So the inevitable has finally happened. A few months back the government authorized themselves the power to take over Fannie Mae and Freddie Mac "should the need arise". Yesterday the government finally pulled the trigger on their carefully planned take over of the mortgage giants that are responsible for about $6 trillion dollars in mortgage debt between the two of them. This debt is now no longer held by the independent Fannie Mae & Freddie Mac. It is now you and I, the average tax payer that is responsible for half of the mortgage debt in the U.S.
Make no mistake; this is the largest government bailout of a financial company in U.S. history. The Government will immediately invest about $30M of liquidity into these companies, but in reality most experts agree that the Government will invest at least $250 Billion into the two firms before it is over. These are companies that reported about $14 Billion dollars in losses over the last year.
Why would the Government do such a thing you ask?
They never had a choice!
Had the Gov. not stepped in now and engineered this indefinite Gov. "conservatorship" the fall of these two behemoths was inevitable. Had we seen either or both of these companies fall it would undoubtedly have been the end for the U.S economy and likely a catalyst for a global meltdown. This is big stakes folks. There was no way Uncle Sam was going to let these companies fall, and hey if you are going to bailout the biggest financial firms in the country... why not make a little money while your at it right!
The Gov. will be given nearly 80% of preferred stock in the companies with a guaranteed 10% annual return. All those other investors holding stock are now in 2nd place if anything should happen being Uncle Sam :)
What does this mean to the average Joe?
Well here is the good news. The day after the Feds shot their bazooka at the financial meltdown, the 30 year interest rates fell from 6.25% down to 5.5% overnight! This is in large part because interest rates are risk based. The lower the risk the lower the rates. Now that Uncle Sam is taking charge the market is GUARANTEED by the Fed Gov. to not fail. No matter how much cash it takes to stay afloat Uncle Sam is willing to foot the bill. This means far less risk and therefore far lower rates. We are predicting that very soon we will see par interest rates in the low 5% range!
This not only provides lower rates but also more liquidity into a strangled credit market. The spigot just got opened a little further and we are now drizzling mortgage financing instead of dripping it. So in addition to lower rates and more liquidity we are predicting that the actual cost of banks lending money will decrease which should drive some investor interest back into the mortgage backed securities. This "could" result in slightly less stringent underwriting standards allowing more people to snatch up some of the excess housing inventory that is hammering home prices.
New construction has already decreased significantly so lower rates, more affordable loans, and more accessible financing could be the catalyst to get us on the road to a housing recovery.
What about the future of Fannie & Freddie?
This is where the Gov. is flying blind. Their hands were forced to step in and their "conservatorship" is open ended. This means that the truly hard decisions will be left to whoever becomes president of the United States in our next elections cycle and their Congress. Senator McCain has hinted that he would like to see the companies broken up or at the very least down sized considerably. Senator Obama on the other hand has seemed to tend toward more regulation but allowing them to remain more unchanged.
Yet another reason to stay on top of politics this year and delve deeply into the policies of our two candidates!
Here is to hoping you and your family can take advantage of the lower rates and cheaper financing... hey... you paid for it!
Source: http://www.fivestarsmortgage.com/mortgage-articles/12/
Tuesday, September 9, 2008
Tuesday, August 5, 2008
Is a Florida Cash out Refinance for you?
There are many factors that you should consider before doing a cash out refinance. Overall one typically cashes out to pay off other debts and consolidate them for monthly savings. Some people just want to have extra cash to do remodeling projects or to take a dream vacation. The reasons for cashing our on your home are as varied as the families that take out the loans!
One school of thought is that the equity in your home does nothing for you while it sits there. Especially in today's declining real estate market. The average depreciation on home values this year has been 13% nationwide. That is money lost to those with equity in their homes! Consider that by taking out as much cash as possible and investing it into money making ventures such as stocks, other business ventures, other real estate, etc... one can actaully use the equity as a means of making more money. The cost of taking the money must be weighed by the ability to pay it off and make a profit with the monies taken against the mortgage of the house. We have seen calculations that show by cashing out equity in your home and using those funds to make more money you can cut as much as 15 years off of the life of the loan. It requires a good game plan and a very strict hand to accomplish this, but for many this concept can be the key to a future of self employement and early retirement.
For others owning the home is the primary concern. They want to pay off the house as early as possible just for the pride of knowing they own their home and don't have to share ownership with a bank or lender. The above mentioned methods are one way to accomplish this in record time. If you lack the knowledge or willpower required to do that then perhaps a cash out refinance is not for you.
