dreamlogic said:If the banks are ripping people off with inflated interest rates, they're sure doing a really bad job of it considering how much money they're losing in mortgages.who else can't make the simple connection: the banks were losing money before but they are ripping people off today, because they need to build up the depleted capital.

nycll said:who else can't make the simple connection: the banks were losing money before but they are ripping people off today, because they need to build up the depleted capital.

Exactly! But, they will have to lower rates eventually.

KingCheap said:I think Mike Garibaldi-Frick of The Huffington Post put it best in his recent article which I will quote from:


First of all, Mike Garibaldi-Frick has no background in finance.
Mike is the guiding force behind the inspirational community art movement, EvolveArts -- his life's work and ongoing creative vehicle. In 1990 Mike formed EvolveArts to bring provocative public art installations out of galleries and museums and into open, public spaces for everyone to enjoy and interpret. The installations are designed to catalyze action, rekindle human connection and stimulate thoughtful and positive attention on important social issues by weaving together art, culture, community and media in constructive forums.


Low Mortgage Rates:

While home buyers cheer the bargain borrowing costs, some economists admit to being puzzled and concerned. If mortgage rates keep sliding, they will pump up any bubble. But if rates snap up suddenly, a bubble could pop, with both prices and investment dropping sharply, hurting many borrowers and investors.

Global financial markets, not any government body, determine long-term interest rates through their bond trading each day. High demand for bonds pushes up their price and drives down their yield, yield being their effective interest rate after factoring in their purchase price. A combination of factors keep driving demand and pushing rates down, forces that have "much more to do with speculation, hedging and politics than . . . with actual investment merit," wrote Peter Schiff, president of Euro Pacific Capital Inc., a Newport Beach, Calif., investment firm, in a recent analysis. "Once these forces reverse, expect bond prices to plunge and interest rates to soar."


This is why interest rates haven't come down after the bailout:
http://www.iht.com/articles/2008/10/27/opinion/edkrugman.php

There's also bizarre stuff going on with regard to the mortgage market. I thought that the whole point of the federal takeover of Fannie Mae and Freddie Mac, the lending agencies, was to remove fears about their solvency and thereby lower mortgage rates. But top officials have made a point of denying that Fannie and Freddie debt is backed by the "full faith and credit" of the U.S. government - and as a result, markets are still treating the agencies' debt as a risky asset, driving mortgage rates up at a time when they should be going down.

What's happening, I suspect, is that the Bush administration's anti-government ideology still stands in the way of effective action.

Events have forced Paulson into a partial nationalization of the financial system - but he refuses to use the power that comes with ownership.

The solution isn't to lower interest rate. The solution is price stability. If nobody knows where the bottom is going to be, nobody is going to be willing to invest into the system. Because there are so many uncertainties, people are pulling out of investments left and right which caused the credit crisis a couple months back which we're still feeling now. It's not the fact that banks don't want to lower interest rates, it's just that they are incapable of doing so.

If you want a better understanding of finance and how the market works get off Huffington Post and read:
The Economist
Economist View Blog

I'm not alone in my view about rates coming down, the government's ability to help cause this and banks marking up rates:

From Jeff Lazerson, president, Mortgage Grader:
"Some banks still refuse to lend or they mark up rates excessively because they don't believe home prices are anywhere close to bottom. Treasury and the Fed will likely push rates down through Fannie Mae and Freddie Mac mortgages. Lower rates will help to stabilize property values."

Dan Dowling, senior mortgage adviser/president, United Mortgage Capital Corp:
"Overall the election results will favor bond and mortgage backed securities prices. These financial instruments, i.e., mortgage-backs, will be increasingly utilized as mechanisms for social and political policy."

