Bailout Bill Passes - Keeps Refinance Rates a-Rollin

The crazy mortgage refinance rates ride continues before, during, and after the government bailout bill finally passed and was signed by President Bush last Friday.

Money is pouring out of stocks and into treasuries, decreasing the 10-year treasury yield. The flucuation in refinance rates has been in the quarter point range, but the yield spread has dropped almost a half-point since September 22. Looks like the risk premium is coming into play again as refinance lenders are asking for a bigger return for perceived risk.

Really, the major risk at this point boils down to home prices. There is still no housing stabilization in sight, so bunker in and wait for the Fed to open up the gates to Fannie and Freddie. The government has done a great deal to open up credit liquidity, but lenders are still hoarding cash. A loosening of the belt on Fannie and Freddie underwriting quidelines is all that is left to spurn willing and "ABLE" homebuyers to the closing table. This would help to decrease home inventories and reverse the declining home price trend. Until housing prices stabilize, the hoarding may continue.

May the Mortgage Rates be with You!

Refinance Tool Box