Tags: Bove | crisis | mortgage | market

Dick Bove: Crisis Lurks in the Mortgage Market

By    |   Tuesday, 02 September 2014 02:45 PM

The mortgage market is headed for another meltdown — by winter, says Dick Bove, a financial services analyst for Rafferty Capital Markets.

And what will the causes be?

The Federal Reserve's tapering of its mortgage bond purchases and the quest in Washington to shut down mortgage agencies Fannie Mae and Freddie Mac, Bove writes in a report obtained by CNBC.

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That could spell the end of the 30-year fixed mortgage, he says.

"This means there will be less money available to fund housing, and the terms of the available funds will be considerably more onerous than what was available under 30-year, fixed-rate loans," Bove writes.

"This means higher monthly payments and lower housing prices. It means a crisis in the mortgage markets — and the economy."

The national average of a 30-year fixed mortgage rate stood at 4.23 percent Wednesday, according to Bankrate.com. Until late last year, the Fed was purchasing $40 billion of mortgage-backed securities a month. That buying is now down to $10 billion a month and will likely end in November.

Already, home prices are softening, with the S&P Case-Shiller index of home prices for 20 cities slipping a seasonally-adjusted 0.2 percent in June.

"We're seeing more inventories coming on line, which is putting downward pressure on prices," Anika Khan, senior economist at Wells Fargo, tells Bloomberg.

"In general, we have seen prices rise at a faster pace than the fundamentals would call for. There's a normalization happening."

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The mortgage market is headed for another meltdown — by winter, says Dick Bove, a financial services analyst for Rafferty Capital Markets.
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2014-45-02
Tuesday, 02 September 2014 02:45 PM
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