Thanks for the comments everyone...sorry about the late response.  I was getting a ton of proxy errors earlier. 

Jason Crouch - You did do well.  Who knows, this might not happen after all, it's just speculation at this point.  Thanks for the comment.  I enjoy your blogs by the way!

Jason Ellis - Yes I agree it won't solve the problem, and the speculation of this may actually cause people to sit on the fence for now, so it's our job to keep our buyers informed as news breaks. 

Donna - It's amazing how many people "sit on the fence" when rates are at or near 40 year lows.  I remember when I was quoting almost 9% to people many years ago..they wouldn't even blink.  But the prospect of getting just a little bit better makes many people freeze.

Charles - I think we would have inflation on the order of post-war Germany if the govt did that.   50% of all the mortgages would equate to several Trillion dollars.  And the gov't and the Fed have already either pledged or guaranteed between 4 and 5 Trillion in various forms, depending on who you ask.  At some point, there has got to be an end. 

Jeff Bolinger - Yes, it's speculation.  And yes, I believe you are correct that rates did not drop as much as I stated in the blog.  I was looking at a past client's profile that closed around that time and forgot she paid an extra point.  The rates dropped around .625 temporarily, but quickly rose back to levels before the news broke.

And from what I understand about Ginnie Mae and FHA rates, Ginnie does not actually issue MBS anyway.  They are ultimately securitized by Fannie and Freddie and are just guaranteed by Ginnie.  I don't understand enough about the secondary market to really make an informed opinion on that, other than what I've just stated and read on Ginnie's website.  http://www.ginniemae.gov/about/about.asp?Section=About

And as far as limiting this to purchases, I'm confused as to exactly how they would go about this since the rates for both are priced the same.  So what would they do?  Create two sets of rates, one for purchases and one for refis?  Or just add a hit for refis?  Not sure I can comprehend the logistics of that.  If the Treasury buys up pools, the entire GSE backed MBS market will lower in price.  If you add an adjustment for refis, whose pocket does that money go in?

I'm not educated enough on the MBS market to really input more than that.  Please respond when you get a chance.  Thank you.

Mark - I agree with you about the slowdown.  There are many reasons, and there's no doubt that homes and rates are more affordable then they've been in years.  A bad decision?  Maybe.  I will reserve final judgment until I hear all of the details.

Lou - Don't believe it until it's on my rate sheet.  It's not reality just yet.

Mortgage Express - I agree with you to a point.  I think there needs to be a new loan that offers self-employed borrowers (especially those who own corporations and may be only taking a small salary and leaving much of the income in the company) good rates if they meet the "common sense" test of low risk.  In other words, if they have strong reserves, an excellent credit history, and especially if they are refinancing an existing mortgage to a lower payment that they've demonstrated the ability to pay on time.    

But as far as a stated program for anyone who just has a good credit score but employs "liberal" accounting, I'm not for that at all without the consideration of other factors.  In one respect, a self-employed individual tells one agency of the government (the IRS) that they don't make any money.  On the other hand, they want to be able to state income to another branch of the government (Fannie Mae, FHA, what have you) and get a government insured loan.  If he "really" makes more money then he is claiming on paper, then he should be reporting that income to the IRS.  You might disagree with me, but I'm pretty sure the IRS would see it my way.  If he really makes more and is not being truthful on his deductions, then he's committing tax fraud.  My take is you can't have it both ways.  You either report your true income, pay taxes on that income like everyone else, and you get the luxury of a loan that's agency backed.   Or you engage in "liberal" tax accounting, pay far less in taxes than someone who is a W-2 employee and actually has to pay taxes, and have to accept the fact that your income is what your tax returns say it is.  Stated was never meant as a way to beat the system, it was designed to reduce paperwork. 

But show me a system where compensating factors can allow someone who has strong reserves, a good down payment and a strong credit profile can get an agency-backed loan with a rate similar to that as full doc, and I'm all for it.  If your landscaping guy has $100K in the bank, good credit history and depth, I would loan him the money myself.  Except I don't have the money, unfortunately.  It is a shame that people who meet the common sense definition of "low risk" are getting stuck with terrible loan programs, but there has to be a standard.  Obviously the one we have now isn't working.

Fast and Easy was a perfect example of how not to do stated income.  Have a 700?  You get a loan. No need to even show bank statements.  That makes no sense. 

Steve - Unfortunately some of the loans that were done (especially pay option ARMs in high cost areas) were made to borrowers that probably couldn't afford the payment if the rate were at 0%.  And stopping foreclosures for 120 days would mostly just delay the inevitable, IMO.  As far as lowering rates to 5%, they already are almost at 5% for people with good credit that can prove income.  Making loans to people with no standards will just delay this another few years, and the problem will be that much worse.  Home values need to fall in areas where the exotic loans allowed them to get out of control. 

Gynell - If I ever get done typing these responses, I'm going to come meet you for a drink :)

Matthew - Believe it or not, I agree with you that the end result of the collective bailouts, guarantees, swaps, discount lending, what have you, will ultimately result in massive inflation that will, coupled with the 65 Trillion dollar gap in government commitments versus expected receipts over the next 20-30 years, result in the eventual collapse of our financial system unless me make some major changes. Inevitable?  No.  But we're quickly getting to that point.  All I can say is that i'm putting a substantial portion of my extra cash into gold and silver, and I think everyone should consider that (if you can even find it right now).

 So, is this a terrible proposal?  I'm going to reserve judgment until I hear exactly how much the government is going to have to spend to manipulate the rates down to 4.5%.  We're really not that far off right now anyway.  Who knows.  The market may adjust enough on its own before they make a final decision.  Probably not though.

I'm just as upset as everyone else about the Trillions of dollars that have been spent and pledged to bailout Wall Street and other people who made poor decisions.  But if we're going to spend money on anything, I'd rather see it go to something like this that's actually has a chance of helping the market stabilize (as long as it's not keeping values too high in areas where they really need to come down).  Remember, I'm in Texas.  We don't have million dollar shoeboxes here like in California.  Values are in line with median incomes here, so this would be a good thing for our area, IMO. 

So where are we right now?  With a boatload of debt and probably a credit default swap bombshell that more than likely hasn't even begun to hit the fan.  And at this point, we're arguably already more socialist than China. 

But at least this program will do more to help Main Street than Wall Street. 

Everyone else.  I'm out of time, but thanks for the comments!  I will check back tomorrow and try to respond to all of you. 

Janice - I think  you make an excellent point about the future value once rates inevitably start to climb higher.  I think at this point many people will be left with no other choice but to remain in their home for the long haul to rebuild some equity.  The trend of upgrading homes every few years might creep to a halt for the majority of Americans for quite some time. 

thanks for all the other comments.  again, i'll update as new information about this proposal breaks