Mortgage Minute

"Mortgage Minute with Kendee Blake"

There is nothing wrong with change, if it is in the right direction." Winston Churchill. And the housing and mortgage industries experienced a great change in the right direction last week, as the Federal government moved to support Fannie Mae and Freddie Mac, causing Bonds and home loan rates to improve significally and end the week around .25 percent better than where they began.

So why did the Federal governemtn take action? Fannie Mae and Freddie Mac both have issued many Bonds which over time mature, and Fannie and Freddie need to pay back the principal on the maturing Bonds. The way they raise capital to pay these maturing Bonds is to issue new Bonds, which happens every month. And as long as Fannie and Freddie can sell new Bonds this system works as well.

But the problems in the mortgage industry have reduced investor appetite to purchace these Bonds. Without the ability to sell new Bonds, Fannie and Freddie are less able to meet the capital requrirements to pay off the maturing Bonds. And if Fannie and Freddie were to default and becaome insolvent, the mortgage and houseing industries...and homeownders across our nation...would face enve more stuggles than we are seeing now.

So the governments decision to back Fannie Mae and Freddie Mac is great news for homecomers, because it ensures the continued liqidity of conforming loans nationwide and it ensures that buyers of this type of Bond have a safe investment going forward.

In other Bond-friendly news, we saw good news on the inflation front last week. Overall Import Prices declinded for the first time since December, thanks in part to the recent plunge in oil and gas prices. And Wholesale Prices, which help measure inflation, fell in August for the first time this year.

Overall, the good inflation news and the Fed's decision about Fannie and Freddie should lead to improving Bond prices and home loan rates in the long-term. With home loan rates at such low levels, it's a great time to review your mortgage situation and make sure you have the rate and program that best suits your current financial needs. I'd be glad to do a quick review for you-and your friends, family members, neighbors or coworkers as well-so just give me a call or email, I'll look forward to hearing from you!

For any questiongs call Kendee Blake 910-612-0531 or kendee.blake@alphamortgage.com