The number one reason for doing a florida cash out refinance is to save money monthly by paying off other debts. Cashing out and paying of car loans, credit cards, student loans, medica debts, and other bills not only saves money monthly but it also builds your credit score. The key to saving money is to ensure that you get the lowest rate possible on your new loan. It is important to work with a reputable company that can acquire the lowest rates possible on your new loan. For many families in the U.S. doing a cash out refinance free's up montly expenses and allows them to finally be debt free and save money monthly for a rainy day.
One cannot stress enough the predicament we are in with our housing market in the U.S. With equity disappearing faster than most could have ever predicted it is vitally important to act quickly if you are considering a cash out refinance in Florida. Our market is declining at a rate far quicker than the national average. Some areas of Florida are seeing values declined at a rate of 3% monthly. Don't leave equity on the table if you have been thinking of doing a refinance NOW is the time.
More information is available on the web at http://www.fivestarsmortgage.com/cash-out-refinance.
One school of thought is that the equity in your home does nothing for you while it sits there. Especially in today's declining real estate market. The average depreciation on home values this year has been 13% nationwide. That is money lost to those with equity in their homes! Consider that by taking out as much cash as possible and investing it into money making ventures such as stocks, other business ventures, other real estate, etc... one can actaully use the equity as a means of making more money. The cost of taking the money must be weighed by the ability to pay it off and make a profit with the monies taken against the mortgage of the house. We have seen calculations that show by cashing out equity in your home and using those funds to make more money you can cut as much as 15 years off of the life of the loan. It requires a good game plan and a very strict hand to accomplish this, but for many this concept can be the key to a future of self employement and early retirement.
For others owning the home is the primary concern. They want to pay off the house as early as possible just for the pride of knowing they own their home and don't have to share ownership with a bank or lender. The above mentioned methods are one way to accomplish this in record time. If you lack the knowledge or willpower required to do that then perhaps a cash out refinance is not for you.
The number one reason for doing a florida cash out refinance is to save money monthly by paying off other debts. Cashing out and paying of car loans, credit cards, student loans, medica debts, and other bills not only saves money monthly but it also builds your credit score. The key to saving money is to ensure that you get the lowest rate possible on your new loan. It is important to work with a reputable company that can acquire the lowest rates possible on your new loan. For many families in the U.S. doing a cash out refinance free's up montly expenses and allows them to finally be debt free and save money monthly for a rainy day.
One cannot stress enough the predicament we are in with our housing market in the U.S. With equity disappearing faster than most could have ever predicted it is vitally important to act quickly if you are considering a cash out refinance in Florida. Our market is declining at a rate far quicker than the national average. Some areas of Florida are seeing values declined at a rate of 3% monthly. Don't leave equity on the table if you have been thinking of doing a refinance NOW is the time.
More information is available on the web at http://www.fivestarsmortgage.com/cash-out-refinance.
Tuesday, January 8, 2008
Federal Reserve officials disagreed sharply in early December about whether the Fed should cut interest rates aggressively or not at all, according to minutes released Tuesday of Fed board meetings held in November and December.
Ultimately, the Fed board of governors and the Federal Open Market Committee decided to cut two key interest rates by a quarter-percentage point on Dec. 11.
Three of the 12 Fed regional banks requested a relatively large half-point cut in the largely symbolic discount rate at the Dec. 11 meeting, while two requested no cut at all, the minutes released Tuesday showed. The other seven banks requested a quarter-point cut.
The minutes reveal more disagreement about the course the central bank should take than had been seen in either the Dec. 11 statement or in the minutes of that day's FOMC meeting.
Subprime lending has all but vanished in the wake of last year's meltdown. 100% Florida mortgages are still available at increasingly lower rates due to these ongoing rate cuts.
Ultimately, the Fed board of governors and the Federal Open Market Committee decided to cut two key interest rates by a quarter-percentage point on Dec. 11.
Three of the 12 Fed regional banks requested a relatively large half-point cut in the largely symbolic discount rate at the Dec. 11 meeting, while two requested no cut at all, the minutes released Tuesday showed. The other seven banks requested a quarter-point cut.
The minutes reveal more disagreement about the course the central bank should take than had been seen in either the Dec. 11 statement or in the minutes of that day's FOMC meeting.
Subprime lending has all but vanished in the wake of last year's meltdown. 100% Florida mortgages are still available at increasingly lower rates due to these ongoing rate cuts.
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