“The wind-down of federal support for mortgage rates, set to end in two months, is a momentous test of whether the Obama administration and the Federal Reserve have succeeded in jump-starting the housing market and ensuring it can hold its own. The stakes for the economy are massive: If the market again falls into a tailspin, homeowners could face another wave of trouble, and it would deal a body blow to President Obama’s efforts to get the economy on track.” — Washington Post, 2010.01.24.
Something to think about:
- Market stablization has required approximately $1.5 trillion federal dollars.
- Post March 2010 interest rates would probably rise .5 to 1 percent (5.5-6.0%) which would shut down much of the refinancing necessary to bring the mortgage market into greater balance and affordability.
- Federal Housing Finance Agency (FHFA) tracking shows that housing prices continue to drop; -4.1% from late 2008 through 3Q/2009 making financing more challenging.
- The FHFA retained mortgage portfolio is required to shrink by 10 percent per year from $900 billion until it reaches $250 billion, which would occur in 2022.
How important is federal involvement in the housing market? A Wall Street Journal summation of the dominant opinion of economists and housing experts is that “The government’s efforts are the primary reason the housing market is functioning at all.”
For those wishing for an end to government involvement in the markets, we will get to experiment capitalism at its most basic level after March 2010 when federal support begins to dry up and banks become your primary source to turn to for mortgages and refinancing.
You can track the projected refinance value of your home online using the FHFA’s House Price Calculator at http://www.fhfa.gov/Default.aspx?Page=86
- David Cho, Neil Irwin and Dina El Boghdady, Stakes are high as government plans exit from mortgage markets, Washington Post Staff, January 25, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402996.html
- Federal Housing Finance Agency (FHFA), http://www.fhfa.gov/
- Deborah Solomon and Jon Hilsenrath, No Easy Exit for Government as Housing Market’s Savior, Wall Street Journal, September 15, 2009, http://online.wsj.com/article/SB125297162259710323.html