The Fed Chairman Bernanke is speaking to Congress this morning, and so far the outstanding highlights are, paraphrasing:

Fed continues to expect conditions to warrant exceptionally low rates for extended period will continue to evaluate purchases of securities in light of evolving outlook as expansion matures, Fed will at some point need to begin to tighten monetary conditions.

A lot of speculation has swirled around:

A.  What will mortgage rates do when (or if) the Fed does stop buying Mortgage Backed Securities (MBS) at the end of March, 2010?  Will other buyers step in to buy the MBS and rates find stability, or, as many more industry insiders expect, will rates necessarily rise precipitously in order to attract new buyers?

and

B.  Will the Fed suddenly announce that they will continue their MBS buying program, in order to aid the housing market and not let all the money ($1.25 Trillion) that they have thrown at the housing market via MBS purchases to date go to waste, letting the housing market deteriorate further.

Based on the comment above from Chairman Bernanke, I feel more and more like the Fed will suddenly announce, toward the end of March, that they will continue to purchase MBS into the foreseeable future.

Nothing is certain, so if you are ready to lock a rate, the sure thing is to lock and be certain.

And, if the Fed does buy MBS into the foreseeable future, with who knows how much more taxpayer money, then that begs the question: Is that the best use of taxpayer funds for the good of our country?

There, I am divided.  First, buying right, meaning buying newly originated MBS under the current strict underwriting guidelines, will eventually make a profit for the country.  We will get a positive return, over time, on that investment. (A lot of evidence suggests that we are NOT buying just the clean, newly originated mortgages, but rather the ‘toxic’, non-performing loans.)

On the other hand, even if we do buy just the good mortgage loans that have the highest probability of performing – there is a lot to be said for simply letting the market take its own course, and let the pain of failure be sharp, direct and deep – but short-lived.

Are we just kicking the problem down the road, to be exacerbated in a worse way some months or short years later?

Greg McBride of Bankrate.com is now commenting on the prospect of higher mortgage rates in the near term, once the Fed stops buying Mortgage Backed Securities at the end of March.  He thinks rates will jump just .50%, others think it will go even higher.  Watch what he says:

Either way, one thing is right. If you are considering refinancing your Atlanta area home, the time is definitely running out. As for Atlanta home buyers, well, what you can afford will decrease in proportion to the increase in mortgage rates. So, if you are ready to pull the trigger and put in an offer, do so.

The housing meltdown seems to be stabilizing, and nowhere more so than in the metro Atlanta area.  Atlanta mortgage rates are down, and the average days on the market before a home sells is declining.  And prices nationally are up 3% from their May, 2009 lows.

So, all is rosey…right?

Wrong.   There are two things that could rock the housing market again.  So let’s take a look at each of the two, and see if we can divine what the housing market may look like at the end of 2010.

1.  As I have relayed here on this blog several times of late, the Fed is saying they are going to stop buying Mortgage Backed Securities – those bonds that determine long-term mortgage rates – after March 31, 2010.   Of course, as the minutes of the Fed meeting stated a couple weeks ago -

“The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in the social markets”

Which means that, despite current plans, they may yet continue to buy the MBS to keep mortgage rates low.  If rates do quickly rise, it will likely be a short-term lull in home buying, as buyers adjust to the ‘new normal’.  Long term, home prices may fall more to make homes affordable, but buyers will still buy…if they are able.

2.  Jobs and Credit. People need a job, an income, to buy a home.  And with unemployment still looming large, that means fewer people who can qualify for a mortgage loan.  And the longer individuals remain unemployed, the more likely it is that they may fall behind on current mortgage or other payments.  And their credit will not then allow them to buy a new place with a loan.

Here in Georgia home buyers may be in a fairly good position in this regard, as new unemployment claims have dropped nearly 21% over the past year, and nearly 10% in metro Atlanta.  So, jobs and credit wise, we are looking better than most.  And we could continue to improve the economy – the main factor there being what the Federal and State governments do with taxes.  If taxes rise too much, then unemployment will likely rise again.

And, Atlanta homes did not have the massive run-up in home prices that other pockets around the country did in the bubble years.

So, metro Atlanta home values are set to remain stable, even in the face of rising mortgage rates, so long as taxes remain fairly stable, thus aiding the jobs recovery, and therefore helping prospective home buyers protect their credit.

That’s my view.  A very possible housing stabilization – with lots of uncertainty.

My industry colleague, Dustin Hughes, made this video for first time home buyers for his market, Portland.  It is applicable here in Atlanta, so I hope you enjoy it.

Now, if you are an Atlanta first time home buyer, call me for Atlanta’s best FHA loan – or any other loan that may work well for your circumstance. The important thing is – to not be a dave . Call me, let’s explore options.

Two bits of news are out this morning that just give a ‘mortgage guy’ indigestion.  (Oh, and if you’re in the market for a home, it should you, too.)

First, if you have been following the news at all recently you are aware that Greece is in a world of hurt.  It’s debt as a percentage of GDP is way, way off the charts of what is allowable under European Union guidelines, and under sane money management.  There was talk that Germany and France would bail them out, then clean up the mess in whatever way they could dream up.

In the meantime, nearly all public sector workers are on strike (which is somewhat of a national pastime anyway in Europe).  But it seems extreme right now.

And, this morning the news came out that Angela Merkel put the brakes on any financial bailout for Greece.  That leaves just two options for the Greeks – either reign in spending in a big way and cause major social unrest, or look at defaulting on their debt.  The first is very bad for the Greek citizens, as it would put Greece into a depression.  The latter would be bad for all of us, since so many countries hold bond from the country, which would become worthless.  Banks would fail, and bond markets around the world would shudder.

