Home Buyers and Borrowers Can't Get a Break

Just like the upcoming peak of the summer heat, the troubles at the mortgage loan finance giants, Fannie Mae and Freddie Mac, are driving mortgage rates up, threatening to deal another blow to the faltering housing market and your pocketbook.

Even as the fools in Congress (oops, I mean the policy makers) rushed to support the two companies, home loan rates have approached their highest levels in five years.

The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday.

The average rate for jumbo loans, (loans that cannot be sold to Fannie and Freddie), was 7.8 percent, the highest since December 2000.

Loan rates are rising because of concern in the financial markets (Meaning Wall Street is screaming "fire" to get what it wants.) about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market.

Mr Paulson and Mr Bernanke and their band of Wall Street cronies have proposed a rescue, and of course they have urged Congress to approve it quickly. (Have you ever heard a Wall Street shill NOT scream "buy it now"?)

But, don't expect any rescue to save us average working folks from higher interest rates or increasingly difficult credit requirements for borrowers.

Bond investors (really Wall Street in this sheep disguise), are driving up interest rates on securities backed by home loans. And, of course the added cost is being passed on to consumers through the mortgage markets.

FYI, for a $400,000 loan, the increase in 30-year rates in the last few days would add $71 to a monthly bill, or $852 a year.

All of this will pressure our supposed representatives in Washington to give the Treasury Department (really Mr. Paulson and his band of wolves on Wall Street) the authority to lend more money (that the Government doesn't have, thereby increasing the debt above an amazing $9 TRILLION) to Fannie and Freddie and even better, to buy their stock with more of the money that they don't have (meaning borrowing more). And, the more the Government has to borrow by selling more Treasury bonds, means more commissions on bond sales by, guess who, the Wall Street bond dealers. Nice game, hey?

Now, this is really a cute game of hide the pea (even if it is a huge $9 Trillion) under the shell. What's next Mr. Paulson? Will you bring in David Copperfield to make all of this vanish just in time for a bit of consumer feel good just before the election?

We all know that higher interest rates make it harder and more expensive to refinance existing debts and to buy homes. Worse yet, rising mortgage rates make it less attractive for current homeowners to consider selling and moving up. So, this only further inhibits the housing market. And, massively increasing the already insane national debt only increases interest rates even more. Please, call your Congress person today and give them a quick lesson in basic housing market economics!

Essentially, the clowns in Washington are doing a version of consumer debt consolidation on a massive scale. But, as is typical in government, they are not lowering the interest cost but raising it and extending the term of the loan. This is simply a case of financial suicide, that can only lead to the ultimate conclusion - bankruptcy, and that will be the USA defaulting on it's debt.

So folks, hang onto whatever you have left and pick up a few Krugerrands to stuff under your mattress. The fat lady hasn't even left her dressing room.

The Best Money Guy