Nashville, Franklin and Brentwood TN Real Estate

Nashville Homes For Sale: Finance Market Update June 29th, 2009

 Your Nashville, Franklin and Brentwood TN real estate and homes source!

Mortgage bond prices shot higher last week driving home loan rates lower. Mortgage rates found support from investors around the world following last week's Treasury auctions. The Treasury sold bonds totaling 104B that were well received by foreign central banks. The indirect bidder participation, an indication of foreign demand, was near all-time highs. For the week interest rates fell by over a full discount point.

The employment report Thursday will be the most important release this week. The ADP employment report will give an earlier glimpse into the employment situation though the two reports are derived from different data so there could be some divergence. Strength in the other economic data will do little to help mortgage interest rates improve.

GSEs

Government sponsored enterprises (GSEs) are financial services created by Congress. Two of the most important GSEs in the mortgage industry are Fannie Mae and Freddie Mac. These corporations are designed to make credit available to targeted borrowers in an efficient manner. Fannie and Freddie were completely privately owned. However actions by the Treasury and Congress within the last year now blur the ownership. The credit crisis resulted in Fannie and Freddie facing huge liquidity concerns. Their insolvency under fair value accounting resulted in drastic measures to prevent total failure. The Treasury placed the GSEs in conservator, increased the lines of credit to the GSEs, and infused both companies with $100 billion for an ownership stake of 79.9%. This US Government ownership of these companies leaves many unknowns. While conservatorship implies temporary control, the Treasury exit strategy remains unclear and has yet to be revealed.

The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBSs) issued by Fannie and Freddie traditionally differ. Treasury securities represent money needed to fund the operations of the US government. MBSs, on the other hand, represent borrowing by homeowners. Because homeowners can sell or refinance their homes, investors in 30-year mortgage-backed securities usually see principal repayment in significantly shorter periods of time. In terms of demand, Treasury securities are regarded as "risk free" investments, and often benefit from a "flight to quality" in times of financial crisis.

*Courtesy Tonya Esquibel WR Starkey Mortgage Franklin TN 615-300-0794

*Permission to re-publish

Vanessa Stalets

615-957-6333

RE/MAX Elite

615-661-4400

Your Nashville, Franklin and Brentwood TN real estate and homes source!

Published Monday, June 29, 2009 2:52 PM by Vanessa Stalets