Mortgage Blog

Is there anyone paying attention to what is going on in our world, especially here in your back yard?  From talks of government bailouts, to the crisis which is oil  our country is spiraling towards a nowhere land of overbought houses, empty pocket books and over inflated goods.  I’m not sure if anyone really remembers the definition of socialism but for this blog’s sake I find it necessary to reiterate the meaning.  Wikipedia list’s socialism as: “Socialism” a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods.  Wow does that sound like anything that is going on right now in the USA?

Is there anyone home?

Okay maybe I should break this down into layman’s terms for those who are blinded by their local and national politician’s flow of garbage which comes from their mouth.  Our current leaders are trying to put together a $700 billion dollar plan to insure mortgage backed securities and stop the defaults which are happening nationally.  For the sake of this article I think it should be known that I am one of the individuals who would probably receive some of the government’s (our) wealth as I have lost my previous job due to this turmoil and am facing an inevitable foreclosure at some point with no possibility of a home refinance.  That being said I’m against any bailout, I lost my job(nothing I personally did), I bought the house which I now can’t afford so I will pay the consequences.  I’m not asking for help, I’m dealing with it as everyone should be.

Now back to the sweat of things, the government wants a stake in most all of the company’s that they are bailing out.  The government will insure and buy bad paper (mortgage backed securities) in order to help with the liquidity problem we are having as no one is buying mortgage backed securities right now.  There is no trading of paper and there is no one lending money; which is the life blood of our economy.

Has anyone wondered how it is possible to spend $700 billion in 1 week?  Does that seem a little strange that the details of the plan are very vague?  Has anyone else recognized that the auto and airline industry have asked for bailouts as well?  Have you ever made a major economic decision in your own life in a week or less?  So to bring this all home the government could potentially own the banking industry, the auto industry, and the airline industry.  It will be like when you were in high school you had to ask mommy and daddy to borrow the car, and have $20 dollars for the night out.  I don’t know about any of you but I like freedom, freedom of choice, speech, freedom to make my own choices; and that may be taken away or at least limited.

Wake UP and do something, I don’t have the answers but I’m willing to try.  Voice your opinion.  Call your congressman and senator.  At least post a comment of your views on this blog.  We need to speak up.  The voice of the American people must not be silenced.  We here at FHR are starting a movement, “The Americans for Freedom Coalition”.  I will bring details in further blogs but essentially the AFC is all about protecting the rights of Americans and the values our country was founded on.  Does anyone realize that this problem was started by government intervention (GSE’s Fannie Mae and Freddie Mac), and now we are supposed to believe that government intervention will solve everything?  I can only do my part and hope that I am wrong about the possible implications of this deal for my kids and their kids.

The Federal Reserve announced on Friday that it will be essentially taking over the troubled Fannie Mae and Freddie Mac.  Fannie Mae and Freddie Mac currently account for about 50% of the nation’s $12 trillion of mortgages.  What does this mean for homeowners and mortgage rates?  Will this be enough to save the troubled mortgage and housing market?  Is it time to consider a home refinance?  Let’s take a look at what this could mean for you.  There still remains an excess of supply in the housing market.  This will not change over night.  The take over will likely mean a reduction in interest rates for those seeking a purchase loan or a refinance mortgage.  How you ask?  Investors in mortgage backed securities have been reluctant to invest due to the unknown continuation and solvency of Fannie and Freddie.  The government intervention basically insures that the two companies will continue to operate and remain solvent.  This bolsters investor confidence which will reduce the interest rates that are available to existing and future homeowners.  The gap between mortgage rates and treasury bills should be reduced as investor’s concerns are reduced.

The Feds are Here to Save the Day

As rates drop, it may allow more potential homeowners to qualify for home purchase loans.  This could help to slowly reduce the number of homes on the market and eventually stabilize the housing market.  Mortgage rates will also allow speculators to start buying homes in highly devalued areas of the market.  This speculation could help to shore up home values in rapidly declining markets.

The available capital for Fannie and Freddie is now virtually unlimited.  They have the backing of government and treasury funds which means that there is almost no chance of the companies going insolvent.  This is great news for the investors of mortgage backed securities.  The government will also be receiving a 10% return on the funds that they grant to Fannie Mae and Freddie Mac.  This could be a good thing for taxpayers, assuming the company can turn around.

There is still a long way to go before the mortgage refinance and housing markets recover.  There will be more steps taken by the government in the Federal Housing Administration and there are sure to be changes in the operating procedures for both Fannie Mae and Freddie Mac.  There is now some good news coming to the market, for the first time in a long time.  This is by no means a fix, but it could prove to be a much needed band-aid.