1. I've already heard that a lot of economist are saying that there could be a significant drop in mortgage rates. I'm not so convinced that we're going to see THAT BIG of a drop for a couple of reasons:
- The US Government just became on the hook for an additional $5 Trillion in debt and that will have an impact on the cost of treasury debt and so forth.
- The additional borrowings by the government are going to have an impact on the value of the dollar and that will make US debt more expensive.
- The only thing that has really changed is that the "right to foreclose" on Fannie and Freddie has actually happened. It hasn't changed that much. But we'll see. I hope I'm wrong. Our rates dropped by .25% today.
2. Volatility in the financial markets will be the "norm" this week. Expect big fluctuations as the markets attempt to sort out what this all means and what happens from here.
3. The government did this to prevent the mortgage markets from seizing up. That was a necessary step because having a mortgage market that keeps lending money is crucial to eventually working through the housing debacle that we are in. However, there are substantial issues in the mortgage world that aren't being solved by the takeover.
4. No substantial changes in programs or underwriting guidelines. The goal of the bailout was to keep Fannie and Freddie functioning and that will happen, but it's not going to make credit a lot easier or downpayment guidelines lower. Let's face it, Fannie and Freddie weren't making any money doing things the way they used to, so I don't think we'll see a return to that.
5. As the markets realize that the fundamental issues in today's housing/economic/credit market crunch haven't gone away, we'll see the euphoria of the first day or two slip and the value of the bailout will diminish. However, it will continue to keep the housing market moving so we can attempt to work through the inventory issues and eventually find a bottom and start building from there.
Comments(0)