As most people are aware , mortgage interest rates have risen to about five percent over the last month or so. This rise in interest rates has had a dramatic effect of the market as refinancing of existing loans has come to a screeching halt. The market is very fragile right now and higher interest rates will only make things worse.
Just read an article about some new mortgage backed securities that are being packaged and sold to investors. Yes , the same kind that got us into this mess in the first place. Based upon how these securities are being rated by the big rating agencies , it appears that nothing at all has changed. The company bringing these securities to market gave them to an agency to be rated but did not agree with the rating. Just like before , they took their package of mortgages and walked them across the street to another rating agency who agreed with them that , yes , they are worthy of a AAA rating and rated them as such. In a very rare bit of honesty , the original rating agency disclosed why it would not rate them AAA. They said that most of these mortgages were originated by homeowners in San Francisco and that an earthquake would back a significant number of the homes covered in this security worthless from damage. When you read the current prospectus for these mortgages , they do not mention anything about earthquakes. Maybe having all these potentially toxic securities rated by at least two agencies should be part of the law. Of course , such common sense will never survive a trip through Washington D.C..
So hold onto your wallets and hide the kids because the people with all the leftover money are conspiring to take what little we have and the rating agencies are along for the ride again. History does repeat itself , it just usually takes a lot longer.
