mortgage rates are not targeted to go down to 4.50%, rather they are going down naturally and that's better than a bailout.
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New York (PRWEB) January 6, 2009
John Sauro, President of North Atlantic Mortgage Corp., talks with Bloomberg's Rhonda Schaffler about the U.S. government's strategy to lower interest rates on mortgages.
John Sauro discusses the current state of the mortgage market including the ability to get a mortgage and the types of mortgages that are available. Sauro discusses the strategy The Fed and The Treasury Departments are playing with respect to Fannie Mae and Freddie Mac. He identifies why mortgage rates have gone lower in recent weeks and why those rates may go even lower.
Sauro said, "It may be tougher to get a mortgage today than it was a year ago but if you can verify your income and have good credit and a down payment, you will get a conforming mortgage of up to $417,000.
Conforming loan amounts (up to $417,000) are tied to the Fannie Mae and Freddie Mac Bonds.
The reason why rates have come down lately is because The Fed and The Treasury Departments are buying Fannie Mae and Freddie Mac Bonds. Doing so raises the price of the bonds due to increased demand and inversely brings down the interest rates on those bonds, thereby reducing mortgage interest rates. This is good for the conforming mortgage market.
Lenders are selling their conforming loans to Fannie Mae and Freddie Mac and will abide by their guidelines with respect to income verification, credit and down payments for mortgages.
Jumbo loans are another story entirely. They are being written. However, many banks want a lower "Loan to Value" on those loans (more equity from the home owner). Some banks may only want to lend 55% to 65% of the value of the home for a mortgage of $1.5mm, thereby reducing their exposure."
Sauro went on to say, "I believe that the government's buying of Fannie and Freddie bonds, will attract other investors like China and other countries because of a re-gained confidence in the mortgage bond arena. China's buying of Fannie Mae and Freddie Mac bonds will push mortgage rates lower."
Sauro said, "mortgage rates are not targeted to go down to 4.50%, rather they are going down naturally and that's better than a bailout."
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John Sauro on Bloomberg's CEO Spotlight