Just when we think we've hit rock bottom, someone hands us a jackhammer...

You know, I kinda figured I wasn’t the only guy who was peeved at Hank Paulson’s sudden decision to re-allocate the Troubled Asset Relief Program (lovingly known as the 700 billion dollar TARP). This week, Congress ran circles around Hank and Ben Bernanke and let the flaming arrows fly. As we expect, the fiery rhetoric accomplished dang-near nothing but satisfying the collective minds of the constituents that our loving Congressmen and Congresswomen represent.

Chalk another one up to big talk and no action. Go Washington!

But all of that got swept under the rug as our latest end-of-the-world-as-we-know-it crisis finally hit home: the union-belabored, fundamentally flawed US auto industry. CEOs of the Big 3 (Chrysler, Ford, and General Motors) came a-jingling their tin cups looking for a modest handout of 25 billion dollars in taxpayer money to bail them out. Congress had a field day pointing out that these CEOs arrived on private jets and were begging for working capital. Rather hypocritical of them.

Nancy Pelosi is requiring a written plan showing how the 25 billion will be used to make these healthier, more viable businesses before they disperse one red cent. My guess is that the automakers could spit on a piece of paper, hand it in, and get the money. Too many jobs are at stake for this to be the ’line in the sand’ that our government will draw.

And the future tax hikes keep racking up. My grandkids are going to hate us.

All of this news caused an 872 point decline in the Dow Jones Industrial Average in two days. Yet another stock market crash causes investors to flee for safer investments, like bonds and mortgage-backed securities. Since Fannie Mae and Freddie Mac mortgage securities aren’t governmentally guaranteed (yet), investors are a tad more cautious about that investment class. So, while we have seen Treasury bond rates come screaming down (meaning a ton of people are buying them), we have¬n’t seen as pronounced a move in mortgage bond trading.

So, the translation of all that is as long as the stock market is suffering huge losses, mortgage rates will stay attractive.

You guys know me by now. Well, some of you do. I don’t constantly hammer you with sales-speak to get you to buy when the buying isn’t good. I try to provide the facts.

Well, the fact is we are staring at the perfect storm for real estate buying. Rates are being held down by one financial crisis after another. Inflation has turned temporarily negative. Home sellers are entering the real estate slow season AND are about to put a whole lot of debt on charge cards that will come home to roost in January AND are psychologically wanting to have a clean start to 2009. All of this implies that sellers can be negotiated down very readily over the course of the next 2 months.

Are we at rock bottom? God only knows. But there is a fine line between timing the markets and just being greedy. The opportunity floating around right this very second is enormous. Jump on it.

Mortgage rates are good simply because everything else is so stinkin' bad

The game has changed yet again, folks. Hank Paulson has had a change of heart in his planned allocation of the 700 billion dollar bailout. Instead of purchasing what he described as “shaky and illiquid” mortgage-backed securities, they are going to directly buy more equity (stock) in banks. So, as opposed to buying assets that are most likely undervalued, they are buying stock in companies that are actively de-levering their portfolios and will likely drop in value. Also, to prevent other credit markets from unwinding, some of the 700 billion is being considered to backstop auto, credit card, and student loans.

Dang college kids and their hacky sacks.

I’m not gonna lie: this ticks me off in a big way. This is the ‘throw dirt over the toxic waste and hope it goes away’ policy versus the ‘actually get rid of the toxic waste’ plan. It will not fix the mortgage market in any appreciable way, but will bolster stock prices and, by proxy, Wall Street and all the retirement funds that rely on Wall Street. Unless a drastic restructuring of our securitization and banking industries accompanies this taxpayer-funded stock purchase, the actions will only delay the inevitable unraveling of a fundamentally broken finance system.

What we’re rapidly heading for is the “lend and hold” method of mortgage lending where banks actually hold in their own fund any loans they issue. Sadly, we as a country don’t have NEARLY the capital in our banking system to support the weight of high homeownership rates. Drag, dude.

Fannie and Freddie have coordinated and are taking yet another feeble stab at staving off preventable foreclosures. It is aimed at helping those who are over 90 days late on their primary home’s mortgage and haven’t filed for bankruptcy. Of course, jack-squat is being done for Mr. and Mrs. Homeowner who are struggling but would rather not trash their credit by missing three consecutive payments.

The shining ray of good news for rates: job growth and gross domestic product are slipping consistently enough that mortgage rates are going to stay historically low for at least the next quarter. A strong dollar impeding exports, the auto industry in dire straits and a global recession will keep the economy weak enough to keep benchmark rates low and disallow the resurgence of inflation.

Hail to the chief

The deed is done, as they say. America has spoken and chosen a new Commander-in-Chief for our fine nation. And whether you want a high-five or a shoulder to cry on in the wake of that decision, there is no doubt that a new era is upon us, like it or not. No one knows exactly what Obama’s election will be an omen of, but everyone wants to tell you their opinion. The fact of the matter is that opinions are like...well, you know exactly what opinions are like. And everybody’s got one.

And so do I. So please, enjoy them with my compliments.

An enormous pile of taxpayer funded bail-out money is just starting to be put into motion. Some of that money is authorized for direct purchase of mortgage-backed securities, which manually drives rates lower. In the past two days alone we’ve seen fixed rates come down by over 0.25%, partially due to this allocation of funds. MY BEST GUESS: GOOD FOR MORTGAGE RATES

No one knows what is going to happen with Fannie Mae and Freddie Mac. It’s a well-known fact that the conservatorship under which both mortgage giants have been placed is an unsustainable situa¬tion. Talks of privatizing the companies (letting private shareholders own the place and make the rules) or nationalizing them (having Uncle Sam bring them onto the balance sheet officially, dumping the risk on taxpayers) or some combination thereof haven’t gotten anywhere yet. Something will need to be done in the very near future. MY BEST GUESS: DEPENDS ON WHAT DECISION IS MADE

China’s economy is slowing at an alarming rate. The USA and China are, for better or for worse, attached at the hip economically. Historically, we buy their cheap exports and they buy our debt. No one’s currency goes crazy due to the trade imbalance and everyone goes on happily ever after. Their gross domestic product averaged out at 12% growth last year and has slowed to a quarterly reading of 9% annualized growth. Now, while 9% is still a large number by our standards, try to realize the magnitude of their population boom. If they don’t generate 15 million brand-spanking new jobs per year, they will not keep up with the growth of their workforce. My guess is that they’ll have to turn on more spending domestically; and less spending on American debt. Add on a slowing American consumer which will slash demand and jobs at Chinese factories, and you’ve got bad news. MY BEST GUESS: BAD FOR MORTGAGE RATES

Obama is a middle-class-aholic, and the middle class would like to not lose their homes to foreclosure. Most economists agree that a fundamental aspect of moving out of this financial slump is to repair the housing market and prop up home values. Obama has made it abundantly clear that he is planning on making our housing crisis a high priority on his presidential list. It may eventually kill us in either taxes or inflation, but he is going to make something work for the housing market, and fast. MY BEST GUESS: GOOD FOR MORTGAGE RATES

The Fed Funds Rate is super-low. With a little more stability in the markets, the cost of borrowing has the opportunity to come roaring downwards. The Fed slashed rates by a full point (in two 1/2 point cuts) down to 1%. As long as inflation stays tame, that could open the door for some very attractive mortgage rates. MY BEST GUESS: GOOD FOR MORTGAGE RATES