On Wednesday afternoon it was announced that the Treasury is considering a plan to lower mortgage rates to 4.50% to stimulate the housing market and our economy. And this was widely reported by the media as I have received several calls on Thursday and Friday about this.

How would they do this? It appears that the Treasury is considering buying more Mortgage Backed Securities from Fannie, Freddie, and Ginnie and financing these purchases by issuing new Treasury debt, probably 10 year T-bills which are currently yielding under 3%. Thus, creating a spread and making money just like a bank does. How I love the power of Arbitrage!

Personally, I believe the Treasury could accomplish this by saying just 1 additional word-explicit. If Hank Paulson and Ben Bernanke would just say that the Treasury "explicitly" guarantees the MBS' of Fannie and Freddie, mortgage rates would tumble without 1 penny spent. But, I don't know any politician who knows how to do anything without spending money. Ugh!

 
Posted by Lonnie Glessner on 12/06/2008 01:30 PM   Comments (2)   Mortgage Rates in the ActiveRain Channel   mortgage rates  
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2 Comments on Just 1 Word Could Lower Mortgage Rates

DEC
06
2008
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That's Great news!
1:43pm • #1
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Hi Lonnie,  I really think this program could have am immediate effect on mortgages and therefor help the housing market.
1:47pm • #2


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Lonnie Glessner

Littleton, CO

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