Finance Friday: Treasury begins buying mortgages

The US Treasury started buying mortgage backed securities this week in an effort to ease the frozen capital markets.  Investors have been reluctant to purchase any mortgage backed securities that are not either guaranteed or sponsored by the government.  Fannie Mae and Freddie Mac have become the lender of both first and last resort.  Allowing investments banks to trade mortgages or treasury securities should ease this situation.  This has lowered the spread between the cost of mortgage securities and treasury securities by over one quarter of one percent.  However, this spread is still almost twice as high as it averaged for 2007.

Mortgage rates remain stubbornly high this week with no point low fee loans still at six percent or above.  Adjustable rate mortgages have all but disappeared as these rates are as high or higher than the fixed rate loans.

Guest Author Randy Kelly is a Mortgage Banker and Finance Author with Boulder West Financial Services. He can be reached on-line at http://www.boulderwest.com/.