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.

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.

The Senate voted this evening to extend the first time home buyer tax credit of $8000 to April 30, 2010.  And, the income limits are increased from the current $75K for individuals, $150K for couples to $125K for individuals, $250K for couples.  Good news for first time home buyers, and good news for the real estate industry.

The expansion of the credit is to home owners who currently own their own home, and have been in the same home for at least 5 years.  Those buyers will receive a $6500 tax credit.

This time around, however, the end date is not a race to the finish line, as the November 30 deadline was.  The new April 30, 2010 deadline is the date by which one needs to be under contract.  They then have 60 days, to the end of June, 2010, to close and still receive the tax credit.

So, good news for the housing industry.  Now, let’s take advantage.  No more excuses.  Let’s go spread the word and move some homes!

Good news for those looking for a home to purchase, and a mortgage on that home.

The Federal Reserve released the minutes from their last meeting today, and discussed the importance of EXPANDING asset purchases should outlook worsen.  GOOD news for us, since the Fed’s purchasing of Mortgage Backed Securities is the ONLY thing keeping mortgage rates as low as they are right now.

So hang on! This ride out of the housing slump is speeding up.

I do like that bathroom, though.

I saw this article on the Reuters Blog, by Rolfe Winkler.  He chronicles quite succinctly the difficulty that the Fed has in trying to pump the economy up, while trying their best to stave off inflation, and potentially hyper-inflation that many economists fear is coming our way.

Note in the graph that the ‘excess reserves’ that the Fed has pumped into the banking system is approximately $700B, up from it’s decades-long level of $10B.

Now, the Fed argues that if it just sits there, with banks earning small amounts of interest on it, then all is well, and they can slowly reel these excess funds back in once the economy starts chugging along again.  Everybody’s then happy, and, no inflation.

The danger is that the economy starts picking up a little steam, and the banks start to aggressively lend these excess funds, to gain even more interest income.  Then, we have WAY too much money supply in circulation, and, you guessed it, hyper-inflation.  And we all pay $10 a gallon for milk.  Leave the Oreos.

Merideth Whitney was one of a small handfull of people – people with a microphone that Wall Street listens to – who accurately predicted the fall of the financial industry back in 2007.  In my book, that’s a feather in her cap.

Another kudos goes out to her for this call, made yesterday.  She is right on with the analysis that, A) the “Making Home Affordable” plan signed into law in March by Pres. Obama will be the first bit of government aid that will actually help the homeowner.  And, B) this plan will put a LOT more money back onto the balance sheets of large banks and financial institutions.

A win-win.  Well, yes.  Just don’t look at the taxpayer footing the bill for a third leg.  But, for the bank and the underwater homeowner, this can be a good thing.  An interesting listen to Meredith Whitney:

I wrote in this blog some time ago about the Hope for Homeowers plan, which went into effect on October 1, 2008 with billions in government funding.  $320B, to be exact.

As of last month, April, an amazing stat came out.  Brian Sullivan of Fox News reported that to date the program has successfully helped modify the mortgages of 1US Homeowner.  And we know, ‘One is the lonliest number that you’ll ever see’.  Especially with that sort of funding behind the program.

There are a lot of reasons for the lack of effectiveness of this program; including that the existing mortgage holder would have to discount the note to 90% of the current value of the home to qualify for the FHA

endorsed refinance.  That has since been modified to 97% of the current home’s value.  Still, mortgage servicers do not want to discount the notes and take real losses that easily.

But, look on the bright side.  With the extreme effectiveness of this Hope for Homeowners program and the billions in taxpayer funds that were allocated to the program – well, government healthcare is coming for us all.  We’ve got that going for us.

A lot of interest has been bubbling up about the $750 billion dollars that the Obama Administration has earmarked for loan modifications for borrowers who are under water on their home values. And, lots of homeowners around Atlanta are underwater, so it affects a lot of us.

The way it works is that it is a true loan modification, not a refinance.  And those eligible are those who are current on their mortgages, but owe more of the home than the home is worth, AND the mortgage is owned by either Fannie Mae or Freddie Mac.

That’s where most people stop.  ”How do I know if my mortgage is owned by Fannie or Freddie?”  Well, now it has been made simple.  You can look it up online or by a simple phone call.

Fannie Mae has set up this website to check if your mortgage is owned by Fannie.

And, to check with Freddie Mac, just call 1-800-Freddie, and press option 5, then option 4.  Then ask.

If the answer is positive, then you can contact your current servicer to ask them to begin the process of modifying your mortgage.

Good luck!