What the Re-election Means to the Mortgage World

Filed under: Market Comentary

It’s Official! President Barack Obama has been re-elected. Last week,  I wrote about what you might expect in the mortgage world depending on which candidate won the election. Now that the election has been decided, here is some more “news” on what you can really expect to see in the near future.

According to Annaly Capital Management Inc., the largest real-estate investment trust that buys mortgage debt, the re-election of President Obama may lead to more “aggressive” housing policies. These include new efforts to motivate refinancing among borrowers with “government-backed” loans.

In addition, the re-election could carry a series of implications for investors. This includes a potential new executive for Fannie Mae and Freddie Mac which might expand Obama’s refinancing push this year.

Analysts say that rates on new 30-year mortgages, which reached a record low last month, will most likely decrease slightly with the Obama administration. And mortgage-bond holders cold probably see and “elevated level” of prepayments continue according to Annaly.

Obama may also eventually allow borrowers to keep “low-rate mortgages” or transfer them to home buyers. This would slow prepayments over the longer term, which could damage holders of low-coupon bonds as benchmark yields rise.

Also, Federal Housing Finance Agencey Acting Director Edward DeMarco may be replaced due to the clashes seen in the past between him and the Obama administration because DeMarco failed to allow the government-supported firms to cut balances for troubled borrowers.

Another key component is how Obama would like to see Americans receive their mortgage interest deductions. Obama’s plan would ultimately find high earners seeing a lower mortgage deduction, which through the reinstatement of a paring that lapsed three years ago, would be equal to 3% of homeowner’s gross incomes exceeding $200,000 for single people and $250,000 for married couples.

And, according to Zillow, when it comes to Obama’s influence on mortgage conditions, Democrats demand more regulation on markets, and that can cause a mass selling of stocks. And as a result, these monies may shift over to mortgage bonds, which would mean lower mortgage rates!

One final thing that is very important to understand is that the consumers should be the ones swaying the housing market with their dollars, and if the consumers stay proactive, it is best for America. Scott Sheldon of Zillow says that if buyers “can benefit by purchasing or refinancing ‘now’ with interest rates as low as they are,” they should definitely take advantage of this great situation.

So whether you are happy of the re-election of Obama or upset that Romney didn’t win, you should be encouraged by what the presidential results mean in terms of the mortgage world.





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