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The HSH Blog

Mortgage & Housing Market News from HSH.com
July 24th, 2008

Will the Housing Bill Lower Rising Rates?



HSH remained ahead of the curve this week (we’ve been cited in numerous publications for the past few days) documenting the rise in 30-year FRMs. Concerns over inflation (the Consumer Price Index (CPI) rose 1.1% in June, and nearly 5% from a year earlier) and poor economic performance have contributed to the rise in mortgage rates. As lenders, as well as the quasi-government agencies Fannie and Freddie, flood the markets with bonds for sale in order to raise capital, demand has been drowned by supply, forcing rates to escalate to attract investors.

So, can the housing rescue bill help to lower mortgage rates? Unless Fannie and Freddie made an agreement with Treasury Secretary Paulson that we don’t know about, there’s nothing explicit in the bill that suggests it. Remember, as part of the bill is structured, it remains merely a lifeline for Fannie and Freddie, not a strong shift in their policy or practice, only an improvement:

The bill also strengthens regulation of Fannie and Freddie, and passage of the bill should make it easier for the mortgage giants to raise additional capital, according to James Lockhart, director of the Office of Federal Housing Enterprise Oversight. Freddie has pledged to raise $5.5 billion in additional capital.

The access to additional capital should allow Fannie and Freddie to purchase more mortgages. With the market already flooded, it only makes sense that they would have to jack up interest rates to attract some takers.

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4 Responses to “Will the Housing Bill Lower Rising Rates?”

  1. Tim Ramsey Says: July 24th, 2008 at 3:51 pm

    I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.

    Tim Ramsey

  2. Tim Manni Says: July 25th, 2008 at 12:39 pm

    Tim Ramsey — Thanks for reading, we appreciate it! Pass the word along, and again thanks for the positive feedback.

  3. Danny Daz Says: July 28th, 2008 at 11:59 pm

    No where the details of the bill are available. It is been said that the govt would support 300m towards the fred/fen to coverup the losses and help refinance for borrowers….. but at the end user/common borrower, what are the specific pros/cons. Can they avoid foreclosure, do rates decline… how does it affect public….can any one comment

  4. Tim Manni Says: July 29th, 2008 at 10:59 am

    Danny — thanks for commenting on the blog. To attempt to answer some of your questions, I made a post this morning (Housing Bill: What Consumers Need to Know) that provides a link as well as discusses the parameters of what consumers need to know about the bill, and which homeowners qualify for the $300 billion designated to convert troubled mortgages into affordable ones. Many news articles go over the main components, as well as the pros and cons of the bill (google news search: “housing rescue bill”). Only when there is a change is regulation does the gov accept public feedback. In this case, when there is a change in fiscal policy, citizens can contact their local representative to voice their specific opinion or input.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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