Mortgage rates are rising, despite the government’s efforts to hold them down.
The government can’t control all the factors that affect mortgage rates. Mortgage interest has climbed because more borrowers refinanced when rates fell and boosted the supply of mortgage bonds.
Experts also attribute rising rates to expanded borrowing by the government to pay for stimulus packages, worries about Fannie Mae and Freddie Mac, and concerns about whether the central bank will continue to purchase mortgage bonds after June.The suggestion that the government solve the problem by creating an entity that offers 30-year mortgages at preset rates of 4 percent or 4.5 percent has drawn criticism.
“Not a lot of buyers are likely to want to buy a 3.5 percent mortgage-backed security, so the government may end up being a significant holder of these loans,” said Nicholas Strand, a mortgage strategist with Barclays Capital. “And that number could run up to trillions of dollars.”
Source: The Wall Street Journal, Prabha Nataraian (02/03/2009)
Good move Fannie Mae: “In a move that provides relief to thousands of renters who face eviction” READ
U.S. home prices fell 5.5 percent in July compared with the same month a year ago and are about equal to where they were in Oct. 2005, according to the Federal Housing Finance Agency.
Prices were down 0.6 percent from June on a seasonally adjusted basis, according to the agency.
James Lockhart, director of the agency, urged Fannie Mae and Freddie Mac to loosen lending standards to encourage more sales.
“I expect any changes to reflect both safe and sound business strategy and attentiveness to the (companies’) mission,” Lockhart said Tuesday in testimony prepared for a Senate Banking Committee hearing. He also said that modifying loans for troubled borrowers should be a “high priority.”
But some observers think availability of mortgages is only part of the problem. “The crash of other financial assets has made folks rather uncomfortable,” said Keith Gumbinger, a senior vice president with HSH Associates financial publisher. “It’s not about keeping Fannie and Freddie afloat any more.”
Source: The Associated Press, Alan Zibel (09/23