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Thursday, September 25, 2008

Inside the Conflicted Mind of Conservative, Free Market Mortgage Broker

Imagine you are a mortgage professional however your political ideology is largely conservative and free market. If you are looking at this bailout, it goes against everything you stand for. You don't want government meddling in business let alone your business. You see clearly the long term effects of saving companies from themselves after they have acted foolishly. You believe there are plenty of free market solutions to the crisis.

On the other hand, mortgage rates dropped significantly in anticipation of this bailout. Then, when it looked as though the bailout wouldn't go, rates shot back up. There is almost no question whatsoever that in the short term mortgage rates will come down significantly if this bailout passes. Furthermore, September employment numbers will come out next Friday. It is quite likely those will look ugly and of course that is also good for mortgage rates. (slow economic growth is anti inflationary which is good for interest rates) Finally, you are hearing rumors on the street that Bernanke might lower rates. That combination is the interest rate perfect storm. If things work out just right, interest rates might challenge all time lows.

It's possible October of 2008 might look like October of 2005 in terms of income. This bailout will likely be the best thing that happened to your business since the refinancing boom of 2001-2003. In fact, it's possible that this bailout might even usher in a whole new refinancing boom. Without this bailout, money will remain tight and that will keep interest rates high. Even a free market solution will likely not cause interest rates to drop. In fact, given that the market expects a bailout, a free market solution will almost certainly cause interest rates to explode.

Yet, you hate this bailout with every fiber of your being on every ideological level. It's a bad idea in every which way except of course for mortgage professionals themselves. What's a conflicted conservative, free market mortgage broker to do, self interest or the best interest?

1 comment:

Anonymous said...

"mortgage professional" is an oxymoron