What, you've never heard of the U.S. Mortgage Office?
You are quite familiar with the U.S. Post Office, right? I'm sure you, like I, are super appreciative of their efficiencies and cost effectiveness. I remember a time when a regular stamp was 27 cents. The sad thing is that really wasn't that long ago!
Well, get ready for the same efficiencies and cost effectiveness for the next time you seek mortgage financing.
Keep in mind, that right now the U.S. federal government owns Fannie Mae, Freddie Mac and FHA and that is really the bulk of the mortgage financing business these days. The've rolled out the Home Affordable Refinance Program, moved forward future home purchases with the $8,000 homebuyer tax credit, and are also buying up a lot of the older vintage mortage-backed securities in the open market.
For all intents and purposes, they are the mortgage market these days.
What does this mean for our future?
Well, in the near term, there is a lot of continuing change on deck.
First, one has to wonder about the solvency of Fannie Mae, Freddie Mac and FHA.
Second, the homebuyer credit goes away in just over a month. Couple that with the end in sight of the Federal Reserve's quantitative easing (buying up bonds and mortgage-backed securities) come Quarter 1 of 2010. The HARP program is slated to end by next July and that is the only way underwater homeowners stand a chance to refinance to lower interest rates.
Third, what happens if we do not get a solid recovery of jobs and get a national unemployment rate of 10+% for an extended period of time? Just this morning I was having that conversation with the banker in the office next door to mine. It doesn't matter how low interest rates get and how lax underwriting is; if someone does not have a job and cannot pay the bills they cannot afford a house at any price or monthly payment!
So, that leaves us with many questions for the years ahead. No big whoop anyway as that has been the standard mode of operation for several years now anyway. Constant change and a murky future, get used to it!
What will our government do?
Politicians always think first about their own political future. I know I just stated that as a "fact" and I'd love to hear an argument that would change my mind on this one!
2010 is a big election year. President Obama and the Democratic Party look to an election where ALL 435 seats in the House of Representatives are open. In the Senate, 36 seats (over 1/3rd) are open.
This creates a BIG RISK that the Democratic Party could lose control in one or both parts of Congress.
With unemployment still rising and home prices still falling, expect some major initiatives to try to prop up the economy by November of next year. Will they be successful? Expect it to be interesting.
Brett Grendahl | Private Mortgage Banker | Wells Fargo
Brett.T.Grendahl@wellsfargo.com
