Transcripts

The Fight To Get Fixed Rate Mortgage Loans

PAUL KANGAS: The Federal Reserve began purchasing billions of dollars in mortgage-backed securities this week, as it first promised in November. The action has done exactly what it was designed to do, drive down mortgage rates. Rates on some 30-year fixed mortgages have dipped below 5 percent, their lowest level in nearly four decades. But as Suzanne Pratt reports, those deals aren't available to everyone.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: At Manhattan Mortgage, after a long lull, business is finally picking up. Mortgage broker Bruce Maasbach and his team say it's been four years since they've seen this much activity. Most of the calls are about refinancing, people anxious to move from adjustable rate mortgages to fixed rate loans.

BRUCE MAASBACH, MANAGING DIRECTOR, MANHATTAN MORTGAGE: The onslaught of people were calling, saying hey, this is something terrific. We really want to do something here for what we've got and change out of a product that we're not happy with and we're probably not going to move as quickly as we thought. So let's lock in and grab the bargain of the day."

PRATT: Conforming fixed rate mortgages are currently the sweet spot in the market. Those are loans under $417,000 in most areas of the country. According to bankrate.com, the national average for a conforming 30-year fixed rate mortgage with no points is 5 1/3 percent, although in some areas, you can get a rate below 5 percent. While the rates for adjustable mortgages have dropped a bit, they're not where they used to be. Experts say that's because demand is down and banks are less willing to take on the risk. Still, there's a perception that banks aren't lending. They definitely are for all types of mortgages, provided your credit is good and you have proof of income and a down payment of at least 20 percent will get you a better deal. But for borrowers who need a jumbo mortgage -- which is true of homebuyers in pricier areas of the country -- the rate for a 30- year fixed is closer to 7 percent. Bankrate.com's Greg McBride explains the government is not propping up that end of the market.

GREG MCBRIDE, SR. FINANCIAL ANALYST, BANKRATE.COM: With a lack of demand among investors, any lender that's making a jumbo loan is, by and large, going to hold this in their portfolio. When the chef has to eat his own cooking, he's a lot pickier about the ingredients. And as a result, you're seeing not only tighter underwriting guidelines, but also much higher rates.

PRATT: As for where mortgage rates are headed in 2009 for conforming loans, most experts say they will stay low, at least for the first half of the year.

MAASBACH: I don't think we're going to go down to 4 percent. I think we're going to see mid fours. I'm not thinking much lower than that. Who knows though.

PRATT: The multibillion dollar question is whether lower mortgage rates will build a solid foundation for the housing market. Experts say eventually they will entice new buyers, but lower rates will not turn bad loans into good ones. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.