Trends for 10

First the good news. It won't take long because there isn't much of it. The HVCC style appraisal system for FHA loans will not take place at least until Feb 15th.
Any delay from the disaster that has become normal for HVCC conventional loans is welcome.

A few items that were just announced and what they mean for home buyers and sellers.
The Treasury department announced that the mortgage backed security purchase program ends 12/31/2009
The Federal reserve program ends in March. When it ends they will have purchased 1.2 TRILLION in mortgage backed securities. If the Fed hadn't acted mortgage rates would have been dramatically higher. When the program ends rates will do what they would have done without the gov't program. I think in March if not in the month prior we will see rates in the 6.5% range. The real problem lies in that other than the federal gov't the demand for the MBS should be almost zero.

Since investors lost the ability to call the notes for lack of payment along with a myriad of other issues the demand has plummeted. Think about it; if the demand was strong the government would not have begun to buy them in the first place. It's not the actual owners of the mortgage but rather the servicers that have become empowered to make decisions on the loans. Should the rate be lowered, should principal be forgiven etc. Hedge funds and private venture capital firms will not jump back in unless the current market changes drastically in their favor. Basically the "security" has been removed from the term "mortgage backed security"
Plus with the free fall in equity even if a home is foreclosed there is likely to be no equity for the bank to recover.

If this happens expect a further decline in home prices that will rival what we have already seen. Add in the fact that ARMS are still going to come due in 2010-2011 which means the supply will rise again in markets around the country and we simply have not seen the worse that is to come. A happy new year indeed.