High Hopes for a Decline in Repossessed Properties in 2010

The government program that held down mortage interests to record lows and kept the prices of houses up has come to an end in March 31, 2010. Administered by the US Federal Reserve, the program involved the government’s takeover of huge mortgage finance firms Fannie Mae and Freddie Mac during the last quarter of 2009. Before this government intervention, the housing market was in dire straits with a rising number of foreclosure bank owned properties and an overall decline in home prices.

With a budget of $500 billion, the program started buying up mortgage bonds and was expected to keep doing it until December 31, 2009. Somewhere along the way it decided to increase the budget to by an additional $1.25 billion and slowly wind down the program until March 31, 2010. The effect of the government purchases was a decline in the number of distressed homes. The mortgage rates for 30-year home loans went down from upwards of six percent in 2008 to less than five percent a quarter after the program’s launch.

A major concern for economists was that interest rates on mortgages would shoot up immediately after the program ends but reassurances were made to keep the option of restarting the program open should the situation worsen.

Policy makers are optimistic that the improvements posted by financial markets  in recent months would balance out the retirement of the program. There is a healthy interest for mortgage securities in the private finance sector that should keep repossessed properties in check.

To continue driving down foreclosed bank owned homes, the government announced that it would continue to back the activities of Fannie Mae and Freddie Mac, particularly all the debts owed by these government entities, including the guarantees they issued. While the functions of these government run mortgage companies remain uncertain, the reassurance of continued government support for them reassured foreign investors like the central banks of China and Japan.

An improved job market has also contributed to a decline in the number of reposssessed properties across the country and coupled with a more open mortgage refinancing climate makes for a potent formula for a sustained economic recovery.

Related Posts:

• Foreclosed Homes Continue to Be Part of Fannie and Freddie
• Holiday Time-out for Florida Foreclosures
• Drop in Home Mortgage Rates Expected to Abate Foreclosures
• HUD and Freddie Enhance Government Foreclosure Program
• Senate Reaches Compromise on Funding for Anti-Foreclosure Bill