Market Watch

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What a day! I don’t know where to begin.

Treasury Secretary Tim Geithner announced plans for the remaining TARP money. $50B will go to owner occupied middle class borrowers facing foreclosure to lower their monthly payment.

He also said the Fed and Treasury are committed to buying $600B of Freddie and Fannie debt and MBS. Banks participating in the bailout will have to undergo a stress test and also participate in foreclosure mitigation programs. The cost of these programs could reach $1.5 trillion dollars.

At noon today, the Senate is set to vote on the $800B stimulus package. Although the senate package and the house package must be married up, the bill is expected to eventually pass.

At 1PM, Federal Reserve Chairman Ben Bernanke will be speaking about liquidity with the House Financial Services Committee.

Needless to say this could make for a very volatile day. The Dow is down nearly 300 points and Mortgage Backed Securities are up 19 Bps. They were up 38 Bps earlier this morning.

It will take some time to see what affect all this news has on the mortgage market. All indications are that these efforts will have a positive effect on rates in the short term.

Although the Fed and Treasury are going to great lengths to keep rates low, there is no guarantee that rates will drop to levels the news media is projecting. The market is very dynamic and cannot be controlled by a single entity including the US Government. The Fed has actually been buying coupons with higher rates than our current rates. This will help to ensure that rates do not go beyond that level and also allows them to recoup that money as customers refinance to lower rates.

It’s still a great a time to buy. We need to work together to get people off the fence and realize that home prices and rates are at historic lows. They are losing opportunities while they wait for rates to drop. Customers waiting to save $25 a month on their mortgage payments while home prices go up thousands are not making a good move.

We will keep you posted as inevitable changes in the market occur. Please do not hesitate to call or e-mail us with questions. We are always here to help!