The big dive in the U.S. 10-Year Treasury bond yield last week pushed the 30-year mortgage rate below 4.00% for the first time since May 28, 2013. That drop could revive mortgage refinancing activity, providing another windfall for consumers. In addition, housing starts, which have stalled around 1.0 million units for the past year, might move higher.
Even more stimulative for housing activity may be the government’s push to allow Fannie Mae and Freddie Mac to lower lending standards and restrictions on borrowers with weak credit. Lenders would also be protected from claims of making bad loans, according to a 10/17 WSJ article. Déjà vu all over again: The government encouraged sub-prime lending during the previous decade, and it ended very badly. In any event, here we go again: The two biggest assemblers of mortgage-backed securities—that will now be explicitly guaranteed by the government rather than implicitly, as before—“are considering programs that would make it easier for lenders to offer mortgages with down payments of as little as 3% for some borrowers.”
God help us! More likely, when the next batch of subprime mortgages hits the fan, Fed Chair Janet Yellen will help us. She’ll do it with QE-10. Thank goodness for Fannie, Freddie, and Feddie.
Today's Morning Briefing: The Bottom? (1) Manic market. (2) From “the top” to “the bottom” in one month. (3) October selloffs have been buying opportunities. (4) Too many bottom pickers? (5) Less worrisome worry list. (6) Investors love central bankers shooting bullets, even if they are blanks. (7) Bully for Bullard! (8) Fannie, Freddie, and Feddie to the rescue. (9) More jobs and cheaper gasoline boosting US confidence. (10) A bit of good news from Europe. (11) Putin playing a weak hand. (12) Ebola, VIX, and high-yield bonds.
