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Dropping Rates....Washington's Nov. 24th Move

This just came in from my secondary market rep this morning:


Stock market up; bond market prices higher, and mortgage market on fire this morning

The Fed has made a massive move to unlock the credit markets that so far have resisted all attempts to light the fire. In a surprising move this morning the Fed announced an $800B spending binge that may finally get mortgage rates down. The move is Bernanke's attack on deflation and getting credit markets functioning again.

The Fed will purchase as much as $600B in debt issued or backed by government-chartered housing-finance companies.

It will also set up a.....

.... $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.

Separately, under the new Term Asset-Backed Securities Loan Facility, the Fed will lend up to $200B on a non-recourse basis to holders of AAA rated asset-backed securities backed by “newly and recently originated” loans, such as for education, automobiles, credit cards and loans guaranteed by the Small Business Administration, the Fed said.

The Fed will start buying the direct debt of government- sponsored enterprises -- Fannie, Freddie and a dozen federal home loan banks -- through primary dealers in government debt next week.

The purchases of mortgage-backed securities will be done through asset managers, and officials aim to begin the effort by year-end.

The unexpected move by the Fed has moved mortgage prices up over a full point and taken the rate for 30 yr fixed rate mortgages down about 3/8ths.

Treasuries are also rallying as is the stock market. Sec Treasury Paulson is about to provide details at the 10:00 press briefing.

Typical good credit rate 11-18-2008: 6.00
Typical good credit rate yesterday evening, 11-24-2008: 5.875
Typical good credit rate rate this morning, 11-25-2008: 5.375


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