Thursday, February 28, 2008

Mortgage Watch: Regulators Speak, Magic 8-Ball Portends Lower Rates

Yesterday, two indicators emerged signaling that mortgage rates will trend down in the near term. Federal Reserve Chairman Ben S. Bernanke reported that "the economic situation has become distinctly less favorable" and the central bank "will be carefully evaluating incoming information ... and will act in a timely manner". Market pundits have all but equated this with a 1/2% cut in the federal funds rate -- the interest that banks charge one another for short term loans -- at the central bank's March 18 meeting. On another front, federal regulators have lifted the $1.5 trillion cap on mortgages that Fannie Mae and Freddie Mac may hold on their books. This second measure, coupled with the proposed regional increase in the conforming loan limit, will increase the pool of loans the giant mortgage buyers can buy, reducing home loan rates. Locally, the relief couldn't come too soon -- the National Association of Home Builders and Wells Fargo declared Los Angeles County the nation's least affordable housing market.