This week Iâ€™m wrapping up a two-part interview I did with Brian Chappelle, a partner with Potomac Partners in Washington, D.C. Theyâ€™re a consulting group to the mortgage industry and are closely tied in with lawmakers on this recovery package. To catch the first part of this interview, hop on CoDreamHouse.com and click on news.
Today we cover a topic thatâ€™s on everyoneâ€™s minds â€“ interest rates. Are they going lower? Chappelle thinks not. Itâ€™s complicated, but in a nutshell hereâ€™s the deal. Chappelle says the Feds are limited on how much they can do to lower rates. They can drive down the 10-year Treasury note and they can buy securities from Fannie and Freddie to guarantee loans, but the problem is the price of money is driven by more factors than the few the government can influence.
Talk with local mortgage experts and theyâ€™ll tell you a problem is a limited capacity. Right now the private sector doesnâ€™t have the ability to warehouse and hold loans. Secondly, given the response on Wall Street, private industry doesnâ€™t believe the Obama plan will work. Couple that with a dozen other issues and the private sector is not likely to go along with more interest rate reductions. The opportunity has been there several times over the last month and a half to drop rates into the low 4s, but what weâ€™re seeing instead is a push back from investors.
On a different note, I asked Brian about the rumors Iâ€™ve heard that Washington wants to regulate every inch of the home-buying process. He says itâ€™s true, and if lawmakers can get past the initial crisis watch out because government regulation is coming to realtors, mortgage lenders, appraisers, credit rating agencies, secondary loan warehousing, investors and on and on. If they have it their way, Washington will be your partner in the real estate business. Unfortunately, thereâ€™s not enough space in this column to debate all the proâ€™s and conâ€™s of that news, but it always worries me when the pendulum swings too far in one direction.