Fannie Mae and Freddie Mac Surge; Mortgage Rates to 8% per Morgan Stanley
Posted on | December 28, 2009 | 1 Comment
Fannie Mae and Freddie Mac are seeing their stocks surge higher by over 15% in trading today as the Treasury announced they will not cap government assistance for these GSEs. Here is a quick piece from PicketPocket on the situation
“Shares of both Fannie Mae and Freddie Mac have surged upward Monday morning at the opening of markets. Traders sent the shares higher by 20%, impressed that the Treasury Department’s holiday weekend announcement that the federal government will remove the cap for governmental assistance for the two entities.
Both companies fell into deep trouble last year as they accumulated huge losses on home mortgages that they own, including risky “Liar Loans,” no-money down loans, and bad credit remortgage loans. These companies’ portfolios suffered paper losses that were so deep that they threatened the entire U.S. economy.”
Earlier this morning we heard from Morgan Stanley and their chief fixed-income economist feels that treasury yields will be up more than 40% in the coming years which is going to push the 30 year fixed mortgage rate to 7.5% or 8%. This obviously would be very bad for the overall economy and especially the housing market. Few people can argue that the low interest rate environment has helped to stabilize home prices.
At the present time we are seeing 30 year fixed mortgage rates around 5% so it might be a good idea to go ahead and get that mortgage application submitted before we start to see the strong move higher in treasury yields. There is a good chance that this move higher has already started as the 10 year yield has moved from 3.2% to 3.8% in less then a month!
Author: Jesse Wojdylo
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One Response to “Fannie Mae and Freddie Mac Surge; Mortgage Rates to 8% per Morgan Stanley”
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December 28th, 2009 @ 1:56 pm
Yeah, get your application in so you too can own an asset which declines in value the day after you purchase it.
Who is this clown writing this story?