Mortgage NewsGreg McBride from BankRate discusses the mortgage meltdown and Suzy Orman give their different points of view on the Federal Reserve’s rate cuts and how it helps the homeowners, consumers and mortgage lenders! Mortgage interest rates remain low for conforming and FHA home loans.
In a recent article, Wallace Witkowski reported that the Federal Reserve said that they will begin buying mortgage loan securities backed by Fannie Mae, and Ginnie Mae in early January. The Fed said it “has selected private investment managers to act as its agents in implementing the program,” which is “separate and distinct from the U.S. Treasury’s program.”
The loan security buying will be financed through the creation of additional bank reserves, the Fed said. Interest rates for home equity loans, credit lines and FHA loans remain at record low levels.
The Federal Reserve moved forward forging their plan to purchase mortgage bonds issued by Fannie Mae and Freddie Mac on Tuesday, saying it would start buying early next month and purchase up to $500bn (£345bn) by the end of June. The aggressive tactics – the Fed had previously said it would buy this amount over “several quarters” signifies the central bank’s determination to hammer down the risk spreads on the mortgage bonds and thereby reduce mortgage interest rates.
The Fed said “the program is being established to support the mortgage and housing markets and to foster improved conditions in financial markets more generally”. The move comes as policymakers at the central bank and in both the outgoing Bush and incoming Obama administrations look to target lower FHA mortgage rates in the hope that lowering them would halt the decline in house prices and thereby support financial asset prices.
Many Washington-based analysts think there is still a chance that Hank Paulson, the outgoing Treasury secretary, will announce plans for low-cost 4.5 % mortgages for new homebuying before leaving office, based on a plan proposed by Columbia University professors Glenn Hubbard and Chris Mayer. Barack Obama’s incoming economic team is also looking at ways to lower mortgage rates and ensure the availability of mortgage financing. Meanwhile, regulators are considering relaxing rules on mortgage refinancing in order to make it easier for borrowers with existing mortgage loans to take advantage of lower mortgage rates. The Fed is also focused on two other areas as it seeks to stimulate the economy – financing consumer loans and potential purchases of Treasury bonds. Read complete article written by Krishna Guha >