New York Fed Enacts $500 Billion Plan To Drive Down Mortgage Rates

The Federal Reserve Bank of New York on Monday said it had started its $500bn plan to drive down US mortgage rates by buying securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, the government-run mortgage financiers.

Mortgage bond yields fell sharply as a result, extending a dramatic decline that followed the New York Fed's announcement of the programme on November 25. Thirty-year agency mortgage securities yielded 190 basis points over Treasuries on Monday, compared with 208bp on Friday.

Read the whole story here.

Comments

[bola47]

looks like the banks are the winners here. where is the guarantee that they will lower mortgage rates?

[Peter007]

The market will lower the rates. It's supply and demand all over again. Rates have dropped on the rumor that this was about to happen. FNMA now has lots of cash and they are going to bend over backward to get it invested in mortgages. They could buy mortgages yielding 3% and still make money. Rates are dropping..

[cayuse]

This has nothing to do with $200 Billion of bad loans. Not even the 8.5 Trillions we gave to the Bankster

It has to do with the greates transfer of wealth in the history of mankind

What do you think $8.5 Trillion would be worth if you invest it into the stock market with a DOW of 7500 and it goes to 14,000.

What leverage are we offering on the $8.5 Trillion, 1 to 40 or 1 to 80?

80 * $8.5 Trillion is $680 Trillion gain.

And you are worried my Gothom citizens. Relax, the Joker, Riddler, Cat Woman at Darth Vader have everything in hand.

[research]

It will make things worse.

They are paying off the losses on mortgage backed securities.

They are paying of the CDS CDO gambling debts.

If you don't understand CDS, you don't know what's really going on.

CDS: two folks betting on stock, THEY DON"T OWN.

[BlueBoomer]

The FIRST thing that needs to be done is to stabilize HOME VALUES...
That will free-up re-fis and home equity loans, as well as sales.

It can be done IMMEDIATELY AND AT VIRTUALLY NO COST...HOW?

The Fed Gov't. can issue a temporary directive to the appraisal industry to take all appraisals and once completed in the normal fashion, bump the value UP by one half of whatever percentage property values in that county/state/region (whichever is most appropriate) have declined since the height of the bubble, say July 2006.

For example, if property values in monroe county, usa have dropped by 30% since July 2006, then any appraisals performed now, whether for sales, re-fi's or home equity loans, would be done in the normal way, using normal criteria, but would then be increased by 15%.

This could be authorized in 6-month increments and stopped when values stabilize/normalize naturally.

The increase in transactions would help the appraisal industry, title companies, real estate agents/brokers, as well as renovation contractors.

AND DID I MENTION THAT IT WOULD BE IMMEDIATE AND WOULDN'T COST A CENT TO IMPLEMENT?

[Peter007]

Think a little bit. Real Estate appraisers don't determine values. They only report them. If an appraiser overvalues a house by 20%, it doesn't increase the value by 20%. It's fraud.
What you may be trying to say is that banks need to lend more money. Some loans were for 110% of the value of a house 3 years ago. Those were very risky loans at the height of the market.
A 110% LTV ( loan to value ) would be less risky now but politically unacceptable.

[JoeBlough]

Isn't fake value what got us here in the first place?

[Peter007]

This is Good news. It would have been better news had it occurred last year but the government is very slow moving. Very slow.
There is the law of unintended consequences that will hit the fan in one or two years , but by that time we'll all be thinking about something else. That's a result of the 420 generation.

[aweissnet]

I'm not buying. I'm one of those thrifty Americans prolonging the downturn.

If they give me a "bailout," I might think about buying. And, investing in real estate? Pffft.

[ResistanceisFutile]

If Obama wants to help the economy and help me stay in my home, he should buy by mortgage and reduce the interest rate to zero. The interest I don't pay can be saved or pumped into the economy.

Before you accuse me of wanting the government to help me, just remember the billions given to the banks that will not help anyone.

[Sundialsvc4]

It is a transparently obvious attempt to sell bad-debts to the Public, without actually doing anything at all to help the members of the Public.

The State of New York, and/or certainly the Congress, could simply limit the maximum interest-rates that can be charged (it's called "usury laws"), or impose remediations that would be aimed at keeping people in their homes.

You know, so we don't have "luxury homes" being burned during the night by the thousands across the country (as, a matter of fact, we already do...), and living in "Bush-villes" (as, a matter of fact, we ALSO already do).

No, "Uncle Sugar is EE-ZEE MO-NEE," and it's well-nigh impossible to turn away the allure of that.

[Peter007]

Sorry , you are wrong. They are not buying bad debts. They are buying securities that are guaranteed by the US government. They are as secure as our country.
The reason , people are being forced out of their homes is a lack of available financing. This action by the Fed. is a direct attempt to loosen up the credit markets.
I see it working already. I'm in the mortgage business and business has picked up dramatically since this announcement last month.
As financing becomes more available, home prices will stabilize and eventually rise.
Don't move out of your house. Its going up in value within 2 years.

