Before the emergency Treasury Department takeover of Fannie Mae and Freddie Mac, mortgage rates were trending higher. As a result of the Treasury action, however, mortgage rates plunged. Rates on 30-year fixed-rate mortgages fell by the largest one-week drop in almost 30 years, and loan applications spiked as mortgage rates hit a four month low.
But low rates are probably not sustainable. Just as the credit score of a consumer shrinks as his debt grows, greater responsibility for saving ailing institutions hurts the reputation of the Treasury. The ongoing demise and bailout of other important financial institutions, in addition to Fannie Mae and Freddie Mac, reduces the quality and marketability of its monetary instruments as investor confidence in the Treasury erodes.
The chances of that happening are growing, because the Treasury may have to help other institutions or buy up tons of bad loans to get them off the market and stabilize our economy.
Here's why:
•American companies own approximately $22 trillion in risky financial instruments such as "securitized" mortgages.
•Because of a lack of government oversight, the whereabouts of this high-risk debt is nearly impossible to track.
•Many of these investments are now worthless, because the market for them has been completely wiped out.
•Which companies own these bad assets, and how long it will take before the worthless investments undermine their profits and leave them bankrupt, remains a mystery.
Until the Treasury gets some concrete answers to that $22 trillion question, and a more precise understanding of how it can remedy the situation even as the economy gets weaker, expect to pay higher mortgage rates. Those hoping to snag lower rates in the aftermath of the Fannie Mae and Freddie Mac takeover better hurry and do it while they're still available.
Center State Mortgage is your #1 source for the lowest interest rates in New Jersey and Staten Island! They have the background and experience to get you that perfect loan to give you your dream home! Choose Center State Mortgage for all your home loan needs!
But low rates are probably not sustainable. Just as the credit score of a consumer shrinks as his debt grows, greater responsibility for saving ailing institutions hurts the reputation of the Treasury. The ongoing demise and bailout of other important financial institutions, in addition to Fannie Mae and Freddie Mac, reduces the quality and marketability of its monetary instruments as investor confidence in the Treasury erodes.
The chances of that happening are growing, because the Treasury may have to help other institutions or buy up tons of bad loans to get them off the market and stabilize our economy.
Here's why:
•American companies own approximately $22 trillion in risky financial instruments such as "securitized" mortgages.
•Because of a lack of government oversight, the whereabouts of this high-risk debt is nearly impossible to track.
•Many of these investments are now worthless, because the market for them has been completely wiped out.
•Which companies own these bad assets, and how long it will take before the worthless investments undermine their profits and leave them bankrupt, remains a mystery.
Until the Treasury gets some concrete answers to that $22 trillion question, and a more precise understanding of how it can remedy the situation even as the economy gets weaker, expect to pay higher mortgage rates. Those hoping to snag lower rates in the aftermath of the Fannie Mae and Freddie Mac takeover better hurry and do it while they're still available.
Center State Mortgage is your #1 source for the lowest interest rates in New Jersey and Staten Island! They have the background and experience to get you that perfect loan to give you your dream home! Choose Center State Mortgage for all your home loan needs!
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