An Open Letter To President Obama

President Obama,

It seems that a relatively decent plan of ’stabilizing mortgage rates’ by way of dumping $500 BILLION dollars into Mortgage Backed Securities (MBS) has turned into nothing more than an investors ‘get rich quick’ dream come true.

Beginning the first week of January, the government, by way of the Federal Reserve, has WASTED $114 BILLION dollars of their total allotment on trying to steady a market that is simply not willing to steady. You would think that a consistent flow of MBS purchases would bring some sense of stability to the mortgage rate world, but instead, we have seen the exact opposite.

WHY?

1) Lenders are NOT formulating their rate sheets with any rhyme or reason. We will see a HUGE rally in the MBS market (as we have on SEVERAL days since the inception of this worthless program), and not really see a benefit to rate sheets (consumer rates). Lenders are reluctant to make a move to lower rates accordingly, and blame it on idiotic claims such as ‘we can’t handle this volume yet! We just don’t have the man-power…. maybe next time??’ This is a ridiculous statement. If they can’t do it NOW, when the government IS trying to help the market, how could we trust them to do it when the government pulls out? Call me crazy, but I wouldn’t trust them for a second.

2) Pesky day-traders have taken it upon themselves to manipulate the market as much as possible to reap the most profits. When we have a “rally day” or even two, what happens IMMEDIATELY? The market sells off, often to a worse place than the last time. What happens to warrant such a withdrawal? NOTHING. No big news in the mortgage world, no massive doom and gloom attack. The MBS investors merely want to sell-off and reap their gigantic profits. Easy to do when you have a government-backed program that will, periodically, drive prices up again.

Picture this for one second. If people KNEW that the government was going to artificially inflate the stock price of let’s say General Motors, a LOT of people would join in that fun, no? You buy low, wait for the government to drive the price up, then SELL SELL SELL baby. Rinse and repeat, as long as the getting is good. To my mind, we would see LESS stability, not more. And that’s what has happened in the mortgage world. DISGUSTING!

What is the point of this exercise? This is FAILED POLICY, and it should come to an end. The rest of that $500 BILLION dollar fund can go to MUCH more effective places. Roads, schools, energy- just to name a few. Putting tax dollars where they do not belong, and where they are making VERY LITTLE difference is, for lack of a better term, asinine.

Everyone is UP IN ARMS about the ‘Stimulus Package”. An $800 BILLION dollar, comprehensive- to say the least, plan to get the economy going again. Where is our anger and outrage over the Fed’s complete and total WASTING of $500 Billion? From now until July (the projected end of this idiotic experiment), we will see no stability, we will see no benefit. Might we see lower rates? Absolutely. But we’ll see lower rates with or without this astronomical waste of funds. And again, what good is a low rate when housing prices are stil inflated, people are losing their jobs, and no one can buy or refinance? Read an old blog I wrote here:  http://www.zillow.com/blog/mortgage/2008/12/05/i-bought-my-house-at-45-too-bad-i-lost-my-job-the-next-day/

Stop the madness, tell the Fed to stop handing their money over to an unruly market who is just pocketing as much money as they can. Thank you so much, Mr. President.

Sincerely and with the warmest regards,

Jennifer Monastero

PS- I hear you are in need of a Commerce Secretary. Is there an application I can fill out on line? It sounds intriguing.

February 13, 2009