Fannie Mae and Freddie Mac: 4.5 Mortgage

The US Treasury have announced a plan to push down the US mortgage rates, the idea behind the plan it for Fannie Mae and Freddie Mac to pay a higher price for loans from lenders, the lenders will be then in a position to offer loans to borrowers for as little as 4.5 percent for a 30 year mortgage loan.

The Treasury will then buy mortgage backed securities with those loans in them, all this sounds like a great idea, however the government will be funding the purchases by selling treasuries. Basically this plan would be like the US Treasury turning into a huge hedge fund or more worryingly like a bank.

To be eligible for the 4.5 mortgage rate you would need to be buying a home not re-financing one, and you would need to qualify for Fannie and Freddie’s conventional loan terms,.

Source:interestrateroundup

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