Mortgage News

Just when you think the world can’t get any crazier, it happens. What a wild ride. In the past few weeks the government has taken over Fannie Mae and Freddie Mac and also now has rescued a major insurer, AIG, to the tune of $85 billion. In the meantime the government also let Lehman Brothers fall by the wayside without a rescue. Now the stock market has rallied upon the news that the Feds will start purchasing distressed mortgages from financial institutions. In a few hours the news mostly reversed a drop of almost 1,000 points over one week for the Dow Jones Industrial Average.

It is the housing crisis causing the financial crisis. Institutions are weighed down by mortgage debt that is defaulting. The more severe the crisis, the lower rates have fallen. And it is lower rates that can hasten the end of the housing crisis which will also end the financial crisis. As rates go lower and housing demand picks up (reports have indicated that this is already starting to happen), confidence will be restored in the mortgage markets. And this confidence will help banks lessen their present round of tightening of guidelines that is shutting many prospective homeowners out of purchasing their dream home. It may take some time but we say–let the next cycle begin!

Congressional leaders and the Bush administration are working with Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke to prepare a massive intervention to revive the U.S. financial system. The proposed plan reportedly includes using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems and allowing them to again lend money. Paulson and Bernanke urged lawmakers to approve the plan rapidly, presenting what some described as a “chilling” picture of the state of the financial system.  Congressional leaders were told that the consequences would be grave if the legislation doesn’t pass by the end of next week. Taking over Fannie Mae and Freddie Mac, creating a new source of funding for investment banks, and assuming control of insurance giant American International Group obviously hasn’t been enough to end the crisis. It hasn’t stopped $79 billion in withdrawals from money-market funds, which are a critical source of funding for the U.S. financial system. "The costs of doing nothing are enormous," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. Source: The Washington Post

Activity is slowing in the commercial real estate market in response to tightening credit and weak economic growth, according to the National Association of Realtors. In its latest Commercial Real Estate Outlook, the NAR reports that financing problems stemming from the crisis on Wall Street, not a lack of demand, are curbing real estate transactions. "Although capital remains available for residential loans, the credit crunch is pronounced in commercial lending," said NAR chief economist Lawrence Yun. "Combined with a slowing economy, the lack of credit is curtailing activity in the commercial real estate sectors. As a result, there’s been a slowdown in the net absorption of space, which is leading to higher vacancies and more modest rent growth." Source: National Mortgage News

Current Indices For Adjustable Rate Mortgages
Updated September 19, 2008