Mortgage Rate News

Citigroup Inc. got its fair share of hits, thanks to the mortgage market and credit market messes. Subprime mortgage writedowns, as well as other credit related writedowns, totaled more than $7 billion. So for quarterly earnings, Citi is reporting a $2.5 billion loss.

And this is good news.

New stock market conventional wisdom: “not that bad” is the new “good”

The news of Citi’s loss of “only” $2.5 billion is having a rather positive effect on the stock market. All around the world, stock exchanges are getting a bit of a boost as they contemplate the fact that Citi didn’t lose as much as analysts forecast the company to lose.

When mortgage lenders and others who deal with borrowers first started sustaining heavy losses as the mortgage and credit markets imploded, all sorts of dire warnings were made and all sorts of losses predicted. As a result of all the gloom and doom, snything that comes up “better than expected” or “not that bad” is considered a victory for that stock. And the stock market derives “confidence” that the worst of the crisis might be over. (Forgetting that this same thing happened last quarter, and things got worse.)

But, in the end, Citi needs to actually start making money. Posting gains and what-not. So BloggingStocks reports on the plans Citi has to do that thing the company was started for in the first place:

What will Citi do to start making money? It plans to cut $15 billion in costs in the next two to three years– It canned 6,000 people in the quarter — it will sell $400 billion in what CEO Vikram Pandit calls “legacy assets” and it will strive for 9% revenue growth.

Meanwhile, Citi has had some luck strengthening its capital base. It raised $13 billion in common and preferred stock during the second quarter which left it with a strong capital position — a Tier 1 capital ratio of 8.7% — well above its 7.5% target.

Tags: credit market, writedowns, home mortgage loan, mortgage loan blog,
subprime mortgage, subprime writedowns, loss Citi

For the second week in a row, mortgage interest rates are dropping. This is good news for would-be homebuyers who have had to contend with higher interest rates, even as the mortgage market stagnates. This could also be good news for mortgage lenders, who have been giving out fewer loans. Lower mortgage interest rates could lead to an increase in loans given out.

Lower interest rates save you money when financing your mortgage

Interest is the money you pay for the privilege of borrowing. When financing your mortgage for a home purchase, you interest charge is simply money that goes straight to the bank. You do not see any benefit from that portion of your mortgage payment.

The higher your interest rate is, the more money goes to the mortgage lender. This means that you pay more money when mortgage interest rates are higher. For a home that costs around $200,000, spread out over a period of 30 years, a 1% difference in mortgage interest rates can mean a difference of tens of thousands of dollars that you pay extra to the mortgage lender.

Lower mortgage interest rates dropping can make things more affordable for homebuyers. And that is important right now. It can make it easier for buyers to get home mortgage loans on foreclosures (which are becoming sought after by buyers and investors alike) right now.

How long will mortgage interest rates stay low?

Even though mortgage interest rates are dropping right now, things could change next week. Mortgage rates have been volatile, and Realtor.org reports that there could be reversal of the current trend:

Amid the nervousness, mortgage rates touched lows not seen since the first week of June. But inflation remains an issue, as evidenced by the Consumer Price Index for June, and will continue to spar with weak economic growth as the factors influence the direction of mortgage rates. The up and down yo-yo of mortgage rates seems likely to continue, with rates fluctuating within a range.

Tags: mortgage interest rates, mortgage rates drop, home mortgage loans, mortgage lenders,
homebuyers

There has been plenty of partisan wrangling over the housing relief bill currently making its way sluggishly through Congress. And there has been disputes between Congress and the White House. Now, though, a solution may have been found. Fannie Mae and Freddie Mac may actually get the housing relief bill through weeks ahead of when it could reasonably be expected otherwise. The Los Angeles Times reports on how the recent debacle with Fannie and Freddie may influence the housing relief bill:

The mortgage initiative unveiled Sunday by the Treasury Department and the Federal Reserve — which is designed to bolster confidence in home-loan giants Fannie Mae and Freddie Mac — requires approval by Congress. To expedite the legislative process, it is being attached to the larger housing bill as an amendment.

And, since no one wants to be accused of holding up the Fannie-Freddie package, differences are being swept aside over the larger measure to help some homeowners threatened by foreclosure.

In an election year, with the economy and the US financial system practically in ruin, nobody wants to hold this up. The collapse of liquidity for Fannie Mae and Freddie Mac could bring about the complete dissolution of the mortgage industry — that’s how influential the two government chartered institutions are. And how much money goes through them.

Besides, after Ben Bernanke’s testimony before Congress this morning, legislators are probably chomping at the bit to do something that they can claim will set the economy on the road to recovery. Bernanke gave is most pessimistic speech yet, turning directly from his optimistic statements weeks ago that the worst was over for the US economy. Now he’s all about uncertainty and expressing worries that there are hurdles he didn’t foresee to economic recovery.

Tags: Ben Bernanke, Housing Relief Bill, home mortgage loan, Fannie Mae,
Freddie Mac, mortgage loan blog, economy