It's been a crazy month so far, with mortgage rates moving up one hour, and moving down the next. Today, the Federal Reserve announced that they were injecting another $200 billion to ease liquidity concerns.
In non-financial jargon, this means that the Fed is making more cash available to banks, since they have lost so much money as a result of the mortgage industry "meltdown".
The great part about the Fed's move is that it will allow banks to receive Treasuries in exchange for their mortgage-backed securities, otherwise known as mortgage bonds. Mortgage bonds are looked at negatively by the market since they've lost a ton of value as a result of the "meltdown."
Banks who have these mortgage bonds have not been able to sell them on the open market, because so few people want to buy them! The Federal Reserve is helping these banks out, since people are willing to actually buy Treasuries as opposed to mortgage bonds.
This lead to a big stock market rally, and bank stocks actually rose today... A great sign. Additionally, mortgage bond prices went up, putting lenders in the position to re-price rates even better today.
Tomorrow will be a light day for financial news. At 10:30 EST the Crude Inventories will be released, which should not have much of an impact on mortgage rates.
I'll be watching the market closely - so if you have any questions feel free to call my office at (949) 340-3531 or e-mail me at firstname.lastname@example.org.
Have a great night!
Galel Fajardo, CMPS®
President, Coast Mortgage Group