Mortgage Rate News

Lending rates are falling right now, and this is good news. Indeed, today’s Election Day is bringing all sorts of good news to the people of the United States. There are indications that banks are starting to lend to each other again, and that could mean that at some point they’ll start lending to the rest of us. CNN Money reports on the drop in lending rates:

A number of U.S. programs aimed at easing funding concerns for banks and encouraging lending between financial institutions have also helped lower Libor rates. Such initiatives include lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.

As rates fell, two key indicators of risk sentiment showed that confidence in the market was improving, but credit still remains tight.

Credit remains tight; credit cards set to cause next leg of crisis

Despite some optimism over the falling lending rates, things may not turn out rosy. The next leg of the financial crisis is expected to be credit cards. Companies are seeing an increase in credit card defaults, and that could lead to a whole new round of problems for the credit market — and for consumers looking to use credit to ease cash flow in these tough economic times.

And, unfortunately, the short-term lending rates do not have much impact on long-term rates, like mortgage loans. So mortgage interest rates are still somewhat high, comparatively speaking. And the tighter credit requirements, combined with home values that are still low, are not helping those trying to get second home mortgage loans.

Election Day: Get out and vote

While the next president’s effects on the economy — and even on the housing market — will be limited, whether we have John McCain or Barack Obama will make some difference in the policies that are enacted. Today is your chance to get out and vote for the person that you think will best be able to handle this crisis and get us back on track.

Today is Blog Action Day. Bloggers around the world are uniting to address the issue of poverty — hoping to bring more attention to global poverty. This is an issue that requires some thoughtful action. When there are those of us who have so much — even during this time of economic hardship — it seems wrong not to reach out and help those who have so much less. After all, it doesn’t harm us when we help others prosper. But we do have the power to prosper on harm done to others. Instead, though, we should make efforts to help alleviate economic suffering.

One of the ways that you can fight poverty is to do so on the local level. Fighting homelessness and poverty is an excellent to join the fight and help others. Look around. Your town probably has some sort of a homeless shelter. There might also be a sort of halfway house that serves as a place where people can live while they get back on their feet. You can donate your time and money to these organizations in the hope that you can help reduce economic suffering and contribute to a brighter future for many.

There are also probably programs that focus on education. With the proper skills and knowledge, it is possible to escape conditions of poverty and eventually be able to afford some form of housing that provides stability and shelter. You know, a home.

Building homes for the homeless

Another problem is affordable housing. Programs like Habitat for Humanity and local neighborhood home building programs can actually provide housing options in a very real and tangible (and somewhat immediate) sense. You can donate your skills and time if you do not feel you have the money to donate. In many cases, your donations of time and effort can be as valuable as monetary donations. Willing hands are often needed to provide homes for those in poverty.

Tags: affordable housing, Habitat for Humanity, home mortgage loan, homelessness,
fight poverty, Blog Action Day, poverty

One of the issues that has been contributing to a lack of liquidity in the financial markets is the fact that banks have been rather reluctant to lend to each other. Without banks lending to each other (and businesses and individuals, for that matter), the flow of capital has been rather slow. Credit has been all but unattainable, and businesses and individuals have been unable to get the funding they need to keep their own operations — and the economy — going.

With the latest bank recapitalization plan, though, United States officials are hoping that changes. In a press conference that ended not too long ago, Treasury Secretary Henry Paulson pointed out that now is not the time for banks and other institutions to hoard cash. MarketWatch reports on some of what Paulson said:

“Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation. At a time when events naturally make even the most daring investors more risk-averse, the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.”

The whole point of the capitalization plan, he explained, is to get the money flowing. The point, he emphasized, is that businesses (and to a lesser extent individuals) need credit in order to keep up their necessary operations. As part of efforts to kickstart the credit market, Paulson said that $250 billion would be used to make preferred stock purchases in certain banks in order to increase capital.

$125 billion of that money is aimed at nine big banks that have already agreed to the terms of using the bailout money. Smaller banks will also be able to take advantage of the program if they wish. Bloomberg reports on some of the conditions of the program:

Participating banks will need to accept limits on executive pay and so-called golden parachute payments. They also will need to give the Treasury warrants for an amount equal to 15 percent of the senior preferred investment, with a strike price determined by the bank’s share price at the time of issuance.

Personally, as someone who is just looking at it from the standpoint of an ordinary person, this plan seems much better than others proposed. It follows along the lines of plans unveiled in Europe earlier. Instead of focusing on buying assets that are next to worthless, the government will instead have equity in companies that are likely to recover in the long run. This means that the government could actually make money on the deal. I also like that some of the excesses that have been enjoyed by company bigwigs, despite poor decision-making, will be curbed.

Fed chair Ben Bernanke and FDIC head Shiela Bair also spoke at the press conference.

Tags: Henry Paulson, Sheila Bair, home mortgage loan, Ben Bernanke,
bank plan, bank bailout, mortgage loan blog