From what I’ve heard, the mortgage paper will yield 4% to the investor, and the other .5% will go toward fees and other costs.
If the Treasury is willing to back this, then you could certainly see people buying this paper at 4% because “somebody” has been pushing rates down on LT Treasuries. The new mortgages would effectively be Treasuries, so okay…there would be buyers.
Question is, are we going to eliminate the private mortgage market? If the govt is going to be the nation’s mortgage lender, I’d presume the private market would be blown out of the water.
As the Treasury has to issues never-ending amounts of new mortgage paper, AND issue more Treasuries to cover the additional non-mortgage programs, AND roll over all the existing debt, will there be enough buyers, indefinitely???
What happens if the U.S. Treasury runs out of buyers? Will rates go up? What happens to housing prices when that happens?
So far, everyone is dancing around the issue, without actually addressing it.
The problem is not high mortgage rates or a lack of credit, nor do we have a “foreclosure crisis”. What we have is a debt crisis…Americans, at every level, have reached the point of debt saturation. There is plenty of money to be loaned out, but too few qualified buyers to whom they can loan (solvency problem, not liquidity).
We cannot solve the problem and grow our economy until we destroy this debt and/or increase wages for the bulk of the U.S. population. Nothing else matters, and all these moves (reducing rates, etc.) will do is lengthen the recession, making it more likely we will see a depression.
Some people are making some very bad decisions, and I just have to wonder if it’s due to their lack of understanding, or if there is a more sinister motive.
