Mortgage Backed Securities

Review:

David Lykken – President of Mortgage Banking Solutions says the housing market is showing signs of bottoming out and the mortgage industry is climbing out of the instability of days past. Requirements for mortgage approval have become much more stringent. This means the loans being created now have very low chances of going into default. As the housing market begins to turn around and the mortgage industry starts recovering, the overall economy should follow.

Mortgage backed securities have always been a big money maker for the banking industry. Mortgage backed securities are simply loans that are bundled together and sold to investors. With the catastrophic default rate, these securities have lost their appeal to investors. Now that the industry is making efforts to lend to well-qualified borrowers, mortgage backed securities should regain their value and marketability.

If Mr. Lykken is correct, there are better days ahead for our nation's economy. Even if he is on target with his observations, the rate of recovery for the housing and mortgage industries is yet to be determined. Experts agree that slow, steady growth is better for our economy. Historically, large growth spurts have been hard to maintain and are usually followed by sudden economic downturns.

As mortgages become more solid, interest rates will probably begin to rise. Now may be the best time to invest in a home or refinance your current home. As of the writing of this article, advertised mortgage rates are in the low 5's. Low interest rates plus low real estate prices equals prime time to invest in real estate.
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