4% Rates: Rock Solid!

The Federal Reserve released implementation details on its previously announced program (dated November 25, 2008) to purchase mortgage-backed securities. This is a new step that the government has taken to demonstrate its resolution to keep mortgage rates low, help the housing market & distressed home owners. Only fixed-rate MBS securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae are eligible for purchase. Other products such as hybrid ARMs, jumbo loans, and structured bonds (CMOs, REMICs, Trust IO/POs, and other derivatives) are excluded. Purchases are expected to begin in early January 2009, and up to $500 billion will be bought, which is in addition to the Treasury’s agency MBS purchase program, which has been running at $20-25bn in recent months. The potential size of the Fed’s purchase program ($500bn) can take down most of the 2009 agency MBS net supply. Therefore, the program may drive conforming mortgage rates even lower, possibly solidly into the 4% range (compared with 5.25% which is about where they are now). Come get some! Pat Townsley, Senior Mortgage Broker, California Mortgage Advisors. http://www.ptre.net/ 415-485-1776