S&P fallout: Fannie and Freddie downgraded this morning

Fannie and Freddie have been asking for another $5 billion or so and today S&P just downgraded them too. I wonder what that will do to interest rates and borrowing. So far nothing with the interest rates today. When the government took them over in 2008 you just knew it was not going to be good.

Credit rating agency Standard and Poor's on Monday downgraded the debt of mortgage finance giants Fannie Mae and Freddie Mac.

The downgrades to AA+ are part of the continued fallout from the agency's decision to drop U.S. sovereign debt to AA+, an unprecedented move that rattled investors and sparked concern over the long-term impact of the action.

76Print
It was widely expected that S&P's downgrade of U.S. debt would roll downhill to other entities that are closely linked to the federal government.

Fannie and Freddie, which were taken over by the government in 2008, fuel home sales by purchasing mortgages from banks.

It's not clear what -- if any -- effect the downgrade will have on Fannie and Freddie's borrowing costs. And since Treasury yields remain at very low levels, a sharp spike in mortgage rates seems unlikely.

Some observers -- even S&P itself -- had feared interest rates would spike after a downgrade. But Treasury yields actually fell Monday, likely because the United States remains a good credit risk in the eyes of investors.



http://money.cnn.com/2011/08/08/news/ec ... le_effect/

Time to put more foreclosures on the market?

Maybe if housing dropped another 20%, buyers would start stepping up. How spooked are prospective buyers? Rents continue to rise.

Okay - they're downgraded. Even so - the credit markets have not done that much.

The market still lends money to the US government over 10 years, at under 2.6%.

US interest rates, are lower than Canada, the UK, France, New Zealand, or Australia (AAA countries)

The downgrade is a political, not a technical event.

Today's market hysteria makes for a decent buying opportunity if you know how to differentiate quality from junk.

Tell me --- how much sense does this rate sheet make?

Measure Latest Rate Last Week
30 yrfixed 4.33% 4.47% (down)
15 yr fixed 3.50% 3.58% (down)
5/1 ARM 2.92% 2.94% (down)
30 yr refi 4.42% 4.55% (down)
15 yr refi 3.63% 3.70% (down)

usually - higher risk means higher rate of return.

Take a look at what the markets say:

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
08/01/11 0.13 0.10 0.16 0.22 0.38 0.55 1.32 2.05 2.77 3.72 4.07
08/02/11 0.05 0.06 0.13 0.17 0.33 0.50 1.23 1.94 2.66 3.59 3.93
08/03/11 0.01 0.02 0.08 0.16 0.33 0.52 1.25 1.94 2.64 3.55 3.89
08/04/11 0.01 0.02 0.05 0.12 0.27 0.44 1.12 1.78 2.47 3.37 3.70
08/05/11 0.01 0.01 0.05 0.11 0.28 0.49 1.23 1.91 2.58 3.49 3.82