Moday Mortgage Update 12-15-08
Posted on | December 15, 2008 | No Comments
Thank you to Katie Mahoney, Carolina One Mortgage 843-345-7009
Capital Markets Update:
Christmas shopping in the malls would be awesome – without the people.
With yet another week flooded with negative economic reports, the market didn’t really tank. I suppose this could be the first real step to a recovery. Just like in the movie Groundhog Day, it seems that every day when we wake up, it’s the same stuff over and over again. Once again, all eyes last week were and still are on the Auto bailout. Late last week, the Senate didn’t follow suit with the House, and voted not to authorize the $14 bridge loan. However, it looks like the White House will take a chunk of the money designated for Wall Street to prevent two bankruptcies and thousands of more layoffs. This would put the unemployment rate at unimaginable figures. Apparently it doesn’t matter to elected officials that the auto workers who own their home would be almost forced to face foreclosures. I’m not too sure where an auto maker employee can go to find a job in the state of Michigan? The main premise behind the opposition is that the short-term loan isn’t the long-term answer and that even with the money they are running on fumes (ba-rum-bump).
The question now is, does the Treasury have the right to use the funds under the Emergency Economic Stabilization Act to bail out the U.S. auto makers? Not sure. Apparently, the bill is so vague that it can use the money for just about anything, including buying the Green Bay Packers a new defense. Remember, of the $700 billion, the first $350 billion went to banks. By law, the Treasury cannot get the other $350 billion without Congressional approval. This is what they were seeking the $14 billion from. Now that Capitol Hill disappointed, the Treasury can raise money by selling some of the preferred stock it owns in the 80 or so banks it funded (this is what the initial $350 billion was used for).
If the big three don’t get the loan, and GMAC with its banking division, Residential Capital Corp are forced into BK, the question that will need to be answered is how are they supposed to sell almost $400 billion in mortgage servicing rights? Until recently, perhaps Citi was in best position but not so much anymore.
Get ready for a busy week as this will be the last full trading week of the year. Start thinking about your New Year’s resolution. Most eyes are on what the Fed will do with rates when they meet this week. Currently, the Fed Funds rate is 1%, and most expect the half-point cut. A few think the Fed may cut rates down three-quarters of a point, which would be the lowest level on record since 1954. I am going to keep my ears perked to any further developments being taken to get mortgage rates down to the 4.50% target as recently reported. As said in the past, the housing market can’t really recover until consumers start purchasing homes. With rates below 5.0%, that may bring some buyers out of the woodwork. On Tuesday, look for reports on housing starts and CPI (consumer prices), and the Fed announcement. On Thursday, we will get reports on jobless claims. Throughout the week, we will also get some earnings from multiple companies (I wouldn’t look for any positive surprises).
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