Taos Real Estate MORTGAGE MARKET UPDATE: Tuesday 09/09/2008

Posted by Jason Leach on September 10th, 2008 No Comments Printer-Friendly Author's website: Jason Leach

Market Direction:
Rates are: MOVING LOWER
Rate Volatility: HIGH

Interest Rate Trends:
Long Term (4-6 weeks): FLAT
Short Term (1-2 weeks): DOWN

FANNIE/FREDDIE SEIZED BY FEDERAL GOVERNMENT…
NOW WHAT???…
Rates have dropped in the last two days following the federal takeover of Fannie Mae and Freddie Mac. The markets are still digesting the results, along with any potential fallout. What does it all mean?
1) Mortgage rates have fallen (over a half point since Monday).
2) New management will abandon recent risk-based pricing & tougher credit standards.
3) Treasury has authority to purchase mortgage-backed securities up through December 2009 (no limit).
4) Mortgage money will be cheaper and more readily available (see #3).
6) Should stop - or at least slow - the tide of foreclosures and begin to contain price depreciation.
7) This, in turn, allows the credits markets room to breath & build liquidity necessary for expanded credit.
As I’ve discussed in the past, much of the issues in our current economy stem from the fact that so much money was bet on home price appreciation - loose and fast guidelines then followed cheap money (thanks Greenspan!). The reason some areas have experienced extreme price appreciation has much to do with easy money (perhaps I’ll speak on this in detail next week).
Now that mortgage paper is essentially government paper (with the full backing of the U.S. taxpayer), will the sunami of price depreciation stop? Can we begin to look for a bottom? I think the answer is yes. With mortgage paper turned into federal paper, the major holders (most of them foreign nations) will be once again willing to invest in the equity markets. This could signal the start of a turn that can get us out of this bear market… and we need that in order for the financial sector to begin functioning once again.
Everything I read says the next six months will be the worst. Expect the news in the following few months to be dire: credit defaults, more deleveraging, more bailouts, and more insolvency. It’s far from over, but at least the Federal government has stepped in with something substantial that has the potential to change our present course. Let me end with this: I’m not for nationalization. Unintended consequences are yet to be realized, but the alternative was worse. Do nothing and we were sure to find ourselves in the worst crisis since the Great Depression. Yep I said it…
We’re not out of the woods yet. Keep your fingers crossed and if you pray, keep praying :) God bless!
Mortgage Interest Rates*
Rates as of Monday, 09 September, 2008:
Conforming APR Payment per
$1,000		 Jumbo APR Payment per
$1,000
30-Year Fixed 5.875 % 5.986% $5.92 7.5% 7.602% $6.99
15-Year Fixed 5.500 % 5.684% $8.17 7.125% 7.286% $9.06
3/1 ARM 5.375 % 5.482% $5.60 6.75% 6.847% $6.49
Land: 5-Year Fixed 6% 6.112% $6.00 6% 6.093% $6.00
*Rates are subject to change due to market fluctuations and borrower’s eligibility.
Members of: Better Business Bureau, National Association of Mortgage Brokers, and New Mexico Mortgage Brokers Association.Jason Leach
Mortgage Consultant
Taos Lending Team
Phone: 575.751.4641
Mobile: 575.741.0814
jason@taoslendingteam.com
www.taoslendingteam.com
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