U.S. mortgage rates dropped the most they ever had in at least seven years at the end of November as a Federal Reserve pledge to buy $600 billion of debt succeeded where seven cuts in the central bank???s benchmark rate had failed.
The average rate for a 30-year fixed mortgage fell to about 5.5 percent. It was the biggest one-day drop in at least seven years. Federal Reserve Chairman Ben Bernanke had received little help from lenders in his previous efforts to revive the U.S. housing market and halt its drag on the economy.
The central bank pledged to purchase up to $500 billion in so-called agency debt as well as up to $100 billion in direct debt of Fannie Mae and Freddie Mac, the world???s two largest mortgage buyers, and Federal Home Loan Banks. The Fed also said it would set up a $200 billion program to support consumer and small-business loans. Together, the programs almost match the $864 billion of U.S. currency in circulation, as reported by the central bank in a Nov. 20 statement.
The Troubled Assets Relief Program, known as TARP, was approved by Congress and signed by President George Bush on Oct. 3. It gave Treasury Secretary Henry Paulson authority to buy assets after he told lawmakers he wanted to try to clear the market of ???toxic??? securities containing subprime mortgages.
Paulson used most of the first half of the TARP funds to buy equity stakes in troubled banks and in insurer American International Group Inc. On Nov. 12 he told Congress he wanted to use the second half to relieve pressure on consumer credit.
The Fed plan, in contrast, is focused on buying securities backed with ???safe??? mortgages that conform to the strict underwriting guidelines of Fannie Mae and Freddie Mac.
Fannie and Freddie have about $1.7 trillion of corporate debt outstanding and $4.1 trillion of mortgage-backed securities.
The current list of San Diego Bank Owned homes is available at HouseRebate.com.
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