Holden Lewis, Bankrate.com:
There has been speculation that the Treasury has been responsible for at least one sharp rate drop by buying lots of mortgage-backed securities. That would have the effect of driving up bond prices, which would cause yields to drop -- and mortgage rates would follow.
Brian Koss, managing partner with Mortgage Network Inc., a mortgage bank based in Westford, Mass., traces the rate drop to something more prosaic than the Treasury putting its thumb on the scales. He hears that mortgage servicers are buying loans, thus driving up prices and ... you get the picture.
He says servicers are buying mortgages because they are steadily running out of loans to manage, in a process called runoff. Mortgages are being paid off when houses are sold, either willingly or in foreclosure. Because servicers are in the business of servicing mortgages, they don't really have the option of allowing all their loans to run off. If they did that, they would be out of business. So Koss' theory is that servicers are buying loans, and indirectly pushing rates down.

KingCheap said:I'm not alone in my view about rates coming down, the government's ability to help cause this and banks marking up rates:<<<<zippppped>>>>>.I ... can... not... resist.. anymore.

Stop quoting stuff you don't understand or out of context. For the sake of internet gods!

KingCheap said:I'm not alone in my view about rates coming down, the government's ability to help cause this and banks marking up rates:

From Jeff Lazerson, president, Mortgage Grader:
"Some banks still refuse to lend or they mark up rates excessively because they don't believe home prices are anywhere close to bottom. Treasury and the Fed will likely push rates down through Fannie Mae and Freddie Mac mortgages. Lower rates will help to stabilize property values."

Fanny and Freddie do not originate mortgages. They affect mortgage interest by purchasing the mortgages and securitizing it. As I said previously, as long as there are people willing to buy mortgage backed securities, mortgages rates will drop. If banks can pass off the risk of holding onto the mortgage to the investors, they will absolutely lower rates. This is what got us in this mess in the first place. Investors were willing to buy MBS that was backed by junk. As long as there was a buyer, banks will lend to anyone.
In what Jeff Lazerson is saying is that the US government (ie the taxpayers) should buy the mortgages so that mortgage interest rates should drop. This is counter to your initial statement of: "if Congress really wants a true stimulus package that won't cost tax payers, work toward getting the rates down."


Dan Dowling, senior mortgage adviser/president, United Mortgage Capital Corp:
"Overall the election results will favor bond and mortgage backed securities prices. These financial instruments, i.e., mortgage-backs, will be increasingly utilized as mechanisms for social and political policy."

Again same thing here. Taxpayers buying up mortgage back securities.


Holden Lewis, Bankrate.com:
There has been speculation that the Treasury has been responsible for at least one sharp rate drop by buying lots of mortgage-backed securities. That would have the effect of driving up bond prices, which would cause yields to drop -- and mortgage rates would follow.
Brian Koss, managing partner with Mortgage Network Inc., a mortgage bank based in Westford, Mass., traces the rate drop to something more prosaic than the Treasury putting its thumb on the scales. He hears that mortgage servicers are buying loans, thus driving up prices and ... you get the picture.
He says servicers are buying mortgages because they are steadily running out of loans to manage, in a process called runoff. Mortgages are being paid off when houses are sold, either willingly or in foreclosure. Because servicers are in the business of servicing mortgages, they don't really have the option of allowing all their loans to run off. If they did that, they would be out of business. So Koss' theory is that servicers are buying loans, and indirectly pushing rates down.
Again same here. Someone has to be the purchaser of the mortgages for banks to drop the rates.

The problem from the market standpoint is that investors want higher interest rates to account for the risk and borrowers want a lower rate. That is how the mortgage rate is determined. What the government can do is be a purchaser of mortgages which will drop the rate. But again, this goes back to costing the taxpayer which you opposed.

Only entity has the ability to purchase the mortgages is the us government. That should be obvious for a while.

^^^ I meant US is the only capable entity to offer ultra low mortgage without subsidy. Consider what the IRS and FBI can do to lower the skip rates in the mom n pop loans.

bring back debt prisons. make deadbeats repair bridges, build railroads, wind farms or other infrastructure the country needs

KingCheap said:Yes, I work in the media. That, I do believe.