A mortgage broker we work with, Andy Block, noted in a recent email to us that he believes that we’re looking at the “beginning of the end” of the credit crisis, and that the government has sent a strong signal that liquidity would not be a problem in the future. A few of his thoughts…
Watching the recent financial turmoil of Fannie Mae, Freddie Mac, AIG, Lehman Brothers and a few others has been unsettling, to say the least. On Friday President Bush proposed a comprehensive approach to stabilize the credit markets, including $700B for the purchase of existing mortgages from banks and other financial institutions, in an effort to shore up the economy. Additionally, the Federal Reserve and central banks worldwide have rapidly and radically expanded liquidity of the money supply. These actions are sending a powerful signal to investors in our financial markets that liquidity is not a problem!
There are now approximately 5 million homeowners delinquent on their mortgages or in foreclosure. With the government takeover of the largest holder of home mortgages, we (the U.S. taxpayers) now own Fannie and Freddie. In order to reach a stable housing market, lending at reasonable rates will most likely continue through 2009.
Is this the end of the crisis? No. But it is likely the beginning of the end.
The stock, bond and credit markets will remain volatile as the implementation of the government bailout is specified, agreed to by congress and acted upon. These actions are necessary to resolve the current financial crisis and begin building toward a stable and prosperous financial future.
It’s always interesting to learn the views of other real estate and mortgage professionals that are in the trenches of this challenging market. Learn more about Andy Block here.