![]() ![]() But he said whatever hard-to-assess impact there is will be more pronounced given the slowdown in home sales over the last year. But it will mean less money to buy homes."ĭavid Berson, chief economist of mortgage financing firm Fannie Mae ( Charts), said there will be a negative impact on the overall home buying market, though he sees the impact as limited. "Maybe it's a cohort that shouldn't be borrowing in the first place. "At the margins what this is doing is making mortgage credit less accessible to some people," said Bose George, an analyst with Keefe, Bruyette & Woods who follows New Century and other subprime lenders. ![]() McMahon and other experts say either move is likely to stop some potential home buyers from getting the financing they need to buy a home - money they might have been able to get in recent years. ![]() "Investors in lower-rated (mortgage securities) will demand higher yields, or alternately they'll pay less for the securities, which will force the underwriters of this product to demand higher quality mortgage loans." "Market forces in general will exert discipline on the process," said Sandler O'Neill analyst Mike McMahon, who follows the nation's largest mortgage lender Countrywide Financial ( Charts) along with others in the field. Some experts estimate that rates for subprime mortgage loans could rise a half to three-quarters of a percentage point because of the higher default rates, and that could top a full percentage point if the default problem gets worse. Instead, they package them with other loans of similar quality and sell them as securities, providing cash to make additional loans. That's because most lenders don't hang onto their mortgage loans. The problems with subprime loans are likely to lead to problems for many potential home buyers with less than top credit ratings. That news sent its shares tumbling by more than a third on Thursday, and hit lenders throughout the subprime sector.īeyond whatever problem the rising defaults in the subprime sector might cause to those lenders and their investors, the news was a setback for the struggling real estate market, according to experts in the field. “At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk,” she said.And lender New Century Financial ( Charts), which specializes in subprime loans, announced it would have to restate results for 2006 to account for losses on defaulted loans it would be required to repurchase. economy and global financial markets,” Yellen said in a letter to Congress earlier this month. default “would likely cause irreparable damage to the U.S. defaulting on its debt for the first time in history.Ī U.S. The Treasury would use “extraordinary measures” to pay debts after that deadline, though its funds would be exhausted within weeks, according to Treasury Secretary Janet Yellen. would be unable to pay its bills sometime in mid-October if the Senate fails to follow the House of Representative’s lead in passing legislation to raise the cap. It has grown by another $675 billion since President Joe Biden took the oath of office, according to the CRS analysis. 20, 2021, when Trump’s term expired, according to the nonpartisan Congressional Research Service. The federal debt grew by $5.4 trillion from August 2019 – the last time the limit was suspended under President Donald Trump – to Jan. Raising the debt ceiling would fund the federal government’s ability to pay for past spending, most of it accrued during the former administration. The 10-year Treasury yield rose to 1.4% on Thursday, the highest in about two months. The average rate for a 30-year fixed mortgage edged up to 3.14% on Thursday, following the Federal Reserve’s Wednesday announcement that it would begin tapering asset purchases “soon,” from 3.07% on Tuesday, according to the Optimal Blue Mortgage Market Indices. 1 deadline for the debt ceiling, mortgage rates are posting a muted response. That year, 2013, also had a debt-ceiling brink. Following Bernanke’s speech, the rate spiked nearly another percentage point, as measured by Freddie Mac. rate for a 30-year fixed mortgage jumped a quarter of a percentage point in the three weeks before then-Fed Chairman Ben Bernanke gave a speech that first cited the possibility of a taper. For example, during the 2013 panic known as the “taper tantrum,” when Wall Street lost its mind worrying about the impact of the Federal Reserve’s ending its first bond-purchasing program, mortgage rates started spiking weeks before the Fed’s announcement. The bond market often has an uncanny ability to predict the future.
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