Mortgage Rate News

This morning, both President Bush and Treasury Secretary Paulson announced that they are essentially pulling out all the stops in an attempt to rescue the beleaguered financial sector. Indeed, after allowing greedy speculators to build the economy based debt and on home mortgage loan decisions that were in no way sustainable, the the government is now riding to the rescue. The finger pointing has already begun as everyone tries, simultaneously, to avoid responsibility.

At any rate, MarketWatch reports on the plan unveiled by the government:

The U.S. government is moving to enact a broad-based plan to rescue the struggling financial system that Treasury Secretary Henry Paulson says will cost “hundreds of billions of dollars.” The multipart plan includes relieving banks of bad assets and halting some short selling in a bid to combat manipulative trading and protect investors.

What really concerned me about President Bush’s speech this morning was his apparent concern that Americans be able to start borrowing again. He didn’t talk about shoring up savings or trying to change our debt-based economy. He didn’t even extoll the virtues of a mortgage market that was much more discriminating in terms of borrowers who are approved for loans. Rather, he emphasized that Americans *need* to be able to have access to money they can borrow.

This bothers me. Especially since we have  spent the last eight years truly transitioning to a debt based economy that requires that ordinary Americans be in debt. The whole point of our economy now is for those at the top to make money off the consumerism and the debt we use to sustain it.

Now is the time to encourage us to save money and get our financial houses in order. It is not the time to talk about the importance of having access to consumer loans.

Tags: consumer loans, mortgage loan blog, home mortgage loan, mortgage market,
economic crisis, financial rescue plan, debt

The time is the late eighties. A Republican administration was coming to an end of eight years in office. In the financial sector, destruction was reigning down as the fruits of gleeful greed from the previous years’ deregulation turned out to be less than sweet.

Fast forward 20 years. It’s like we’re in almost exactly the same place.

In the late eighties, the government formed the Resolution Trust Corporation in an effort to buy all the assets from the savings and loans mess and prop up the economy. Now, as one would expect — since history is repeating itself, the government is considering this option again. The news has many hopeful that the government will not leave them to languish in the depths of despair, reaping the rewards of their greed-inspired über-risks.

A new structure wouldn’t actually look just like the RTC, but the sentiment behind it is the same. The Wall Street Journal speculates on what a new structure could look like in these modern times:

Any eventual plan isn’t expected to mirror the Resolution Trust Corp., which was created during the savings and loan crisis to hold and sell off the assets of failed banks. Rather, a new entity might purchase assets at a steep discount from solvent financial institutions and then eventually sell them back into the market.

But will an incarnation of the Resolution Trust Corporation really be as helpful this time around?

Most of what was put into the RTC were actual properties. The government could then sell them off. Now, though, things are a little different. Instead of tangible real estate that might appreciate in value, many of the “assets” that the government is thinking about buying are actually bonds backed by foreclosed properties. This changes things.

Of course, chances are that the move will stabilize the U.S. (and world) financial markets. But it may not actually help in terms of addressing the root causes of the problem. Instead, investors and others are getting a very clear message that risk that they take on will be socialized and spread out for everyone to help absorb. The other problem is that current measures will do nothing to prevent this sort of thing from happening again.

What do you think? Do you think its a good idea for the government to buy bad assets?

Tags: Resolution Trust Corporation, stock market, home mortgage loan, mortgage lenders

Now could be a good time to refinance into a second home mortgage — if you have the credit and the equity to do so. Why? Because a couple of things are happening that may make home equity loans a little more desirable:

1. The Fed could lower interest rates today.
2. The Fed has just injected liquidity into the market.

Of course, even if the Fed does not lower interest rates today, the rates are still fairly low for a second home mortgage. And if you can lock in a lower rate, you could save thousands on your home mortgage loan. Also, thanks to the liquidity in the market, there is a very real possibility that banks will be more willing to lend to you.

However, it is not just that simple. Banks are still wary, and you will need good credit and plenty of equity in order to refinance. No one is sure whether the housing market has reached bottom yet, and many mortgage lenders are still reluctant to lend money on a home that could go upside down.

If you do decide to try and refinance with a second home mortgage right now, here are some things to consider:

• Only refinance the amount of the loan you have left. It may not be a good time for a cash out home equity loan.
• If you can handle the payments, consider a shorter loan term than 30 years. Refinance for 20 years or even 15 years.
• Try a local bank. Such institutions may be more willing to work with you than the big banks.
• Shop around. Make sure that you look for the best deal. Mortgage lenders should be fighting for quality business right now.

Things are looking interesting on a variety of financial fronts right now. If a refinance will help your situation, it may be just the time to take care of it.

Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, interest rate decision, refinance