You go to start your car and then, nothing. Unbelievable, the battery just died. But no worries, you call for help and within the hour you’re back on the road.
But, there are a few caveats. Keep the engine running for at least 15 minutes to charge up the battery. And if it’s dead, don’t turn off the engine till you’re at the nearest store that carries a new car battery.
Well Fannie and Freddie just got bailed out and there’s a few warning signs we should definitely consider - caveats, if you will.
Mortgage rates on 30 year fixed loan dipped below 6% finally, but guidelines are still tight. And here in California, our “jumbo” loan amounts are going to shrink from $729,750 to $625,000 starting January 1st 2009.
Keep It Running. Well, so far we’ve seen good news in dropping rates, but we better keep the engine running. If we want this market to pick up, we have to keep this momentum. Like a dead battery, if we shut it off too early we’ll be right back where we started.
This bailout has hit every news headlines and my one hope is that buyers are listening. California is amongst the top states in the nation to get hit hardest by the foreclosure wave and we simply have too many homes sitting in our inventory. Take a look at this top 10 list of riskiest mortgage markets and notice how we own 8 of the 10 spots. What we need are buyers, and hopefully the reassurance that comes with this bailout gives them that extra kick.
Are We Dealing With a Dead Battery?
If we are, no matter how much momentum we have - it just won’t be enough. In a way, this bailout was meant to be a preventive measure and not a cure. If there wasn’t a bailout, we would have had a whole new set of problems.
So what will it take then? Here are a few things the San Francisco Chronicle wants to see on top of this bailout:
- Easier underwriting guidelines
- Larger conforming loan limits
- Lower jumbo rates
I would love to see all of this happen - but, what do you have to say?
- What’s your opinion on this latest bailout?
- What changes do we need to see to really jump start this housing market?
(8 votes, average: 4.63 out of 5)
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What problems do you think we would have if there wasn’t a bailout?
I would like to add to Scott’s question, asking what problems specific to California would have been created? I was also wondering if you could share some insight on how the bailout will help Californian homeowners specifically?
If there wasn’t a bailout - mortgage liquidity would have seriously suffered. As hard as it is to get home loans now, it would be near impossible without Fannie and Freddie. Homes would sit on the market, dropping sale price values, and result in further losses in equities.
Specifically, California would have suffered considerably because of the nature of our housing market. Median home prices are considerably higher and the rise in foreclosures has hit us the hardest. Had the bailout not occur, we could all expect the severity of our housing crisis to get worse. No investors would touch these mortgages as there would be no assurance or security to back them. Many have issues qualifying for jumbo loans nowadays; if there was no bailout, it would have been difficult to even obtain a standard conforming mortgage.
As you know, we already face loan qualifying issues simply because our conforming limits and jumbo loans are struggling to keep up pace with our values. Realistically, Californians should see the bailout as a preventive measure instead of a curing element.
The drop in mortgage rates is a nice outcome, but that should affect borrowers throughout the nation. One thing to remember though is our larger loan amounts will yield higher dollar savings because of lower mortgage rates.
Another thing to lookout for is to see if these lower mortgage rates help to cure some of the hardest hit counties. Places such as Sacramento, Modesto, and other parts of the central valley need the serious help of buyers to offset the excessive inventory of homes.