Editor’s Note: Freddie Mac released the results of its Primary Mortgage Market Survey® in which the 30-year fixed-rate mortgage averaged 5.93 percent with 0.7 point for the week ending September 11, 2008, down from last week when it averaged 6.35 percent. Last year at this time, the 30-year FRM averaged 6.31 percent. This is the opportunity buyers have been waiting for to lock in a low rate and take advantage of this large inventory of homes. Low rates and low home prices will not coincide much longer, as rates should trend up going forward, to hedge inflationary fears. Now is the time to buy.
View the Mortgage Market Survey here.
The federal government takes over Fannie Mae and Freddie Mac. Interest rates decline. A greater sense of security grows in the mortgage market. Mortgage-backed securities have one of the world’s most secure buyers. This is all good news, but there are Fannie and Freddie stockholders who will simply lose their investment, and there are taxpayers–all of us–who will pay to keep the system truly solvent. And we don’t really know what will become of our mortgage industry in the near- to mid-term future.
Steve Peterson888-232-7687 office/ 775-219-7151 cell
Weekly Commentary
Thumbnail Sketch: The story of the week, if not of the decade, is that the government took over Fannie Mae and Freddie Mac. The consensus view: “It had to be done.”
No one is particularly happy about this event, but it is clear, from the haste with which the Treasury and Fed moved this past week, that there was an intense effort to stave off likely approaching panic about the weaknesses to be found in the two secondary market giants. For example, we learned that the fiscal reserves of the agencies had been greatly overstated. (Accounting techniques were blamed, but let’s face it, the markets were about to lose most of their confidence in the future of these corporations.)
So now we have a mortgage market that is effectively run by the U.S. government.
As you can see to the left, mortgage rates already seem to be declining because the federal takeover eliminates most of the uncertainties about whether we’ll have a viable mortgage financing system in the future. (The federal backing of Fannie and Freddie’s mortgage-backed securities, after all, is now explicit, rather than implicit.) The average rate on the 30-year fixed-rate mortgage is down by about a quarter of a percent. We can read this as something of a vote of confidence.
“The government’s action will have a beneficial effect on some mortgages, but not all. It will have little or no impact on jumbo mortgages — home loans for large amounts,“ writes Holden Lewis for Bankrate.com. “The government’s bailout of Fannie and Freddie won’t affect rates on home equity loans or home equity lines of credit, either.”
The long-term effects and results of this takeover are nearly impossible to predict. How will they be run? How soon will they be privatized again and in what form? What changes will this bring to the way mortgages are written in our nation and, most likely, in the world? Mark Zandi, chief economist of Moody’s Economy.com, acknowledges the far-reaching questions but points out that “the immediate impact of the takeover will be to lower mortgage rates and increase the availability of mortgage credit.” And that should help to hasten a meaningful recovery in the real estate market as well as the overall economy.
Still, it will cost Fannie and Freddie’s shareholders a great deal and also cost the American taxpayer, and the latter will doubtless be the subject of many angry editorials. An outright failure of Fannie and Freddie, though, would have been potentially devastating. Take the editorials, therefore, with at least a partial grain of salt.
For Additional Information please feel free to contact our office:
Alvin Steinberg, CRS
Coldwell Banker Incline Village Realty
917 Tahoe Blvd., Suite 103
Incline Village, NV 89451
800.666.4718 Toll Free
775.832.1888 Direct
775.832.1889 Fax
www.LivingLakeTahoe.com
email: Alvins@cbivr.com
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