Capstone Mtg Co. Blog

The Treasury Department is considering a plan to purchase a substantial amount of mortgage-backed securities (MBS). The details of this plan are still sketchy, but if implemented the Treasury would begin buying the mortgage-backed-securities (MBS) that are backed by the 30 Year fixed-rate mortgages from Fannie Mae and Freddie Mac. Why? Advocates of the plan believe the increased demand for these mortgage-backed securities (MBS) will prompt mortgage rates to drop. Which in theory, would help homeowners refinance into lower-cost loans (i.e. increase consumer spending) and also enable potential homebuyers to get into the market.

Sounds like a good plan. So, what at are the potential pitfalls?
1. Due to shattered equity values, free-falling credit scores, and depressed household incomes only a limited number of borrowers would benefit
2. If the governenment enters the MBS market, then private investors would probably be pushed out, forcing the government to remain the primary buyer of such investments. At sometime, this will create inflationary pressures.

At the end of the day, the government will probably straddle the fence and allocate a trillion dollars toward the plan. How low could rates go? Experts have speculated that rates could go as low as 4.5% with no points. The key words here are "speculated" and "could go as low". Will this happen? Maybe. Recent goverment purchasing activity has pushed the 30 Year Fixed Conforming Rate to 4.875% + 0 pts (with a 30 day rate lock period). Of course, most lenders will not accept a 30 day rate lock period, unless the Borrower has already submitted a completed application.

Capstone Mortgage Company does not charge the Borrower an application fee. My recommendation is to submit your application ASAP (note - the rates listed on our website www.Capstone1993.com usually reflect a 30 day rate lock period). I don't know if we will reach 4.50% + 0 pts but anything below 5.00% + 0 points would be considered a home run for a 30 Year Fixed Rate Conforming mortgage.