Friday, May 29, 2009

Mortgage Chaos

The government is buying Fannie Mae and Freddie Mac debt to force down yields and stabilize home prices. Could it reach still lower? 3.50%? Perhaps. But if it does it will likely be of extremely short duration as suddenly every mortgage in America will benefit from refinancing. If you haven't done your homework you will likely miss it. So do your homework, be prudent and conservative. If you plan in remaining in your home for more than a few years, this could be a windfall moment when you look back.

That was my view on April 10th and I am sticking with it. Particularly since it turned out to be right. Less than 1/10% from the bottom, I think we won't be seeing those rates again in our lifetimes. C'est la vie.

Unless the fed begins to increase purchase of mortgage backed securities massively that ship has sailed. Mortgage originators have frozen all new applications until they work through the backlog of committed but not closed loans on their books. Below is a letter being sent out by one mortgage originator.

John Barnyak