[barakagirl]

the Fed is privately owned... they have their own profit making interest in mind at all times. They create these cycles to ensure continuous financial enslavement of the masses.
Sadly all our politicians are owned by bankers. Both BO (who I strongly support) and McCain voted for the financial Bailout under the threat of Financial Amarggedon.
People need to realize that the Feds is nothing but a fraud and the Federal Reserve Act of 1913 must be overturned.
How can you justify a "Central" Bank that has never been audited and whose shareholders are the biggest banks in NY?

[Peter007]

Good point. However, don't you have to dance with the one that brought you to the prom?
This is the system that we have now. They screwed up. Now they are trying to balance things out.
I think they will.
Getting rid of the Fed has as much support as Ron Paul has. When he ran for president he got 1%. Not much support there. Reality check.

[WIpatriot]

Considering the stupidity of the populace, 1% support does not mean he is wrong.

Your thinking that the rape and pillagers are feeling remorse and want to fix the mess they created is laughable.

[beaupritchard]

Government could create thousands of small businesses by just busting up all these financial and industrial companies that are "too big to fail" and funding the subsequent small businesses that move in to replace them.

Smaller businesses would employ more people generate more taxes, increase innovation and all the typical stuff small business is suppose to add to the economy.

Let's face it ... stepping in and saving these company from bankruptcy was a selfish move by Paulson to keep his friends from going under ... not act in the interest of the american people.

[Peter007]

Government policies always favor large businesses over small business. Thats the nature of the beast. Large business can always contribute millions to political campaigns. Big government is always better than small government. Yes, GM and Ford. Too many labor jobs at risk.

[WIpatriot]

Ever think what it would be like to stop feeding the beast?

[tomas0808]

They're flailing. Playing whack a mole. It's not gonna work because the system still depends on the masses spending money and buying crap and that isn't gonna happen for many years, even if we did have the money it'll take a long time to restore faith in the system. Even a war isn't gonna bring us out of this one, like what finally stopped the Depression.

[Peter007]

Point of interest. Both Germany and Britain emerged from the depression before the United States did in the late 30's because they were gearing up for a war. They both emerged from the depression early but look at the state of their countries in 1945. Tragic.

If the Fed can stabilize the housing market, other parts of the economy will pick up. It may take a few years but we had overspent for about 5 years. A little modesty may be prudent.
Interest rates are down, gas prices are down, the stock market may have bottomed, lower taxes are coming. The recession has been going for about a year. The average is about 15 months.
Its always darkest before the dawn.

[JoeBlough]

War spending helped get us out the Depression because we were an Industrial Nation. Now we are a Consumer Nation. War spending helps our overseas industries.

[heartlandjim]

Ronald Reagan called it trickle down. Now they call it tarp the banks a few trillion more and they will trickle down. We are going to go bankrupt as a nation folks. Look out! Its coming!!!

[truthforme]

Umm . . . we're ALREADY bankrupt.

[WIpatriot]

Only technically.

Well, maybe morally, too....

[ChWh]

Before long they will pay us interest to take their money. Unfortunately we have 3-5 more years of rate resets on mortgages so it'll be a long run until this mess is over with. Fasten your seatbelt and wait it out.

[rollingdivision]

At some point the US dollar will collapse. Ordinarily we don't get anywhere near to testing the limit of faith in the dollar. But it seems we are pushing the limits and unfortunately there is scarcely any way to know when the emotional limits of investors will be over whelmed. The scary thing is this will be an almost entirely emotion reaction if it comes, with investors abandoning the dollar at some point fearing a collapse. Then people abandoning the dollar will precipitate in the feared run on the dollar. As a panic, once it starts it may be unstoppable.

[vegasobserver]

If the dollar starts to collapse, I believe the Obama administration will do *something* to halt the collapse. It won't be just a half-measure, it will be something with real teeth.

The question is, how low will the dollar have to sink before they act? Will it lose 20% of its value against the euro? 50%? 90%?

A smart move right now would be to convert all your savings into a basket of foreign currencies, mostly euros.

As you earn money, keep squirreling most of it away in euros.

You're right, there is going to be a huge crash of the dollar in the next year or two -- the only question is, how far does it fall and how fast?

[GravitonX]

That begs the question: Abandon it for what?

[rollingdivision]

And that is what the US politicians are counting on. It may not be so much for a particular currency as much as not the US dollar.

[Peter007]

As of today, the US dollar is still the safest currency. The next level is the EURO and the E.U. will have to begin inflating their economies soon. The next level are commodities. When the dollar was falling, money went into oil and other commodities. Look at how that investment turned out. Scary.
Look for the law of unintended consequences to take effect in the next 15 months. . Something , unexpected, will rise in value.

