4.875 interest rates -- now available 12-12-08

The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to
dramatically force down rates and stimulate the moribund housing market, according to sources familiar with
the proposal.
Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home
purchases, according to the sources. But to participate in the government's program, mortgage lenders would
have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year
fixed-rate loans.
These securities would be purchased primarily from Fannie Mae and Freddie Mac, the financing giants that buy
most mortgages from U.S. lenders, according to sources who spoke on condition of anonymity because the
plan has not been finalized.
The cost of the plan and source of funding remain unclear. One possibility is for the Treasury to raise money
by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because
it would be buying securities that pay 4.5 percent.
At a meeting attended by the Treasury's Interim Assistant Secretary for Financial Stability Neel Kashkari and
the National Association of Realtors in mid-November, senior Treasury officials said they were optimistic that
subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market, sources said.
Treasury officials told the Realtors that the plan could be a more effective way to help homeowners than
focusing efforts solely on borrowers who are struggling to meet their monthly payments, the sources said.
Democratic lawmakers have been advocating a proposal to modify the mortgages of distressed homeowners.
A source said Treasury officials suggested at the meeting that the Realtors start a grass-roots campaign to
press the mortgage rate plan with lawmakers.
Treasury officials described the situation as fluid and said the plan was still being finalized, according to people
in contact with the department. The officials expressed concerns yesterday that premature disclosure of the
plan could prompt Americans to put off buying homes and hold out for a better rate, sources added.
Treasury spokeswoman Brookly McLaughlin said she would not comment on the matter.
Key to solving financial crisis
Treasury Secretary Henry M. Paulson Jr. has said that a recovery in the housing market is key to solving the
financial crisis. Such a rebound would restore confidence in the banking system and support the value of
troubled assets backed by mortgages.
Though he has said a mortgage modification plan proposed by Federal Deposit Insurance Corp. Chairman
Sheila C. Bair could help the housing market, Paulson has expressed concerns about whether it would reward
borrowers who bought houses they couldn't afford. Bair's plan would use tens of billions in federal funds to
modify adjustable-rate mortgages for several million financially troubled homeowners.
The initiative under review at the Treasury would be an alternative. Borrowers would have to meet standards
set by Fannie Mae, Freddie Mac or the Federal Housing Administrations that include documenting their income,
sources said. Fannie and Freddie were put under government control in September. The Treasury plan would
not apply to refinances.
MSNBC.com

denver market ready for upturn

Denver overall outlook is sunnier than for most western cities because neither inventory nor prices spiraled out of control during the boom. Dinged by a telecom bust earlier in the decade that cost the city 5 percent of its jobs, the local economy wasn’t primed for irrational exuberance. Now with six months’ worth of homes in inventory—the level most experts judge to be roughly in balance—the city offers considerable upside.
In particular, upscale buyers are flocking to Cherry Creek, the towny neighborhood that’s home to Neiman Marcus and the Cherry Creek Arts Festival, one of the country’s top urban arts fairs. Here, prices leaped 16 percent in the past year, according to Integrated Asset Services, an firm specializing in mortgage investments. The area’s popularity illustrates a common theme in U.S. housing markets: established, close-in neighborhoods are often holding up better than suburbs, because they didn’t endure overbuilding and because higher-income owners were less likely to need subprime or adjustable-rate mortagages.

Cherry Creek’s success also highlights the strength of the envy factor. In a recent Coldwell Banker survey of luxury homeowners, 17 percent said they’ve considered moving to get into a certain address or zip code—a reminder that the lure of prestige or good schools moves homes even in a shaky economy. Cherry Creek’s 80206 zip code may be Denver's ritziest—as seen in the new development North Creek, which features a mix of million-dollar tower condos and brownstones along with a private garden courtyard, à la New York’s Gramercy Park.

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