US authorities launched fresh efforts Tuesday to unfreeze credit and limit the economic downturn with programs to buy up to 800 billion dollars in mortgage loans and asset-backed securities. The initiatives call for up to 600 billion dollars in Federal Reserve purchases of home loan securities, and a separate 200 billion dollars for asset-backed securities to assist consumers with more credit lines. The Federal Reserve and Bush administration continue efforts to stimulate the economy with cash injections intended to jump-start American credit markets that have nearly been frozen shut since October. The government has not made their intentions to increase liquidity while decreasing the home loans costs for borrowers looking to refinance or purchase a home. Last month, HUD introduced FHA home loans for distressed homeowners who were 90 days or more delinquent on their mortgage, but after thousands of borrowers completing the applications for this Hope for Homeowners program, only a few actually were approved by FHA mortgage lenders.
With the housing sales plummeting and the foreclosure crisis worsening, the government wants mortgage lenders to provide loan modification to prevent foreclosures. According to mortgage marketing executive, Bryan Dornan, “Clearly, the sub-prime mortgage meltdown ignited sparks through the financial markets and has spread like wild fires burning our economy and many American’s home equity in the process.” Dornan continued, “The lure of low mortgage rates has faded because the traditional refinance has completely disappeared because lenders continue to tighten credit guidelines beyond Main St. America.”
Economist Marie-Pierre Ripert noted in a recent article, “Both these measures are clearly a significant step in the action implemented by the Fed in trying to avoid a deeper recession and to prevent the economy to fall in a deflationary spiral.” The US central bank said it planned to buy up to 100 billion dollars of bad mortgages and debt obligations of housing-related government-sponsored entities like Freddie Mac and Fannie Mae in the next week and purchase 500 billion more in a home loan modifications scheduled to roll out by the end of this year. The 500 billion dollars in mortgage securities is said to be bought by asset managers selected in a competitive mortgage servicing process “with a goal of beginning these purchases before year-end,” the Federal Reserve said. These purchases “are expected to take place over several quarters.” Many real estate analysts believe that we have not seen the bottom of the housing market and this foreclosure crisis and lending drama may just be the beginning of a much more severe decline with no real solutions achieving any measurable success rectifying the lack of credit.
[...] unknown wrote an interesting post today on Home Loan Wholesale; Will $800 Billion More Cure the Mortgage and loan modifications; a quick excerptWith the housing sales plummeting and the foreclosure crisis worsening, the government wants mortgage lenders to provide loan modification to prevent foreclosures. According to mortgage marketing executive, Bryan Dornan, “Clearly, … [...]
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