The Quick Takes Pro blog by Michael Kahn, CMT about anything that might affect your portfolio.
Wednesday, January 13, 2010
The Re-Fi fallacy
From CNBC this morning - Robert Brusca, of Fast and Opinion Economics
Housing is affordable - but the banks are not lending because they do not want to lock in mortgages at these low rates. The hurdles are huge - such as a very high credit score.
Is this really true? Banks make money on mortgages by borrowing from the Feds and the CDs that the public locks in at near 0% rates and then lending it out to the borrowers at 4% (example). This differential isn't much different when the interest rates are at 2%, because the corresponding mortgage rate would be around 6%, give or take.. I don't buy this argument that banks don't make money at low rates. I do however agree that they are not lending. Reasons are more to do with stricter standards on loans imposed by Govt., returning bailout money (which only recently that most big banks have done) and building their asset base.
You are VERY naive about the markets. Yes, the banks CAN borrow from the FEDS (AKA tax payers) at zero, BUT...it is short term and if they lend at long term rates (Mortgages), they are F'ed (when rates rise)..and THEY WILL - just a matter of when. This philosophy of yours is what screwed banks with the Resolution Trust Debacle in the early 80's...hence, the gummint created FNMA, Freddie Mac...which we (Tax payers) own and has been a repeat of what happened in the past and will happen again....why? Because bankers never learn (are GREEDY) and politicians are corrupt. They don't change standards....BANKS do. The only reason a bank is concerned with a regulation is if the govt. agencies won't buy a loan.....only then do they give a crap...otherwise...stick it to the tax payers. Enjoy your beliefs...when the next shoe drops (and it will), you may have a better understanding. I wish you well. I am open to a 2% loan from anyone...for 30 years...R U Game with YOUR money?
Why do you assume I am endorsing the Govt plan or even the banks' activities for that matter? Who said anything about lending at 2% for 30 years? Credit is revolving, all the time. Boy! you seem to have completely misunderstood what I wrote.
Anyway, the name TradeDog - reminded me of the saying "dogs bark, but the caravan moves on".
Is this a "stealth" bull market? Investment advisors are as bullish as they were in 2007 but when you look at the S&P 500 we are up about 4.5% in the last three months.
6 comments:
Is this really true? Banks make money on mortgages by borrowing from the Feds and the CDs that the public locks in at near 0% rates and then lending it out to the borrowers at 4% (example). This differential isn't much different when the interest rates are at 2%, because the corresponding mortgage rate would be around 6%, give or take.. I don't buy this argument that banks don't make money at low rates. I do however agree that they are not lending. Reasons are more to do with stricter standards on loans imposed by Govt., returning bailout money (which only recently that most big banks have done) and building their asset base.
You are VERY naive about the markets. Yes, the banks CAN borrow from the FEDS (AKA tax payers) at zero, BUT...it is short term and if they lend at long term rates (Mortgages), they are F'ed (when rates rise)..and THEY WILL - just a matter of when. This philosophy of yours is what screwed banks with the Resolution Trust Debacle in the early 80's...hence, the gummint created FNMA, Freddie Mac...which we (Tax payers) own and has been a repeat of what happened in the past and will happen again....why? Because bankers never learn (are GREEDY) and politicians are corrupt. They don't change standards....BANKS do. The only reason a bank is concerned with a regulation is if the govt. agencies won't buy a loan.....only then do they give a crap...otherwise...stick it to the tax payers. Enjoy your beliefs...when the next shoe drops (and it will), you may have a better understanding. I wish you well. I am open to a 2% loan from anyone...for 30 years...R U Game with YOUR money?
Why do you assume I am endorsing the Govt plan or even the banks' activities for that matter? Who said anything about lending at 2% for 30 years? Credit is revolving, all the time. Boy! you seem to have completely misunderstood what I wrote.
Anyway, the name TradeDog - reminded me of the saying "dogs bark, but the caravan moves on".
Is this a "stealth" bull market?
Investment advisors are as bullish as they were in 2007 but when you look at the S&P 500 we are up about 4.5% in the last three months.
Paul O'Cuana
Please play nice.
Paul,
Can't be stealth - we see it going up.
Cruisin' for a bruisin' - that's another story
Michael, You're right. It's the opposite of stealth.
Still a lot of excitement but not much movement since October.
Paul O'Cuana
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