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Today U.S. stocks declined the most in more than a week, led by banking and real estate shares, as growing speculation the government will bail out Fannie Mae and Freddie Mac rattled the mortgage market.

As has been happening in Wall Street for the better part of year, traders are overreacting to speculative news regarding financial institutions.  Rumors destroyed Bear Stearns, IndyMac and now it looks like they are adversely affecting the world's largest residential lending bodies.  Both Fannie Mae and Freddie Mac are government backed agencies, and account for over $1 trillion of residential loans, so no, the federal government would never let those institutions fail.  They have suffered because of poor performing loans and no one should be taken by surprise with this information.  I can't but feel that there is some market manipulation occurring here that is enriching those parties that know how to game the system, i.e., short trading. 

Residential finance and real estate will recover.  Wall Street and the government seem unprepared in dealing with our current economic state. 

Housing & Economic Recovery Act of 2008

The Federal Government is now providing a $7500 tax credit for all qualifed first-time homebuyers purchasing between April 8, 2008 and July 1, 2009.  

There are income limits which are as follows: $150,000 married, $75,000 single.  The tax credit is phased out if your income is higher than those limits. 

Now the tax credit will be paid back to the government at $500/year over 15 years, interest free, so technically it's really a temporary credit.  Nevertheless, it amounts to an interest free loan from the federal government, which is a positive and it helps make home buying that much more attractive in a difficult market. 

There are some fantastic bargains available out there, and now there's just a little more available to take advantage of those bargains.  

Many have asked what market trends influence mortgage rates?  It's a fairly complicated question and contrary to the general public perception, it has little to nothing to do with the Fed's funds rate, which is what we hear on most media outlets.  Perhaps the simplest or easiest way to track mortgage rates is to keep a look out at treasury bonds on bloomberg.com.  If you see bonds trending higher, and conversely yields heading lower, then generally we'll see improvements in mortgage rates, meaning they'll go lower. If bonds go lower (and yields higher), then mortgage rates will increase. 

Obviously, there are some exceptions to this because there are other factors that will influence rates.  For instance, bonds may be performing very well because the stock market is down, but if it's financial stocks that are dragging down the market because mortgage backed securities are performing poorly (such as with the market today) then you will still see increases in mortgage rates.

We all love to shop online for just about anything.  From trinkets you find on ebay, to houses and financing for those houses.  Whenever buying online, it's always important to know just who you're dealing with, right?  You want to know whether the seller is credible and will deliver what you expect.  Now considering how important that is for tangible items (again those trinkets), it's even more so with intangible items such as financial advising and lending.  How do you know if that person will deliver what you expect and what they've promised?  You will need to do your homework. 

Luckily, you have the internet.  It's not just a great tool for finding an item or service you've been looking for, but it's a great researching tool for making sure you're dealing with a credible source.  This may seem like common sense, but I'm still surprised by the number of people who've told me that they didn't do any kind of background check on their accountant, attorney, loan officer, etc.  Even with people who are referred by family and friends, it's still important to do your own research.  It doesn't take long and it could save you in the long run.