For anyone following the financial news lately, these are nervous times. Last week the government stepped in and bailed out mortgage giants Fannie Mae and Freddie Mac. This weekend there was a new list of companies standing at the payout window looking for a helping hand from the Feds. And the government said no.
Over the weekend Bank of America bought Wall Street titan Merrill Lynch, and Lehman brothers was forced into bankruptcy. This is sending tremors across the financial system. We all knew that the government couldn’t continue to back up all the bad decisions that Wall Street made and that in order for the economy to get past this period some companies would have to fail.
The stock market is in for a bad day today, and money is now flowing into Treasury notes and mortgage bonds. Some are even calling for the Fed to cut rates at their meeting tomorrow. As I write this T bills are up 159 points and mortgage backed securities are up 72 basis points. This is a flight to quality and interest rates should drop again this morning. If you have clients who were on the fence about refinancing their mortgages, start working the phones. They’ve just gotten another chance.
That’s assuming this is the bottom, and the Fed cuts rates, and things remain relatively stable from hereon. What happens if there’s more pain in the near future?
It is now 18th September. 3 days on, and I am in agreement with Ling. The only people who should gain confidence from recent events will be the banks and money men, who know that when it all kicks off, most of them will be bailed by the Government.
The condition of the mortgage market is really very poor and there is no sign of improvement still in 2009. God knows when the market will improve.