CNBC Said this was going t be the most historic trading day of this Century... because Bear Stearns was being sold to JP Morgan for $2 a share. Normally, bad news in the Economy is GOOD NEWS for mortgage interest rates. But these days we are not dealing with normal.
Rates have gone down a tad, and we are slightly under 6% on a 30 year fixed rate mortgage - but we are not WAY down. The Fed meets tomorrow, and on Weds. will announce if they are going to cut rates... and mortgage rates might tumble in concert with the Fed. But there are no guarantees!
Bear Stearns was in trouble, to no small degree because of mortgages sitting on their books. When Wall Street stopped purchasing loans from companies like American Home Mortgage last August - there were hundreds of trillions of dollars sitting on lines waiting for Mutual Funds and the Derivative market to purchase (and then put into everybody's mutual funds and 401Ks). Well - no one bought those loans. Those TRILLIONS of dollars ended up in CDOs and SIVs on the books of companies like Bear Stearns. Let us also not forget that Bear owned subprime companies ECM, and Encore and wrote the guidelines for subprime loans that it then sold in the worldwide market.
Today's mortgage loans are as safe an investment as they've ever been! Once Wall Street understands this - rates will come down.
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