The government's move helps to stabilize the shaky mortgage market and take out some of the unknowns, removing some of the fears of mortgage investors, said Bob Moulton, president of Manhasset, N.Y.-based Americana Mortgage Group. Without worries about Fannie and Freddie, more people were willing to invest in mortgage bonds, creating downward pressure on mortgage rates. The lower rates could hold for a while, some mortgage professionals said, a welcome respite compared with the mid-6% range the 30-year hit at various times this year. Another area where the government bailout could help homeowners: So-called conforming jumbo mortgages could become more obtainable and affordable, said Gibran Nicholas, CEO of the CMPS Institute, a training, certification and membership program for those who provide mortgage and real estate equity advice. These are mortgages at the top of the conforming limit, as high as $729,000 in high-cost areas including California. Recent legislation created this new breed of mortgage when conforming loan limits -- the top mortgage amounts Fannie and Freddie were allowed to finance -- were raised in an effort to make bigger loans more affordable. But the mortgages still remained harder to get and more expensive than loans that met the previous $417,000 limit, Nicholas said. "Buyers in the bond market have been reluctant to invest in new types of mortgage bonds -- such as those backed by as-yet-untested conforming jumbo loans," he said in an email. But now, the government could buy bonds backed by conforming jumbo loans and become the "catalyst" to jump start demand for them in the bond market, Nicholas said. A break on conforming mortgage rates could, in turn, help bring some stability to the housing market if buyers decide to take advantage of them, said Lawrence Yun, chief economist of the National Association of Realtors. "There is generally one quarter lag time between when rates fall and when home sales pick up," he said, adding that an improvement in home sales might come in the fourth quarter. Coupled with lower home prices and a temporary $7,500 tax credit for first-time home buyers, there could also be more activity from those who don't currently own a home, said Jim Sahnger, a mortgage planner with Palm Beach Financial Network. But for others, it is going to take more time before they're comfortable making a home purchase. Some worry that prices will continue to drop, while others fear they'll lose their jobs or are just trying to keep up with high fuel costs and other household expenses, Cutaia said. "As soon as there's certainty -- a general feeling among the populace that this is the bottom and it's not getting worse -- people will come outside and buy houses," Cutaia said. Refinancing "boomlet" The rate drop could also spur somewhat of a "refi boomlet," in the next several months, Cutaia said. Some of the people seeking a refinance are those with adjustable-rate loans that have already or will soon reset to higher rates, said Greg Willis, president of retail lending for Ace Mortgage Funding in Indianapolis, Ind. Still, people who are underwater on their loans -- owing more on their homes than they're currently worth -- probably aren't going to get any additional relief due to this recent Fannie and Freddie development, said Jared Bernstein, senior economist at the Economic Policy Institute, a nonprofit group that examines economic issues with a focus on the interests of low- and middle-income workers. "There are significant numbers of people out there who still have homes worth less than their mortgages and it doesn't change that game," Bernstein said. Amy Hoak is a MarketWatch reporter based in Chicago.
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