This is helpful information from Cherry Creek Mortgage on Treasury Secretary Paulson’s decision not to use the $700 billion in our national checking account to buy up bad loans. I think it is actually a good thing Paulson is secure and smart enough to admit that his original idea was not the best and that he is willing to change his mind to do what is best for the country, rather than his ego. Just my opinion.
The update below asks more questions than it answers, but that is where we are right now.
For mortgage markets, the biggest news of the week came from Treasury Secretary Paulson during an update on the $700 billion TARP rescue plan. Paulson surprised investors with the news that the Treasury has scrapped the original plan to purchase troubled assets from banks and will use the funds in other ways to support the still “fragile” financial system. Lawmakers and investors were provided few details about the anticipated future use of the funds, and this abrupt shift in plans added to the uncertainty confronting investors in recent weeks.
While mortgage rates ended the week nearly unchanged from the prior week, daily volatility remained high. During October and November, movements in mortgage rates have been much larger than usual, primarily due to the high degree of uncertainty facing investors. Will there be a second major government stimulus package and what form will it take? What will be the impact of the extra debt issued to fund the government programs? Will other countries such as China have less money available to invest in US bonds, including mortgage backed securities, while they stimulate their own economies? Finally, how will the Treasury use the remaining funds from the $700 billion TARP plan (discussed above)? Once investors have answers to these and other questions, we should see less volatility in mortgage rates.
Source: Cherry Creek Mortgage
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