From Ryan Halldorson at Smart Mortgage:
Interest rates took a nice drop this week and are sitting at some of their lowest levels of the year! The reason for this is the government’s takeover of Fannie Mae and Freddie Mac.
A little background on the way the mortgage world works will explain why the two events are tied together. Banks and lenders do not lend out their customers savings account money for 30 years to cover the mortgages they produce. Instead, they fund loans with their own assets, underwrite it to Fannie/Freddie guidelines, then sell the loan to Fannie/Freddie for a small profit and then typically service the loan (collect the payments) for a small monthly profit. Fannie/Freddie buy the mortgages that the lending world produces, package/bundle them, and then they sell them on Wall Street as Mortgage Bonds. Investors of the world can either put their money in stocks (risky) or they can buy Bonds if they want a safer investment.
With the US government now running Fannie/Freddie these Mortgage Bonds are viewed as a safer investment and therefore the demand for these Mortgage Bonds has increased. The way that the lending world satisfies this increased demand is by lowering interest rates to produce more mortgages.
For real estate or loan information, call Angela McDonald at (602) 369-6409.
No comments:
Post a Comment