BloodhoundBlog

There’s always something to howl about.

Tag: Treasury (page 1 of 1)

December 3, 2008

Treasury may lower mortgage rates?

by

Mortgage Officer

Author website

WASHINGTON (MarketWatch) – The Treasury Department is contemplating a proposal that would cut mortgage rates for new loans for homes, according to the Wall Street Journal.

The plan would employ Fannie Mae to offer mortgages with rates as low as 4.5%, roughly 1% lower than current rates.

The measure is under consideration as part of the Treasury Department’s continued effort to limit foreclosures, which has been at the core of the financial crisis. The plan would seek to revitalize the financial market without bailing out homeowners and lenders, the Journal reported.

As part of the proposal under consideration, Treasury would buy mortgage securities backed by Fannie Mae and Freddie Mac, in addition to those guaranteed by the Federal Housing Administration.

Fannie Mae and Freddie Mac guarantee a significant chunk of all new mortgages in the United States.

Treasury may set mortgage rates at 4.5% to boost sales – MarketWatch.

Okay, not to rain on everyone’s parade, but let’s take a logical look at the numbers and the statistics behind it.

  1. What’s the only way possible that I’m aware of to lower mortgage rates?  By raising the price of mortgage backed securities which lowers the rates on them.   Lower rates on mortgage backed securities equals lower mortgage rates.
  2. How do you increase the price of mortgage backed securities?  The only way that happens is by increasing the demand for them.
  3. How do you increase the demand for them?  Have the government step in and buy a HUGE (I’m talking many many many zeroes!) amount of mortgage backed securities off of Fannie and Freddie.
  4. How is the US government going to come up with that money?   All joking about printing presses aside, in reality, they are going to have to borrow the money.
  5. How do they borrow the money?   By issuing a LOT of US Treasury bonds to finance their purchase of mortgage backed securities.

So, what happens with the price of US Treasuries if suddenly there’s another $1 Trillion on the market?

  • Demand stays the same
  • Supply goes way way up because the government is flooding the market with more debt.
  • Price goes up down because there is more supply than demand.
  • Rates go up.

(Thanks Sean for correcting my Read more

September 29, 2008

An Update on the Bailout….

by

Mortgage Officer

Author website

and yes, after doing some more reading on it, I do still consider it a bailout.

I’m going to put a copy of a post that Yves at Naked Capitalism wrote in italics and then my comments will be interspersed in bold print and then I’ve got more thoughts at the end.

Hope this helps you understand it better.

Congressional Charade: Changes in Bailout Bill Cosmetic, and Everyone Knows That

For a quick, one-stop synopsis of the Mother of All Bailouts (as of this month), see this readable version at Clusterstock (we’ve become a recent convert to this site).

Reader and sometimes contributor Lune, who was once a Congressional staffer and still subscribes to the the inside-the-Beltway press, provided a wrap of their coverage of the bailout bill. It makes clear that everyone understands that turning Hank Paulson’s three pager into a 110 page draft made for a nice fig leaf but made virtually no substantive difference.

Gee, why doesn’t that surprise me.   They added 107 pages of rules and regulations and it’s basically just spelling out the same difference as before.

From Lune:

Well folks, we’re almost to a done deal (certainly closer than Thursday). The Hill papers are reporting that they’re getting closer in both the Senate and the House to the needed votes to pass the new bailout bill. Roll Call gives the most frank assessment of what happened over the weekend in an article entitled “Same Bailout, New Dynamic” (subtitle: Outrage Prompts Sales Effort).

All the late-night talks, last-minute demands and dramatic pronouncements aside, the fundamental structure of a $700 billion Wall Street rescue plan that Congress spent the weekend wrangling over has not changed significantly from the outline proposed by a bipartisan group of Senators and House Members last Thursday.

Did you hear that?:  It’s basically the same deal as last week Thursday, just spun differently.

“This is in essence the same,” said Sen. Bob Corker (R-Tenn.), who attended those talks.
. . .
Assuming enough House Republicans agree to vote for the package, it appeared that the House could vote as early as today, while the Senate might have to wait to take it up Wednesday after Rosh Read more

Inventing Real Estate 2.0

Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

Media Contacts