I have been saying all year that the only solution to the housing crisis is to lower mortgage rates. Finally, the government has figured out how to enact a plan to do so.

Read the article that was published by the AP yesterday….

Treasury Department Considers Plan to Lower Mortgage Rates

Financial industry lobbyists are urging the Treasury Department to take steps to lower rates on 30-year mortgages to 4.5 percent.

 

AP

Wednesday, December 03, 2008

rendell ‘no life’ makes napolitano qualified, »rendell ‘no life’ makes napolitano qualified, napolitano

169 visitors also liked this.

 

powered by Baynote

WASHINGTON — Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market.

Under one proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.

If enacted, such a plan would be an unprecedented opportunity for anyone with good credit and a solid income who could qualify for a mortgage at the lowest rates on records dating to the early 1960s, said Keith Gumbinger, senior vice president at financial publisher HSH Associates.

“You would have the mother of all re-fi booms,” said mortgage industry consultant Howard Glaser.

The goal of the industry’s proposal would be to take advantage of the unusually large difference, or spread, between mortgage rates and yields on government debt. On Wednesday, the yield on the 10-year Treasury note yield sank as low as 2.65 percent, while the national average rate on a 30-year fixed rate mortgages was 5.75 percent, according to HSH Associates.

In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and a 30-year mortgage rate, but that spread currently hovers around 3 percentage points.

Analysts said that the government could use its ability to borrow money at low rates to in essence flood the market for mortgage-backed securities. This increased demand would tend to push down the yield on mortgage securities sold by Fannie and Freddie, which now average about 5.5 percent because of investor concerns about default risks. Once those yields fall, the theory goes, lower mortgage rates should follow.

That would have two benefits for the economy: Immediately adding money to the pocketbooks of homeowners who can refinance their mortgages and reduce their monthly payments, and eventually help arrest the slide in home prices since much lower mortgage rates would allow more potential buyers to qualify for loans.

“The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound,” said Greg McBride, senior financial analyst at Bankrate.com.

If the government does buy up mortgage securities, it would be similar to the effort announced last week by the Federal Reserve to purchase up to $500 billion of mortgage-backed securities from Fannie and Freddie. The two mortgage giants, which were seized by federal regulators in September, own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt.

The Fed, however, did not announce a specific target for mortgage rates, which plunged about a half percentage point after the announcement.

That caused new mortgage applications to more than double last week, according to the Mortgage Bankers Association’s weekly survey released Wednesday. Refinance volume more than tripled, and made up for nearly 70 percent of all applications.

Still, the industry plan is not likely to help borrowers whose credit is so damaged that banks don’t want to lend to them.

“It doesn’t do anything to help all the borrowers facing foreclosures,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “It’s going to benefit the people who have equity in their home, who have decent credit and can refinance.”

Treasury is considering several options, and could announce a decision as early as next week, industry sources said.

Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions the department may take in the future.

The proposal was reported Wednesday afternoon on The Wall Street Journal’s Web site.
Treasury could make such a proposal as part of a request for the second $350 billion of the $700 billion financial rescue fund, industry sources said.

Treasury Secretary Henry Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks, while not doing enough to help homeowners facing foreclosure.

In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.

The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.

Meanwhile, the National Association of Home Builders is leading a new “Fix Housing First” coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.

Get the best mortgage loan for you

When you decide to buy a home or refinance a mortgage, it’s a big step. 

Buying a new home is a source of anxiety, frustration — and a huge sense of accomplishment. You didn’t pick the house that was best for someone else, you picked the one that’s right for you! Find the mortgage loan that best fits your needs, too. “Less paperwork and more personal attention” means you enter a frustration-free zone from application to decision. Getting the right mortgage loan is like getting the keys to your new house! We can help you get there.

Refinancing your current mortgage has never been easier. If you thought refinancing meant getting buried under mountains of paperwork, think again! We make it easy and worry-free to reduce your interest rate and monthly payment. We can even help you pay down your balance more quickly for comparable monthly payment. Let our professionals guide you to the very best refinanced loan!

Tapping into your home equity is easier than ever before. You’ve been paying down your balance, and property values have gone up! Tap into that wealth and reward yourself. We’ll help with the best program to fit your goals.

Our mortgage professionals give you the personal attention you deserve and treat you with the respect due a valued customer. We understand you’re making a commitment in buying a new home, refinancing and mortgage or cashing out your home equity. So we make a commitment to you. We will help you qualify, apply and be approved for the right mortgage loan for you. Not anybody else!

Please navigate our website to learn more about us, what we do for you, and how easy it is to get started.