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How the Government Blew Up the Recovery from the Recession...and rates as well!

By
Mortgage and Lending with Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 NMLS ID# 158606

Had a great conversation with a guru in the world of mortgage lending.  This individual is a hawk within our mortgage industry. 

We discussed a number of things that today that related to the mortgage industry.  When I asked about the recent implosion about the mortgage industry he brought up some interesting dialogue.  A few incredibly interesting points.  First, the point that I knew....Mortgages and Real Estate Lead the Way out of a recession

1)  THE REAL ESTATE AND MORTGAGE INDUSTRY HAS BEEN THE LEAD EACH AND EVERY ECONOMY OUT OF IT'S RECESSIONEvery recession ended with a real estate boom.  Sometimes it's been both the real estate boom or it could have begun with just a mortgage refinance boom.  But from December until now, we've enjoyed a refinance boom.  However, for the last 2-3 weeks the bond prices have dropped by the most insanely fast pace that I've seen in my 15+ years in lending.  A virtual free fall in bond prices.

2)  OBAMA'S SPEECH LAST WEEK - THE GURU POINTED OUT THAT WHEN OBAMA SPOKE TO Russia and China over the last two weeks, he stated "the United State's Economy will rebound and make strong because both China and Russia continues to buy the long term debt of the United States."  There was a self-aggrandazing attitude and arrogance coupled with a "given expectation" that they would continue to buy our debt.  Needless to say, the Chinese audience was laughing at him at this remark.  For the Chinese, humility is king.  The Russian government wasn't interested in their role either.  As a result,

3)  FANNIE MAE JUST ANNOUNCED YESTERDAY THAT both Russia and China have sharply decreased the amount of debt from the United States that they had been buying.  It was a marked and sharp decrease effectively immediately after the speeches last week.

4)  THE CREDIT RATING OF THE UNITED STATES HAS BEEN SO HIGHLY RATED.  If our credit rating drops, then we drop from a first tier country to a 2nd teir or third world country status.  We have never been that....ever!  And we can affectively kiss whatever remaining status we have in the world goodbye.  The bottom line is that our debt is no longer a preferred by international and overseas investment community.  That means that they believe that the United States of America will default on it's debt.  Sooooooooooo.... what does that mean in common english please?

OTHER COUNTRIES DON'T WANT BUY OUR DEBT! 

Bond prices drop as a result and rates go up when bonds aren't being purchased.  Needless to say, life just ain't that good when we're in the midst of a recession and cockiness of our leadership drives off investors.  With no investors, the United States is really exposed. 

I'm not preaching panic here, but I am concerned that our leadership can't rely on the government (you and I) to continue to buy our own debt at the pace they were.  They, too, just announced a slow down in purchasing our debt.  It might not be pleasant to talk about but we need that bastian of hope.

After all....it's going to be real estate that leads us out of this recessoin.

 

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Comments (10)

Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Larry- They will just go and print more money. Do you have any idea of how much money they are printing every single day right now? IT is scary. This has to stop and the people have to stop it. But does anyone have the testicle fortitude to do so?

Jun 11, 2009 01:41 AM
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

Thanks for the explanation.  It was straight forward and easy to understand.

As for being laughed at by the rest of the world, we apparently no longer have an Office of Protocol.  Arrogance rules.

Jun 11, 2009 01:43 AM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Nestor and Katerina...it's sad, isn't it.

Susan....we need to fuel home sales and a lower mortgage rate market....but they can't seem to see that.

Jun 11, 2009 01:50 AM
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I am not sure I agree they don't see it.  I think the more likely - and admittedly, scarier - possibility is, they do INDEED see it.  And are intentionally taking this route.

They are not that stupid, which only leaves the most plausible explanation;  they don't desire to fuel home sales. They don't desire to stimulate the economy.  After all, control is easier when the economy implodes.

Occam's razor.

Jun 11, 2009 02:11 AM
Home Loan Search.Online
Home Loan Search Online - Newnan, GA

It amazes me the arrogance of our leadership. Can you see the inflation on the horizon...

Jun 11, 2009 02:12 AM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Larry: Good points. Thanks! I think the purchase market, which is not as susceptible to rates, is starting to take off. If that's the case, no worries. Refi's are nice but short-term. Purchase cycles last longer and I'm seeing a lot of people out looking. I do agree with you about the government's role though. Personally I don't like it. Take care.

Jun 11, 2009 02:19 AM
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

This makes things a little clearer. I wondered how much the US purchasing of MBS played into this, now I see that that is only a small portion. The arrogance that our president has could and may be a major, major blow for our country. "Pride goes before a fall"

Jun 11, 2009 05:48 AM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Susan...I think we have a lot of similar ideologies, but I think that they really are that stupid.  In other words, I think about 3 people out of every bill or project know what it's about.  The rest are on the bandwagon or really just don't understand the problems before them.  It's a shame really.  They're here to serve us, not themselves.

Paul...thanks for chiming in.

Steve....I think the statement "because of your continued investment in our debt, our road to recovery is..."  should have been shelved.  Instead, "we are grateful and humbled by your investment in our country.  Let the United States be a leader in the road to world prosperity."...blah, blah, blah.  The arrogance is obvious.

Jun 11, 2009 06:05 AM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Larry, you said, "THE REAL ESTATE AND MORTGAGE INDUSTRY HAS BEEN THE LEAD EACH AND EVERY ECONOMY OUT OF IT'S RECESSIONEvery recession ended with a real estate boom.  Sometimes it's been both the real estate boom or it could have begun with just a mortgage refinance boom. "

Yes but some in high places just don't get it.

Jun 11, 2009 09:07 AM
Cynthia Tilghman, Realtor® Onslow County NC Home Specialist
Kingsbridge Realty, Inc - Hubert, NC

Hi Larry,
What's the say, "the blind leading the blind" ---yes, I think we have a lot of people in Congress with "poor vision". 

Jun 11, 2009 09:50 AM