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WSJ: Treasury Considers Plan to Lower Mortage Rates to 4.5%
Calculated Risk —
From the WSJ: Treasury Considers Plan to Stem Home-Prices Decline The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new home loans ... The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages. ... Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants... Oh my ... ...
Prices and mortgage rates
SCSUScholars —
... and now Treasury Secretary Hank Paulson are doing. The graph shows that affordability has only turned around for us over the last few months, and as the quote above by June Fletcher notes correctly, that is only part of what we're waiting for. If you have $25,000 on your credit card bill and have a $20,000/year job, cutting your card interest rate from 15% to 10% or even 5% isn't going to get you out of debt. Prices have to fall enough to get buyers into the market, and for long enough that sellers recognize that they are better off getting out of that house and facing ...
Treasury wants to drive mortgage rates to 4.5%
Rolfe Winkler —
... into mortgage-backed securities in order to “revitalize” the housing market, which is to say prop up housing prices. Mortgage rates responded by falling below 6%. But that’s not low enough for Hank, so he’s considering a new plan to bring mortgage rates even lower, to 4.5%. According to an item on Journal website: ...
Housing Supply Fix? Grant Investors A Tax Exemption Benefit
Manhattan Real Estate: New York City Real Estate Tips —
A: I'm just a guy thinking out loud here about an alternative to help the housing supply problem in this country, instead of meddling with rates! Breaking news on WSJ.com states, "Treasury Considers Plan to Stem Home-Price Decline; Rates Could Be as Low as 4.5% for Newly Issued Loans". Instead of rate meddling, why not tweak the capital gains tax benefit for investors and make it similar to the tax exemption that is offered to primary residents who live in their homes for a period of 2/5 years? Let me explain.
First, the rate meddling news from ...
Paulson Still Doesn’t Understand Housing’s Problems
The Big Picture —
... would ease the market without appearing to bail out homeowners and lenders.
Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.
Bad idea, Hank.
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Sources:
Treasury Considers Plan to Stem Home-Price Decline
Rates Could Be as Low ...
House Prices and Interest Rates
Calculated Risk —
... And later today, the WSJ reported that the Treasury would "purchase securities underpinning [GSE mortgage] loans at a price equivalent to the 4.5% rate". The purpose, according to the WSJ: ...
Fed Watch: Potentially Very Bad Policy
Economist's View —
... leadership at the Federal Reserve, however, should have worked
to correct the moral hazard they infused into the financial system.
This is not to deny the importance of crisis management, but to point out
that when the crisis is over, you need to be able to correct for the excesses of
your actions. With that in mind, crisis managers need to be wary of taking
actions that they cannot revoke when necessary.
Which brings me to the trial balloon Treasury floated today;
leaking plans
to stem the decline in the housing market:
The plan, which is ...
Risk the Credit of the Republic for Homeowners
The Aleph Blog —
... Lowering the mortgage rate to 4.5% will subsidize borrowers who can refinance through conventional mortgages, but will do little good elsewhere. The subsidy will also add to the financing needs of the US Treasury, which is getting stretched. ...
WSJ: Treasury Considers Plan to Stem Home-Price Declines
Fund My Mutual Fund —
... Well this was going to be one of my 13 Outlier Predictions for 2009 - but it appears the Treasury Department is already on the case per the Wall Street Journal. As I said, with the way we are going to use Freddie and Fannie the cost to the US taxpayer is going to be far higher than the $200 Billion we were promised. It will come in the form of subsidies, principle adjustments for underwater home owners, interest rate buy downs, and the like. The cost will be enormous, and probably never measurable after it's all said and done. ...
Are You Tired Of Your Children Being Raped?
The Market Ticker —
... Now Henry Paulson wants to "stop home price declines" by, you guessed it, adding even more debt! ...
Keepin' It Real Estate: Treasury Tries to Re-Inflate Housing Bubble
Minyanville —
... ), the Treasury Department is considering a plan to push interest rates on purchase money mortgages down to 4.5% - well below the current market rate of around 5.75%. Artificially lowering rates so buyers can afford more house led us into this mess; it s doubtful the same tactics will lead us out. According to the Wall Street Journal , the plan is in the early stages of development, but officials expect the initiative to spur buying activity. The aim is to prop up home prices by enabling borrowers to afford more expensive houses. Columbia University economists believe such ...
Treasury wants to reinflate the housing bubble
Bubble Meter —
The U.S. Treasury apparently wants to fight the symptom by recreating the problem: The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages.Economist Tim Duy thinks this is "potentially very bad policy": The key word here is “temporary,” implying a sunset clause. This is a program, however, that screams permanency. Once the ...
Recession Silver Linings
Conglomerate —
... 3. If I wanted to buy a house (and hopefully I don't own one already), I might soon be able to lock in at 4.5%. (??!!??). Yes, that's not much of a bargain today as Treasuries seem to be paying slightly above zero percent interest, but in 10 years or so, someone will be arbitraging quite nicely (hopefully). Yes, I understand that first-time buyers might just prefer to let the prices fall instead of having prices propped up by easy financing, but you can't ask for everything in this mixed bag, I guess. ...
