By Michael Allen
In today’s Wall Street Journal, a lengthy article details the federal government’s action in taking over both Government Sponsored Enterprises (GSEs) to stabilize the US mortgage market. Another huge benefit to the action last weekend is to calm the fears among many foreign central banks. The central banks of most major foreign powers, including China hold huge portfolios of the bonds issued by these two mortgage giants.
These foreign central banks have become increasingly uneasy recently due to the unstable conditions in the worldwide for these bonds. To read the full article on the WSJ website, click HERE. The takeover action had a multiple benefit. In the US mortgage market rates dropped nearly a full quarter percentage point from 6.125% to 5.875% In addition, the stock markets rallied with the Dow Jones Average closing up 289.78 points.
On the foreign front, the move calmed many anxious central bankers across the globe who have been the largest buyers of US mortgage backed bonds and government bonds for many years now. It is a fact of life in today’s world that we live in a highly interconnected marketplace.
The main point however of this action was to stabilize the mortgage market and make mortgage financing available to consumers at favorable rates again. With the recent troubles Fannie Mae and Freddie Mac have experienced, they have reduced their funding of new loans by many Billions of dollars. This has reduced availability of mortgage financing and put a damper on many people’s plans to purchase a home this year.
Hopefully the recent takeovers will stabilize our mortgage markets and make mortgage financing more readily available to hopeful buyers. If you have been wanting to buy a home this year, check with mortgage lenders and see what programs are available with the recent changes. Hopefully you will find that your desires to own a home can indeed come true this year!
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