Dec 4, 2008 7:38 am US/Mountain
Treasury Department Considering Bold Mortgage Move
WASHINGTON (AP) ―
Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates in an effort to stabilize the housing market.
Under the proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent, Scott Talbott, a vice president at the Financial Services Roundtable, said Wednesday. That's about one percentage point below the current rate of 5.6 percent.
Treasury would do so by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Talbott and other industry sources said.
Treasury is strongly considering the proposal and could announce a decision as early as Monday, industry sources said.
Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions Treasury may take in the future.
In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.
The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.
The National Association of Home Builders is leading a new "Fix Housing First" coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.
"The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound," said Greg McBride, senior financial analyst at Bankrate.com.
While the plan, if enacted, will help anybody looking to buy or sell a home, or refinance out of an expensive mortgage, it may not help those whose credit is so damaged that banks don't want to lend to them.
"It may change the number of borrowers seeking loans but it won't change the qualifications for who gets those loans," McBride said.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
Timeline: U.S. Credit Crunch & Financial Failures
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