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What the Takeover Means for Your Mortgage
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For years, mortgage rates closely followed U.S. Treasury bonds, but they fell out of sync as foreclosure losses mounted, Cecala said. Absent the problems surrounding Fannie and Freddie, rates for the typical 30-year mortgages would be about 5.5 percent or lower; current rates are more than 6 percent.
With the government backing, investors are likely to see investing in mortgages fall back in line with investing in U.S. Treasury securities, analysts said.
When can we expect mortgage rates to drop?
No one knows for sure. It could take a day, a few weeks or a month for the takeover to affect rates, analysts said.
It may depend on whether the housing market improves, said James Sahnger, vice president of Palm Beach Financial Network of Stuart, Fla., which tracks mortgage rates. "I think in the short term it will improve modestly," he said. "I don't know [if] we're going to see significant improvement because of the overall risk [remaining] in the housing market."
What is the best way to negotiate a lower interest rate for my mortgage?
Same as always: Force lenders to compete for your business. Get multiple offers and have your finances in order to make yourself more competitive, analysts said. "Shop around and get them to bid," Cecala said.
In this market, that also means having a high credit score and a significant down payment. Many lenders now want at least a 10 percent down payment, but borrowers can make themselves eligible for a better interest rate with a bigger upfront investment, analysts said.
To ensure a better rate, borrowers should also weigh whether their mortgage would qualify to be bought by Fannie and Freddie. Congress recently increased the limit of loans that the firms can purchase to $729,750 for single-family homes in high-cost markets, including the Washington area. If the home exceeds that limit, the borrower needs a "jumbo" loan, which remains more expensive.
Mortgage companies have tightened lending standards in the past year. Could the takeover affect those conditions?
