Transcripts

The Mortgage Rate Reduction Sparks A Rise In Home Ownership Interest

SUSIE GHARIB: Millions of Americans are investigating the drop in mortgage rates. Those rates are at fresh lows today thanks to the Federal Reserve's blockbuster plan to pump over a trillion dollars into the mortgage market. The move heated up phones at mortgage providers with calls from people who had been waiting to buy or refinance a home. At Scott Gurvey reports, there's lots of interest but few easy answers.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: I checked in with my mortgage lender in New Jersey today. You may have checked in with yours. Melissa Cohn, president of Manhattan Mortgage, says the Fed set off a stampede.

MELISSA COHN, OWNER & PRESIDENT, MANHATTAN MORTGAGE: The phones have been ringing off the hook. The e-mails are flying in and everyone is waiting for what they have been told could be that 4 percent mortgage rate.

GURVEY: My banker's rate is still well above 4 percent and his message for me was not yet when I asked if it made sense to refinance. Freddie Mac's weekly survey on mortgage rates, released today but taken before the Fed announcement, quotes a 30-year fixed at 4.98 percent. A five-one adjustable rate mortgage was the same. Analysts say rates did fall today by about 3/8 of a percent, a big move by mortgage rate standards, but not enough to satisfy.

COHN: The expectation of the borrowers, thanks to the press, is that interest rates are going to drop down to say the 4 percent level with the Fed continuing to buy mortgage-backed securities and starting to purchase long-term Treasuries. The reality is that the banks are very backed up with the rates where they are today and they don't have a great incentive to bring the rates down to 4 percent because they can barely process the volume of business that they have in house at the moment.

GURVEY: One of the reasons the banks are overloaded is that they laid off so many people earlier in the year when the housing market collapsed. The experts say rates may not fall that much in spite of the Fed's efforts. They believe that what the Fed actions will do, is help keep the current historically low rates in place for some time, perhaps into next year. This will extend the window of opportunity for potential home buyers if the economy improves. But Greg McBride of bankrate.com says it will not provide relief for some current home owners.

GREG MCBRIDE, SR. FINANCIAL ANALYST, BANKRATE.COM: The problem that serves as the biggest obstacle for many homeowners looking to refinance is the lack of equity in their homes. The lower mortgage rates aren't going to change that dynamic. The fact that mortgage rates have come down may be little consolation to somebody who doesn't have enough equity or is upside down on their home and can't qualify for these low rates.

GURVEY: And speaking of low rates, my bank said if its competitors make rate cuts, it will too, so I should keep checking. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.