GOOD NEWS FOR THE HOUSING MARKET! Fannie Mae & Freddie Mac issued bonds are soaring, resulting from Sunday's announcement that the government will at least temporarily take control of the both GSEs.
Mortgage yields now have every reason to come down, which means lower interest rates on mortgages. The spread between mortgage and Treasury yields has been a thorn in the mortgage industry’s side. The spread has spent the past few weeks again at historic highs, exceeding 2.75%, because of credit and volatility fears.
With yesterday’s action in place investors can buy higher yielding bonds with the same security as a treasury bond. This has and most likely will continue to translate into lower mortgage rates.
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