Until now, Fannie Mae and Freddie Mac have been able to defeat all kinds of predictions regarding their failure. They have come out of trouble every time, and have succeeded in building their image as an eternal formulation.

But it is about time that their eternity may be coming to a halt. The two mortgage giants, who were once sponsored by the government, which now controls it, could really be facing their ends. The MBA wants to split up Fannie Mae and Freddie Mac, and it is possible if a functioning mortgage market is maintained without them.

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It might be unbelievable for many, but the Federal Reserve Bank has actually succeeded in making profit from the financial crisis.

The Fed has had $14 billion as profits made on loans disbursed in the past two years, according to an internal estimate obtained by the Financial Times.

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Guardian in a recent report revealed the perpetrators of the global financial crisis. It  revealed their names and photos too. The British Guardian newspaper on Monday published a list of people whose work has proved fatal for the world economy. Lies have been told by  both policy makers and business sharks.

The publication also listed visionaries who, warned us long before the actual crisis hit our shores.  Unfortunately for the all us, these people were not involved in the process of decision-making.

In its famous “black list” Guardian has 25 spots. Almost half of them are filled with the people that have something to do with economic crisis of today. here are some of political and financial heavy weights.

Bark up the wrong tree “guru”

Alan Greenspan, head of the U.S. Federal Reserve( 1987 to 2006), is on the list at number one. The most influential financier has received from fans the world title of “guru”, “oracle” and “maestro”. In the delight of observers led his calmness with which Greenspan has held America through crises of 1987 and 1991, as well as the collapse of IT-industry in 2000 and panic in the markets that followed the September 11, 2001.  It was Greenspan in early 2000 pursued a policy of low rates of the Fed, which led to easy money and irresponsible distribution of loans by banks. Moreover, the head of the Fed encouraged mortgage borrowers to take loans with floating rates. When rates inevitably increased after the tightening of fiscal policy in the middle of this decade, the people proved to have nothing to pay sharply increased the cost of credit.

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It had not been long since we expected that mortgage rates will go up in next few months. The prediction for mortgage rates to go up was made because investors were sidelined and inflation was likely to rise. The downward spiral in home prices and the global financial crisis scared the already shaking investors a bit more. But all is not bad news. If you are planning to buy a home during this crisis, you might strike a deal of your life if the rate for mortgage finance and refinance go down in 2009.All investment pundits are predicting that home finance rates will go down in 2009 compared to 2008. Let’s analyze the main factors or fundamentals of mortgage rates movement. Economic outlook, inflation trend and Government policy… all these factors are signaling that we have lower interest rates ahead of us.

Already the mortgage rates being offered are very very attractive. National average for 30-year Fixed Mortgage has fallen to below 5.6% in December 2008. It is way down from 6.6 percent just 7 weeks before that. following are the main factors that in my opinion will influence the 30-year fixed rate mortgage and 15-year variable rate mortgage. If you act as a wise consumer, you can get great benefits from this knowledge and use it to protect your depleting wealth and equity in your house.

Yes! Mortgage rates will go down in 2009

30-year fixed mortgage rates will start from 5.5% and keep dropping till June 2009. from there as economic conditions in overall economy will start to improve the mortgage rates will move up again and might hit 6.5% by end of 2009.

Still at these rates, getting a home finance loan is not a bad deal. It’s still very attractive loan rate. There is no evidence available to suggest that home finance loan rates are likely to go up as the market is stalling. plenty of inventory is already out there. The economic conditions never change quickly and there will always be a window available to get the best deal on home loans. My prediction is that this window is already open and will remain open till June 2009.

I see 6 Factors that support my 30-year fixed rate mortgage outlook as i predicted above.

1. Deflationary Pressure

2. Global Recession

3. US Government Policy

4. Housing Market Mess

5. Poor Credit Scores

6. Wait and See Attitude

Deflationary Pressure:

With announcement from world bank, world is officially in the worst recession since World War II. Inflation is a thing of past. we are facing worst of deflation in our country. Core consumer price index has fallen sharply (mainly due to lower oil prices). Yields on Govt. securities like bonds and treasury notes in hitting bottom. It is interesting to note that 30-year Fixed Mortgage rates mostly follow 10-year Treasury Notes. Deflation will rule most of 2009. this will help keep the loan rates down.Recession

Recession:

The National Bureau of Economic Research recently announced that the United States did indeed enter a recession in December 2008. While predictions as to the duration and depth of the recession vary, economists at Goldman Sachs recently revised their original forecast in the face of deteriorating economic news. “This deepens and extends the expected recession, bringing the drop in GDP close to the decline seen in 1982 (2.3% in our forecast versus 2.7% then),” the economists said in the report.

Government Policy:

The massive bailout initiatives that governments around the world are now undertaking will undoubtedly lead to renewed inflationary pressures but as we can read the fine print of these spending plans, we are unlikely to see any material effect before first quarter of 2010.

The Mess in Housing Market:

The drop in home prices, mixed with rising mortgage delinquencies and foreclosures, has forced investors to demand higher rate of interest on their investments especially in securities that are backed by home loans. Resulting in increasing spreads — you can clearly see that difference between 10-year Treasury Bond yields and 30-year fixed mortgage rates has increased significantly. Home prices are expected to continue the downward spiral, at least till June, 2009 — and mortgage delinquencies increasing at alarming pace — this “risk premium” would remain High. “We’re not going to get back to the same tight relationship between the 10-year [Treasury] bond and fixed mortgage rates any time soon,” says Bill Cox , a mortgage lender from Illinois.

Poor Credit Scores :

Even if the mortgage rates will remain low in most part of 2009, a large number of people will not be able to benefit from these.(May be this is another reason for rates to be down). People’s credit scores are hitting rock bottom due to increased borrowing and Job situations. 1 in every 15 American is jobless.People who already have adjustable rate mortgage and want to take advantage of lower interest rates are unable to do so. The decrease in housing prices have eroded the home owner’s equity and most of them have negative equity. They are unable to refinance home mortgage loans due to negative equity, meaning they owe more on their mortgage than their home is worth. As a result, they will not be eligible for refinancing. There not a great number of  potential home buyers in the market these days.

Wait and See Attitude:

Even though, the loan rates are attractive today, people are in no hurry. They understand the economy better than year ago and know that 30-year mortgage rates are not likely to go away if they don’t hurry. they know they have enough time. Blogs like ours are helping in spreading the message. People are convinced that home loan rates are low and will remain low for considerable period of time and they can get their sheet together before taking another debt obligation.

Is the world heading toward a zero rate policy? This question is being asked by hundreds of economists and businessmen.  As evidence of deep recession is unfolding, bankers and economists are predicting that UK interest rates can hit zero any time now. The Bank of Japan’s decision to lower its key policy rate to 0.10 percent from 0.30 percent followed by US Federal Reserve Bank’s dramatic move is more proof to that fact that world is heading toward a global flat zero interest rate.

The Bank of Japan’s policy board voted 7-1 to cut the uncollateralized overnight call rate target from 0.3 percent. It was the second cut in less than two months. Japan’s interest rates have gone lower — they were effectively at zero from 2001 to 2006. TOMOKO A. HOSAKA of AFP reports

“The BOJ is in a similar situation to the Fed — the policy rate is down to a critical point, and policy conduct will inevitably shift to full-blooded quantitative easing,” said Tetsufumi Yamakawa, chief Japan economist for Goldman Sachs.

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