Second, Mortgage Backed Securities – those bonds that determine long-term mortgage interest rates for Atlanta and the country – are trading at just more than half a point above the 10 year treasury bond.

So what?, you may flippantly say.

So MBS traditionally trade at 1.5-2% above the 10-Year.  And nature likes an equilibrium.  Couple that with the fact that the Fed is easing out of being the principle buyer of Mortgage Backs, and it looks and feels like a tightly wound spring, ready to spring higher.

Sure, the government just handed Fannie and Freddie some $70 billion to buy delinquent mortgages – and that smells of buying MBS, which could help keep rates low a bit longer.  But, that is small change compared to the $1.25 trillion already nearly spent to keep rates low.

What to do? Simple.

If you are in the market for a metro Atlanta refinance, lock now.  And if you are close to buying a home around Atlanta, lock now.

You probably did not like that Jack-in-the-box when you were a kid as it popped out with the clown head bouncing.  And they don’t get any better with age – especially when it costs you real money every month…for 30 years!

I recently met these two guys who are doing some very interesting and innovative video marketing in the mortgage industry.

So HERE is a link to the video that they put out today.

It explains how banks are making money on the mortgage loans transferred from all the banks that the FDIC shut down. In a nutshell…we, the taxpayers, are paying the losses to keep the banks whole, and profitable.

As always, if you are looking for a metro Atlanta refinance, call and we will see what we can do.

As of this writing, there are 2,244 HUD owned properties for sale in Georgia.  And, they are generally all affordable.

A HUD home for sale in Gwinnett County

But you know the great thing about considering buying a HUD home?  If you finance the property with a new FHA loan, then a buyer only needs $100 down payment.  Right.  Just a Benjamin!  Of course, there are closing costs as well.  When making an offer to buy a HUD home, one can always ask HUD to pay some portion of the closing costs, but plan on needing a bit more than just a hundred bucks to get into the home.

The other great thing about HUD homes is that, although some need some repairs to the home, often times HUD will pay for the necessary repairs as well.

They have each of their properties inspected, and if the inspector notes needed repairs, he will also note an estimated dollar amount to complete the repairs.  And that is the amount that HUD will generally escrow for the repairs, so that you, the buyer, move into a very well-kept home by the time you close and are ready to move.

Certainly Georgia USDA Rural Housing loans are also good loans, which require no down payment.  The reason to consider a HUD home with an FHA loan around metro Atlanta is that USDA requires that the property be in a rural area to qualify, as well as limiting the income of the buyer with ceilings.  So, some properties would not qualify for a USDA loan, and some buyers would not either.

Those limitations do not exist with an FHA loan to purchase a HUD home.  So, if you are in the market and want to consider a HUD home, let me know and I will be happy to direct you to a real estate agent who is well-versed in the negotiating and buying process surrounding HUD homes.

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffet

We have all heard that quote before, and think we understand it.  But acting on it is an entirely different thing.

I have over the past several months been working with a number of real estate investors picking up just terrific deals on Atlanta real estate.  While the news anchors and commentators generally wring their hands wondering which wave will hit next to push real estate values down further, some sharp investors are buying Atlanta area real estate.

And, they make money as they buy, because they buy right.  And that is the key.  Rents, though down by all accounts, still are enough to cover the note, management fees and to set aside sufficient reserves for repairs and vacancies, right from the start.  And the cash flow, tax benefits and future appreciation are there for the taking for these savvy investors.

Recently I was asked to participate on a podcast, which you can hear right HERE, with a nationally recognized expert on real estate investing, Jason Hartman.

Enjoy the podcast, and if you are interested in picking up an investment property or two, just let me know.  I work with some of the pros in Atlanta who make it turn-key and easy.

Since January, 2009 the Fed has been buying Mortgage Backed Securities – those bonds that determine mortgage rates.  And we have seen a year with the lowest mortgage rates in literally decades as a result.

The goal of the Federal Reserve’s agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBSsecurities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program in January 2009, the Fed has spent $1.122 trillion in the agency MBS market, or 89.8 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010.

So what happens in March, when the Fed stops buying?  Last I heard, the Fed was buying 85% of all MBS.  If that buyer leaves – how high will rates need to go to attract new buyers? That answer will keep you awake at night, if you make your living in the mortgage business.

The question on everyone’s mind is: Will the Fed suddenly announce that they will put more money toward buying MBS, even after March?

I am inclined to think they will, since not doing so would send the housing market into a tailspin again if mortgage rates rose dramatically.

But, the certain thing is if you are in the home buying market, get them off the mark and lock in a rate soon. Anything else is a gamble.

You may recall that back in September ‘08 the federal government essentially nationalized the mortgage buying giants and backing them with $200 billion in guarantees against losses.

Two days ago, on Christmas Eve, they got another federal gift: a removal of the caps to fund losses at Fannie Mae and Freddie Mac.  Now, they are no longer limited to $200 billion each.  They are unlimited.  In exchange, the government gets 80% of the stock in each company paying 10% dividends.

Is this good or bad for the housing industry? Well, it means the government is fully committed to doing all it takes to help the housing market turn and lead us out of recession.  That’s good.  It also indicates that all parties involved expect the losses to exceed the $200b limit and want to prepare for it now rather than wait for a crisis time. That’s bad.

But for now, for the prospective home buyer around Atlanta, the same thing applies: that now is the best time to buy due to the $8000 tax credit, and the low, subsidized mortgage interest rates that, according to the current plan, will rise sharply in April, 2010.