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What's the potential for long-term damage from this maneuver? This has the smell of an election-year short-term fix to me.

I'm still sticking with my call that this is the bottom for interest rates. I think the takeover will result in higher rates (longer term).

Once they slip WaMu into the FDIC portfolio, the jitters among bond investors should return, shouldn't they?

This 'bottom' for interest rates might only last the week!

The problem with the housing market has less to do with the actual price of homes than it does the direction of house prices.

A bad housing market is where houses are declining in value!

(houses were more expensive in 2005 but things were great because they were getting MORE expensive)

All that lower rates do is slow the rate of decent to it's ultimate bottom.

If you want a healthy market you want to RAISE rates. This will acclerate the drop to the bottom and then allow prices to move higher as default risk lessens and rates start moving LOWER (so the buyer of your home can afford to pay more).

Ideally we get back to a healthy market where the value of your home increases with your payments toward principle and inflation.

Those thinking lower rates are good news are missing the big picture.

Imaging going from Nasdaq 5000 to Nasdaq 2500 without ever being allowed to go through Nasdaq 1700. This would mean that absolutely no one in the last 8 years would have been able to buy stocks and sell them later for more. This kills volume.

So, all house buyers for years and years will be unable to sell later for more (meaning divorces,jobloss, sickness all result in shortsales or defaults for years and years--but with lower rates just a little less so? ). Also, people will forget what MEW is.

A critical number of homeowners are already underwater. Let current asset holders take the full brunt of the losses and lets move on...instead losses will be taken one buyer after another for years and perhaps decades.

average joe,

Who would Raising rates benefit? (You and I)

Who would Raising rates hurt? (The Banks)

Unfortunately the "little people" like you and I don't matter in this chess game. All the banks are doing now is trying to prolong the process to get government to take on a larger and larger financial burden. Because banks can't be allow to fail! It doesn't matter how reckless and stupid they were with funds and assets.

What we need is a PURGE of the entire banking system. Give someone new a chance that won't be stupid with $$$.

Haven't you ever heard the statement...

"Privatize Profits and Socialize losses"

Yes I have heard that.

You are exactly right.

The move today is simply to protect current asset holders at the expense current savers/ future asset holders.

Anyone waiting to buy with cash should pray for higher rates.

My preferred benchmark - http://www.aimloan.com/

30 year fixed: 5.750% with no points
Jumbo-conforming 30 year fixed: 5.875% with no points

They were showing 6.00% in both cases all weekend.

Who would Raising rates benefit? (You and I)

Who would Raising rates hurt? (The Banks)

Unfortunately the "little people" like you and I don't matter in this chess game.

Around 65% all households in the United States own their houses. Most of the remaining 35% are students, seniors, poor people, etc. basically people who can't or don't want to own, regardless of price. US Census web site says that median renter household income in San Diego County is around 40k/year. People like you and I, renting even though they could afford to be homeowners, are slim minority. Four out of five households either benefit from lower rates or don't care.

"Around 65% all households in the United States own their houses. Most of the remaining 35% are students, seniors, poor people, etc. basically people who can't or don't want to own, regardless of price."

....well if that's true...who is left to buy?

Sure is alot of work and money to keep rates low for 0% of the population.

Considering that, as you say, everyone is already set, either they "own" or don't care too, why not have rates rise?...get real estate prices low so cash investors can get houses cheap and cash-flow at low rents...you know, for the 35% who don't care to own.

"Four out of five households either benefit from lower rates or don't care."

"Around 65% all households in the United States own their houses.

Actually, I saw some numbers on this from Bruce Norris's recent August presentation that can be accessed at his thenorrisgroup.com web site (part 12). At the peak of the credit bubble, ownership was a little above 69% and has since fallen to 67.9%. The historical mean since the eighties has been around 65%. Norris thinks we are heading there and that vacancy rates nationally will hit 6%.

I have been in process for a 30 year fixed. On Friday I was being quoted 6.125% with 1 point. Late today I locked at 5.5%

....well if that's true...who is left to buy?

Sure is alot of work and money to keep rates low for 0% of the population.

For the most part, they buy houses from each other when they move from place to place. Selling and then buying in a new place becomes troublesome if you have less than 20% equity, almost impossible if you're underwater.

Isn't the point really about further risk taking by/for the taxpayers? Shouldn't rates be rising to reflect the risk being taken? Any debt taken in the name of the public should have a minimum down payment of 10%. This would just barely cover the transaction costs of forclosure, and not even cover the continued asset price deflation. Anything less is unconsionable. Paulson et al should be strung up.

No, the rates should be kept low by tightening the lending standards to bring down the level of risk being taken.

We received a letter from our mortgage lender today promoting investment in their REIT. Funniest damned thing we've read in months.

My tax money is being spent to make sure I can never afford a decent house. Splendid.

GeneK,

Your tax dollars are also being spent to keep "homeowners" that can't afford the mortgage in their house.

And BTW these are the houses that you should be able to buy but can't because the prices are too high.

Jim,

You can get MUCH better rates than you quote from Credit Unions. I suggest you visit Pentagon Federal Credit Union (which is where all of the financal guru forums like FatWallet.com go) and look at their rates:

https://www.penfed.org/productsAndRates/mortgages/mortgageRatesListing.asp

And remember, these rates include free 90 day locks and almost no closing costs (you only pay for title insurance and tax stamps).

Guaranteed to make your local mortgage broker or retail banker cry!!

I was referring to the relation between mortgage rates and the level of risk that should be acceptable in making loan approval decisions. Anyone who can't afford their current mortgage probably doesn't meet the level of risk I would consider appropriate and would be turned down for a lower rate refi. The only people who should qualify for refi are people who can already afford the loans they have (i.e., they've never missed a payment) and don't really need to refi, but would if it puts more disposable or savable cash in their pockets.

The price of homes would come down because the number of people who are qualified for a loan at the acceptable level of risk would constitute a much smaller potential buyer pool that you have to compete with...assuming you make the cut yourself.

UCLAMBA,

No difference in rates today, the banker from yesterday is quoting the same as your credit union's rates today.

I'd much rather work with a local rep who can deliver personal service, but that's just me.

The closing costs on a purchase loan would be within a $500 difference.