Orange County Register

Mortgage rates in Orange County slid a bit early today as markets digested both the House of Representatives’ rejection of a bailout for financial firms and a takeover of Wachovia’s banking operations by rival Citigroup.

The best rate on a 30-year fixed-rate mortgage up to the old conforming limit of $417,000 dipped to 5.750% with a one-point fee, from about 5.875% on Friday, said Al Hensling, president of mortgage brokerage United American Mortgage in Irvine.

He said the best rates on loans greater than $417,000 and up to nearly $730,000 fell by a similar amount to 5.875% with a one-point fee.

Rates are not falling more — and may even increase soon – in large part because investors are shying away from securities backed by mortgages, Hensling said. Even after the government takeover of mortgage buying giants Fannie Mae and Freddie Mac earlier this month, investors remain reluctant to buy securities issued by them and essentially backed by the federal government.

“Right now we are in total market paralysis,” Hensling said.

Although the mortgage securities market is frozen, people can still get a mortgage, he said. The door is wide open for borrowers with good credit and a 20% down payment, he said.

The House’s rejection of President Bush’s $700 billion plan to buy toxic mortgages and related assets from private companies was a temporary setback, Hensling said. Because of the gravity of the situation, a bailout will pass Congress soon, he said.

And if it doesn’t, he said, “I think you would see a lot more failures and an increase in the lack of confidence in the market and the government and the economy.”

When and if a bailout deal clears Congress, Hensling expects the stock market to rebound, and that will mean investors will sell Treasuries and buy stocks. That means yields on Treasuries will rise, and mortgage rates will also increase, at least a little, he said.

The yield on a 10-year Treasury fell to about 3.6% early Monday as investors bought the bonds. Hensling said by comparison when that yield was in 3.6% range four years ago, during the housing boom, 30-year fixed-rate conforming mortgage rates were in the high 4% range. Today they are a full percentage point higher.

And in related news…

• Citigroup buying Wachovia banking operations
• O.C. foreclosure starts plummet amid new law
• Local lenders react to revised bailout news
• When mortgage paperwork becomes a nightmare
• JPMorgan-WaMu means harder-to-get mortgages
• JPMorgan buys seized WaMu, deposits are safe
• Schwarzenegger vetoes bill regulating mortgage brokers, subprime lending
• Huntington Beach’s housing market still slipping, agent says

And more meltdown coverage…

• Sanchez is a no on the rescue plan
• Campbell urged colleagues to vote yes
• Bailout going down; dow off 700 points
• Credit crunch creeps up on consumers
• Rohrabacher still opposes bailout plan
• Financial rescue vote a tough one, Calvert says
• Bush praises bailout deal
• Campbell ok with deal; outlines next steps

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