"You've Caught the NET!"

Good news on home mortgage rates, folks!  They've headed down, in the past 24-hours alone!

Sorry . . . no improvement yet on the massive inventories of distressed homes available for sale here in Chicago and in many communities across the U.S., and underwriting and credit standards are higher to get these now-cheaper loans. Thousands of jobs have been lost over the last few months, here in Illinois and elsewhere. 

But amid a sea of gloomy housing news over the past few days, this favorable interest rate news is certainly welcome!

As we know, one the key problems recently standing in the way of the U.S. Economy in general, and our Housing Market in particular, is the availability of financing dollars for consumers and businesses.

Yesterday, the Fed moved to break up the log jam of frozen funds for business and consumer loans, including mortgage financing.  They pledged to pump another $800 Billion, mainly from the Federal Reserve, into the nation's credit markets, to help restart bank lending once again.

The Fed's move includes plans to purchase up to $600 Billion in mortgage debt owned by Federal Banks, Fannie Mae, Ginnie Mae, and Freddie Mac - giant U.S. Loan Guarantors and Investors now directly controlled by the Federal Government.  They also plan to provide an additional $200 Billion to investors acquiring securities tied to car loans, credit card debt, small business loans, and auto loans.

This dramatic move inspired investor confidence right away.  Within the last day, rates on many 30-Year Home Mortgages, for purchase of a new home or refinancing your current loan, fell dramatically - up to 0.5%, in many cases. 

One of our loan officer partners at Bank of America here in Chicago, Tommy Gonzalez, reports current interest rates as low as 5.375% for a 30-Year Fixed Rate Loan with 10% down, assuming the borrower has very good credit.  He reports today's rates for FHA-Guaranteed Loans fell as well, to 5.50% for a 30-Year Fixed FHA Loan.  Refinance rates are currently as low as 5.625% for a 30-Year Fixed, Gonzalez continues.

Said U.S Treasury Secretary Henry Paulson, "Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance."  He added that the market for securities backed by consumer debt "came to a halt" last month, making it extremely difficult for many to find affordable financing for everything from student loans to household items.

In recent weeks, investor yields on mortgage-backed securities have increased.  This has the effect of raising the costs to borrow.

Beginning next week, as the Fed begins to purchase securities tied to mortgage debt.  The effect will be to increase the price of this debt to investors, driving down yields, and theoretically bringing down mortgage interest rates.

Michael Feroli, an Economist with J.P. Morgan Chase, said yesterday, "We expect this action will measurably improve conditions in the mortgage markets and will have beneficial effects on housing and the broader economy."

Please read our post this afternoon @ BlogChicagoHomes.comfor more, as well as a link to in-depth coverage from Jon Hilsenrath and Deborah Solomon's article in today's online Wall Street Journal.

DEAN & DEAN'S TEAM CHICAGO