Why Rates Came Down
Posted on | December 3, 2008 | No Comments
A few weeks ago Fannie Mae released its first earnings report since the federal takeover. To say the least, it wasn’t good. The media used words like dismal and gruesome. The reason was Fannie Mae had the largest loss of any U.S. based company this year and yes; this was AFTER the federal takeover. So when Citi almost imploded right after this information was released, the government had to step in yet again to bail out a long standing financial institution.
What they did this time was to guarantee the bad mortgage backed securities to reduce the overall losses thus giving Citi some breathing room. This government guarantee has seemed to relieve some of the pressure for the banks thus giving them some incentive to loan money for mortgages, thus pushing the rate down. I don’t make commentary on what is happening, I just try to drill down what is going on into understandable chunks based on my understanding, which, I’m sure, is limited. At any case, I hope this helps you to understand the process if not the reasoning behind the moves made by the Fed and the U.S. Government.
Bottom line: if you are in the market to buy and home or wanting to refinance a home, now is a good time to do either.
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