Mortgage Rate News

Some mortgage bonds are struggling on the market right now. The solution? The United States Treasury thinks that the Federal Reserve should start buying troubled mortgage bonds. The New York Sun reports on the possible move for the Fed to start buying troubled mortgage bonds:

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, the manager of the world’s biggest bond fund at Pacific Investment Management Co., Bill Gross, said. While purchasing the some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.

Is the government really considering upping the taxpayer burdens already present in this country? It appears to be the case. While the Fed has said it’s not going to do as yet, one never knows. So far, the Federal Reserve under Ben Bernanke has shown that it will do whatever it takes to keep investors happy. And if it means more for taxpayers to worry about, or if it doesn’t truly benefit the pocketbooks of ordinary Americans, so be it.

Additionally, this is adding fuel to the fire in terms of the debate over how involved the Federal Reserve should be in terms of economic manipulation. The entire idea of instilling confidence in the market, and of economic stimulus, is one of manipulation and efforts to guide the economy. And, even though the Federal Reserve doesn’t print and mint money, it still has the authority — and the ability — in this modern age where information is more likely to be currency than actual currency, to “create money out of thin air.”

But, eventually, someone has to pay for it.

Tags: Fed buying mortgage bonds, money out of thin air, home mortgage loan, mortgage loan blog,
Federal Reserve mortgage bonds, economic stimulus, manipulate economy

The largest mortgage lender in the nation, Countrywide, has been have trouble for quite sometime. Subprime mortgage writedowns have plagued the company, and as the foreclosure rate rises, so do delinquencies on Countrywide home loans. The Motley Fool reports on the bad news for Countrywide:

Last week, the California-based home lender reported a nine-fold jump in delinquencies of at least 90 days in the past year, now totaling 5.4% of its $28.4 billion adjustable-rate mortgage pool. Perhaps more alarming was that 71% of borrowers from that pool chose to make the absolute minimum payment necessary, which doesn’t even cover total interest accrued, thus pushing loan balances higher every month.

Additionally, Countrywide has sustained losses due to home equity lines of credit — to the tune of $704 million in 2007.

But all that will soon be water under the bridge, right? After all, Bank of America has offered to buy Countrywide. But until the deal actually happens, there’s always a chance it will be scuttled. And Bank of America may balk as more mortgage market news, especially concerning Countrywide, rolls in.

If the deal is broken, then it means a very long haul on the road to mortgage market recovery. And those with Countrywide stock could find themselves stuck with large losses. But if it does go through, those who buy Countrywide stock now may be handsomely rewarded.

Disclaimer: I am not an investment professional. Nothing in this piece should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional.

Tags: mortgage loan blog, mortgage market news, home mortgage loan, home equity lines of credit,
Bank of America Countrywide, subprime mortgage writedowns, Countrywide stock news

When one thinks of financial planning moves, foreclosure isn’t normally at the top of the list. Much like 20 years ago no one would have put bankruptcy on a list of financial planning tools. However, bankruptcy has been considered a viable financial planning option in some circles for more than a decade now, even with the bankruptcy rules passed a few years ago. Now it looks as though foreclosure may be heading into the realm of financial planning as well.

Inman News offers insight into how foreclosure is increasing as a mortgage trend — and not just among the financially strapped:

Not only the social stigma, but also the financial pain of foreclosure has diminished. Landlords reportedly have put out the welcome mat for former homeowners despite their impaired credit. Everyone seems to acknowledge that even a foreclosure will drop off a credit report in a matter of a few years, and that then these walk-away homeowners will be ready and able to get new mortgages and purchase new homes. Expect them to do so just in time for the next upturn in the housing cycle.

In non-recourse states, lenders can’t pursue former homeowners for unpaid mortgage debt after foreclosure. And now that much of this forgiven debt can be excluded from taxable income, those who walk-away from a mortgage often can avoid the federal income tax liability as well. Not even the all-mighty Internal Revenue Service can touch these folks.

This probably isn’t going to do much for “economic stimulus.” If a home’s value falls, and the mortgage payments no longer seem worth the hassle, foreclosure is becoming the option of choice. It frees up the money used on a mortgage payment, and, much like cutting your losses from a poor investment choice, it cuts you free. Yes, it will show up on your credit score, but, like bankruptcy, it will eventually disappear.

Tags: financial planning, smart financial planning, home mortgage loan, mortgage foreclosure,
mortgage blog, mortgage trend, bankruptcy