[themodernleader]

The stated reason of lowering the interest rates is an absurd rationale. Lowering the interest rates on loans will do virtually nothing to reinflate the commerical and residential markets in real estate since they are sated with over building from the last bubble.
The main reason is obvious but unpalatible to ordinary Americans, therefore, not even suggested. The inferred promise to guarantee Fannie Mae and Freddie Mac debt is being faithfully paid out, many billions to foreign individuals and governments. The futility of the task will not be revealed until months or several years down the road as the defaults become a torrential, unbearable drain on the Fed's committments. Trillions of dollars of bad mortgages (sold as bonds), have been guaranteed.
Attempting to bail out bad debt wrapped in swindle is the height of disrespect for the American currency. It is also the height of sheer stupidity and incompetence of sacrificing short term relief for long term currency collapse. The entire bunch of miscreants running our financial system must be cleared out and able Americans emplaced to turn our financial system in a new direction. Otherwise, we will own dollars not worth a Continential.

[GravitonX]

The currency collapse is inevitable. The tide of business failures brought on by unemployment, which brings on more business failures and foreclosed mortgages, will mark the march. The Fed will either A) Bailout banks, which will leave hundreds if not thousands of communities with thousands of derelict foreclosures, which won't sell because there are even few qualified homebuyers (either by ruined credit or by tighted lending standards) than before or B) Basically bailout the Street by essentially giving all of these homes to people for pennies on the dollar (free) with dramatically reworked "mortgages," just to have them occupied and not drag down entire communities. In either case, you are talking about trillions, not billions, of dollars in transactions that will require the US government to basically print money and either direct inject or "sneak" it in for these deals (not necessarily into common circulation).

[MilwaukeeDan]

tdl,GX, I think you both are on to something, this smells rotten, they are going to destroy the dollar.

[rollingdivision]

The only thing we can hope for the US dollar, is that in the worldwide market, the dollar remains seen as the best bad currency.

[Javani]

It is not merely "inferred" any more.

Arguably Paulson exaggerated the sense of crisis to get a free hand to get trillions to repay and bulk up the mortgage assets owned by foreign reserves, borrowing the money to do that from much the same entities. It's doubly bad. But who says anymore Bush does not cooperate with the "World." He is the guarantor of them, with your money and your descendents' money.

[Peter007]

I disagree. The housing collapse was the main cause of the current crisis. It may have also been a symptom, but it also was also a cause.
There is a strong demand for housing in this country. People are forming new families and kids are doubled up with their parents. The problem is a lack of financing for homes.
When the cost of renting exceeds the cost of owning, there will be a flood of new buyers into the market. Its a cycle.
The most important factor in the cost of a house is the cost of financing. Thats being lowered.
The housing cycle takes years and not months to operate. Its not like stocks and earnings of companies. This is a two year process.
I'm seeing increased activity in my business which is the mortgage refinance business.

[stevielee]

$500 Billion more and not one dime of it will go to directly relieve homeowners that are in trouble - especially those that still suffering under the loansharking "adjustable rate mortgages" scams.

Why does all public monies have to be laundered through the oligarchical wealthy first - and if they are feelling particularly generous on a given day ( usually after their coffers have been replenished by the fed), then they just might let a few small indebted fish of their indentured hooks - throwing them back into the swelling sea of credit poverty.

If we has a modicum of decency as a social structure and nation, we'd have Bernake, Paulson, Chris Cox as the rest of our institutional Ponzi-ist do a public perp walk pronto.

[Peter007]

Look at the cash in your wallet. It says Federal Reserve Note. The Federal Reserve is a private organization. Its not a branch of the government. If you want money, you have to get it from the Federal Reserve.
The money IS going to homeowners. Banks had to " borrow" from the federal Reserve at 5%. Now they have to lend that money out or lose that interest payment.
Banks needed to have adequate capital before they could lend. Thats what the bailout was all about. When some banks used the extra capital to buy other banks, that did not deplete the capital. It may have added to their reserves. More reserves means they HAVE to lend more. Thats all they know how to do.
All adjustable rate mortgages are not scams. I have one an it costs me 2.3% interest. Its always been lower than a fixed rate. ( now at 5.5% ). I'm making money using an adjustable rate.

[stevielee]

You are all over this comment thread trying in vain to buttress and refute any criticism of your "beloved" FED and the financial system in genera. Adjustable rate mortgages ARE a SCAM Peatty. If you are making money from one, good for you, but the vast majority of folks who bought into this Ponzi scheme are scr*wed royal.

And the only reason the money "in my wallet" is a Federal Reserve note is because the ruling oligarchy hijacked our nation financial system early one - to ensure our eternal indentured and indebted status as citizens. The money IS NOT going to homeowners - as you incorrectly posit. The cold hard facts clearly show right now that the banks are hoarding our tax dollar'ed bail-out money and are NOT, I repeat NOT lending it out to anyone but of few of their inside "buddies", or only if they absolutely have to.

You must be one of those bottom feeding mortgage brokers who's interest it is to keep the whole can of worms crawling. You can continue to propagandize on behalf of the cleptomaniacal bankers and other assorted quick buck'ers, but your end is very, very near Pete. You and you kind will have to re-invent a whole new way to pillage and ravage what little is left of planet Earth.