People say us reporters never write any good news. Well, there may just be some silver lining amidst all these dark clouds on Wall Street.
Gibran Nicholas, who heads a mortgage industry certification outfit called the CMPS Institute, notes that all the panic selling on the Street means banks will be far more likely to offer better mortgage terms to distressed home owners rather than foreclose on them. It also means they’ll be more willing to negotiate with any real estate buyers interested in bank-owned property.
The government taking over Fannie Mae and Freddie Mac will mean lower interest rates, in spite of the recent Fed decision to hold them steady. “These rates should remain low well into 2009 because they closely track the Fed Funds rate that is controlled by the Federal Reserve,” Nicholas says. “The Fed really has no desire to increase interest rates in the middle of credit crisis.”
Lastly, and this is a big if, Nicholas notes that the U.S. government just may come out ahead on its market interference. The $85 billion bailout of AIG is a lot of money. But the feds could be earning 11% on that loan, plus any appreciation they get from owning 80% of the world’s largest insurance company. As far-fetched as that sounds, the government made money off its early 80s bailout of Chrysler.
The time to buy, the old Wall Street saying goes, is when there is blood on the street.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.