Fed Mortgage

Dona · by **Dona** » 24 Oct 2009, 15:12

In this time of crisis with american voter constituency regarding mortgage defaults, should fed punish lenders

Being that american mortgage holders are in a crisis and losing their homes, what level should the voters demand of their representatives that they require lenders to work with people who are losing their homes? Should lenders be rewarded if they work with mortgage holders and be punished if they do not. I think that people who feel this way should write their congressman about this issue and ask for help. An election year is coming up. Lets see change that helps all americans, and shows grace during this holiday season on home owners, and bless the scrogges who convert to helping their fellow man.

Katherin · by **Katherin** » 24 Oct 2009, 15:12

Lenders should only be punished if the borrowers are as well. Everyone who signed one of those mortgage agreements knew the rates would increase in time. The mortgage companies were banking on people's incomes improving over that same few years where they could manage the higher payments when they came. They were not luring folks into bad deals so they could take houses and resell them in a glutted market. I'm not prepared to defend or blame anyone on this. Hopefully Mortgage companies will find a way to salvage as many deals as they can. After all, it would be to their benefit to do so.

Kamala · by **Kamala** » 24 Oct 2009, 15:12

I have been pre-approved for a mortgage through my credit union. The loan is a 5-year ARM for 80% of the value, and a 5-year Balloon for 17% of the value, and I am putting 3% down on the house. I am set to close 1 week from today. I have a loan commitment from the lender.

I read in the news today that the FED is considering curring interest rates for the money that banks borrow, (which to my understanding is how they set thier interest rates?) by .25 to .50 %.

If they do cut rates, would that affect a credit union? Should it lower the rate that I am being offered for my home loan? Would I be foolish to ask my lender (credit union) if my rate goes down?

What are your thoughts?

Thanks!

Tomasa · by **Tomasa** » 24 Oct 2009, 15:12

Most likely it won't. The Fed rate isn't strongly correlated to mortgage rates.

Mortgages are more strongly correlated to T-bill rates, such as the 1-year T-sec. These go up and down depending upon how much money the govt. lends and how many people want to buy our bonds. It's determined more by China and Saudi Arabia than the fed. The reason for the strong correlation is that mortgages 'compete' with T-bills for money. Both are long-term, relatively safe places to earn some interest income.

-->Adam

Alfreda · by **Alfreda** » 24 Oct 2009, 15:12

Anyone know how to get the 3 month mortgage payments by the fed?

That was outlined in the 'spendulous' package?

Tova · by **Tova** » 24 Oct 2009, 15:12

It is my understanding that you are to contact your mortgage holder. They must apply for it on your behalf.

Zack · by **Zack** » 24 Oct 2009, 15:12

Why do mortgage rates keep going up after the Fed lowers their interest rate?

We're in the market for a house, and it would seem that the lowering Fed rate would trickle down to the mortgage business. Instead, those rates keep going UP! How do they expect people to help out the economy by buying homes when they keep making it so unattainable and unattractive?

Jermaine · by **Jermaine** » 24 Oct 2009, 15:12

Mortgage rates are not driven by fed rates. They are driven by the bond market, which competes with mortgage backed securities for capital. Investors need to buy the mortgages from the originators, and the rates are determined by their pricing models.

As a previous poster noted, mortgage rates follow the 10 year treasury most closely. The spread between the 10 year and mortgage rates has been increasing due to increased fears of inflation (which the fed cuts make even worse) and the general perceived riskiness in the mortgage market (forclosure rate?). As such, investors are saying they'd rather invest in other securities because the rates are not paying them enough for the risk they are taking. That is why rates sometimes go up when the fed cuts.

Lucie · by **Lucie** » 24 Oct 2009, 15:13

Hi
How come Fed rate is down and mortgage rate are up to the roof?
Thanks

Gladys · by **Gladys** » 24 Oct 2009, 15:13

The Fed doesn't affect the mortgage rates. The FED is the cost of Short Term loans to banks from the Federal Reserve Bank.

To finance mortgages with FED loans, the banks would have to keep renewing the short term loans, which would put the Banks in an ARM position since the FED rate varies so much.

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