Treasury Schemes To Reduce Mortgage Rates Even More

Update: Still very few details on this, though CNBC added some more odd reporting, namely that the idea is to spur the purchase of new housing units, not necessarily to producer more refis. We can see why the Treasury would like to do that, since the housing glut is a killer, but how do you go about targeting reduced rates at new housing, and not refis? Plus, there’s the concern we addressed below: Who would take out a mortgage today with this news hanging out there?

Original post: Last week’s big Fed action spurred a boom in mortgage refis, and now the Treasury is looking to do more to ease rates. The Wall Street Journal says Paulson would like to see rates in the mid-4% range, down from the current mid-5% range. Details are light, but it seems that the basic idea is to buy up more Fannie and Freddie securities in order to drive down prices.

CNBC says an announcement won’t be made in the next day or two, but that the plan is being taken seriously.

Expect another surge in refi applications if the plan goes through.

Hopefully the people who refi’d in the last week have time to call up their brokers and tear up their applications.

See Also
Mortgage Applications More Than Doubled After Fed Bailout

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