis?
  • What will be the impact of Obama’s long-range fiscal policies?

Looking at the recent news provides some perspectives on what the Obama Presidency will mean for mortgage rates, both short-term and long-term.

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Plans, Politics and Mortgage Rates

October 16th, 2008

As national and global economic plans were unveiled, the stock market careened between seven-hundred point losses and nine-hundred point gains, then back to huge losses again. Overall, the losses far outweighed the gains, despite a general impression that world governments were taking all the right steps to address the credit crisis.

Meanwhile, each of the two major-party Presidential candidates came out with mortgage plans of their own, but these didn’t create a ripple in the markets.

Why then? Because the financial markets are starting to focus on the real problem. Meanwhile though, some potential home buyers who understand that problem and how it affects them may find the that the mortgage and housing markets are presenting a compelling opportunity. 

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30-Year Mortgage Rates Fall Back Below 6%

October 9th, 2008

It should have been hailed as good news. Instead, the move by 30 year mortgage rates back below 6% was largely overshadowed by other events:

So what is a mortgage shopper to do? Take advantage of lower rates, or stay on the sidelines until the world financial turmoil subsides?

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Bailout or No Bailout, Expect Manic Mortgage Rates

October 2nd, 2008

Mortgage rates, which had enjoyed a sustained downtrend through mid-September, rose for the second consecutive week, as of October 2, 2008.

This rise was despite the fact that the mortgage bailout bill seemed to have edged a step closer to passage by achieving overwhelming Senate approval. The rise also appeared to occur into the headwind of bad economic news, as factory orders were reported to have dropped sharply in August, while new jobless claims rose.

The contradiction is that the bailout bill is supposed to give lenders more confidence, while interest rates in general typically fall during an economic slowdown. Despite this, mortgage rates rose. So what is going on here?

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Bailout or No Bailout: Are Mortgages Really That Scarce?

September 25th, 2008

As congress debated the Wall Street bailout, there seemed to be an underlying assumption that some kind of package was necessary to put liquidity back into the mortgage lending industry. The general impression is that tougher lending standards have made mortgages scarce, and indeed, the number of existing home sales continued to slip in August. Taken at face value, these stories might be enough to scare potential home buyers out of the market, at least long enough for the bailout package to kick in. However, before heading to the sidelines, those potential home buyers would do well to ask two key questions:

  • Are new mortgages really that scarce?
  • Will things be better or worse once government rescue efforts take hold?

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Fannie and Freddie: Who Wins, Who Loses?

September 10th, 2008

Speculation abounds about the government takeover of ailing mortgage giants Fannie Mae and Freddie Mac. Who wins and who is left hanging? Forbes.com offers a succinct analysis:

BAILED OUT!

The largest banks especially those like Bank of America with large mortgage lending capabilities, which may get to take over some of the Fannie and Freddie business.

Homeowners may be able to refi their existing Fannie or Freddie mortgages at lower rates and avoid foreclosure.

New home buyers who might obtain lower rates if the government chooses to inject more liquidity into the mortgage market.

Short sellers of Fannie and Freddie common stock–the companies’ shares slid more than 80 percent on Monday after the weekend’s announcement.

Holders of Fannie and Freddie debt, including foreign governments and central banks. They are more likely to be repaid now.

Homebuilders and home improvement companies if the bailout stabilizes the housing markets.

TWISTING IN THE WIND!

Fannie and Freddie’s stockholders who may lose their entire investment.

Taxpayers who will foot the bill for bailing out the companies and repaying their debts.

U.S. Treasury debt owners as prices have fallen because of an increased government debt burden.

Fannie and Freddie employees, facing even more uncertainty about their futures.

Lobbyists, who will lose Fannie and Freddie as clients.

Politicians and others who received financial and other backing from Fannie and Freddie.

The CEOs of Fannie and Freddie who are now unemployed and probably deserve it.

Commercial banks that hold Fannie and Freddie preferred shares.