Since mortgage interest rates are connected to 10-year Treasury notes, rather than to the Fed funds rate (you know — interest rates are supposed to be cut again today), it is not really a surprise that rates on home mortgage loans are not going down. They shouldn’t be going down at this point. What is a surprise, however, is that they are higher than they should be.

The whole point of what the Federal Reserve has been doing in terms of a $200 billion liquidity plan and extending the financial institutions that can get special help is to increase the amount of money being lent. In terms of the mortgage market, it doesn’t seem to be working. Mortgage market credit is still tight — and tightening. According to some analysts, mortgage interest rates are two percentage points too high.

The San Francisco Chronicle explains why mortgage interest rates are rising more than they should be:

Some investment funds that had borrowed enormous sums against their Fannie and Freddie securities have been forced to sell them to meet margin calls. This excess supply has reduced the price and increased the yield on these securities. If lenders want to sell new mortgage-backed securities into this market place, they need a higher yield. That’s a big reason mortgage rates are rising.

It is possible to get some good bargains on real estate right now. Home prices are lower than they have been in years. Unfortunately, with credit tightening, you might find it harder to get home mortgage loans. Check your credit to make sure that it is good, and see if you can afford a big down payment. That may be the only thing that gets you into a home right now.

Tags: mortgage interest rates, mortgage rates rising, home mortgage loans, mortgage loan blog,
mortgage market, lower home prices, $200 billion liquidity plan

One of the most venerable financial institutions is taking a dive today as it is pulled from the brink of total collapse. JPMorgan has agreed to purchase Bear Stearns (for a paltry $2 a share — but, face it, at this point that might be considered generous) in order to save the financial sector giant from collapse.

In addition to an emergency Fed rate cut this weekend, the government was on the scene for the acquisition. The implications of the historic JPMorgan and Bear Stearns move are reported by ABC News:

“This is going to go down in very historic terms,” said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. “This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we’re probably heading into a recession.”

Many of the problems faced by Bear Stearns revolve around the subprime mortgage market and credit market crisis. Bear Stearns had invested heavily in risky loans, and is now paying the price.

Details of the plans JPMorgan has for the company are fairly uncertain at this point. The 14,000 employees of Bear Stearns will be unsure of their jobs, and JPMorgan has yet to announce what it will do with the brand that has lasted 85 years and even survived the Great Depression.

Even with this news, there is a very strong likelihood that we are headed straight for a recession (if we aren’t there already). All this further emphasizes the need for better, enforceable, national lending standards. National lending standards that are based on whether borrowers can afford the payments after a reset. It may mean credit that is more difficult to get, but it would also likely lead to a more stable economy.

Tags: JPMorgan Bear Stearns, subprime mortgage market, home mortgage loan, mortgage loan blog,
credit market crisi, emergency Fed rate cut, recession

Next week was the deadline for Michael Jackson to pay up on what he owed on his Neverland Ranch. Jackson owed close to $25 million in payments on his Neverland Ranch, and it was beginning to look bleak. Now, though, the famous — or rather infamous — celebrity, has announced that he is saving the Ranch.

The BBC reports on the deal that allows Michael Jackson to save Neverland Ranch from foreclosure:

L Londell McMillan said the singer had now worked out a “confidential” agreement with an investment group which meant he would keep the property.

“Neverland and MJ are fine,” Mr McMillan said.

The deal had been struck with the Fortress Investment Group, he added.

Being able to refinance is one way that you can avoid foreclosure. Many of us have to get refinancing through our banks, though. Most of us wouldn’t be able to get funding from an investment group. Other options for the rest of us include:

1. Renting the home out to someone else in order to have them make the mortgage payments. Of course, that means that you will have to find somewhere else to live.
2. Talk to your lender about other options, such as modifying the loan terms (as under Project Lifeline), short sales, or other programs.

Many people wondered how Michael Jackson would avoid foreclosure. He managed it. And while you won’t be able to do it so dramatically, it is possible for you to avoid foreclosure as well.

Tags: Michael Jackson Neverland Ranch, Michael Jackson foreclosure, home mortgage loan, Michael Jackson save Ranch,
avoid foreclosure, Project Lifeline