Most don’t realize that without all the Feds efforts mortgage interest rates would be much higher and economy worse off that were we are today.  Today processes are at work to bring the mortgage market back.  As much as most want to say how hard it is to get a loan there is a reason for this.  Investors who buy mortgages need to feel confident that the loans they are buying are good quality(solid appraisals, good credit, stable income).  We desperately need these investors to come back into the market and begin to buy these securities.  Simply put if they don’t buy - mortgage rates will need to rise to a level that makes it attractive.  We need to do our part to make sure the mortgages they buy are the best quality.

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week’s statement is the Fed’s nice way of saying “no.” They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will most likely climb higher…most likely back above the 6% area. Next year this time we could be in the mid to low 6′s.  So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Now is the time to take action.

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