Mortgage Rates close to "bottoming out"?

By Kim Chipman and Romaine Bostick at Bloomberg.com

March 27 (Bloomberg) -- Mortgage rates are “probably as good as it’s going to get” and the housing market is likely to rebound sooner than some forecasts, Freddie Mac interim Chief Executive Officer John A. Koskinen said.

“Mortgage rates, if they go down at all further, it’s going to be incremental,” Koskinen told reporters today in Washington after he met with President Barack Obama. “Interest rates are probably close to bottoming out, and therefore we are telling people” to buy a house now.

The U.S. 30-year fixed mortgage rate as tracked by Freddie Mac fell to 4.85 percent, the lowest on record, on a government plan to increase purchases of mortgage bonds. The U.S. housing market, the worst since the Great Depression, may improve sooner than some economists’ forecasts as people who had put off home purchases take advantage of a “buyer’s market.”

“This is more attractive than they’ve ever been and about as attractive as they’re ever going to be,” Koskinen said of mortgage rates. ‘We are going to begin to see a lot of home purchases by people on the sidelines who are suddenly discovering ‘hey I can afford a house.’”

“I think you will see a return of confidence in the housing market that we haven’t had in the last couple years.”

Freddie will also have a “modest amount of assets” to participate in Treasury Secretary Timothy Geithner’s plan aimed at ridding banks of toxic real-estate holdings.

Modest Amount

Geithner announced a program this week that may generate as much a $1 trillion in financing to buy illiquid assets using $75 billion to $100 billion from a U.S. bank rescue fund. The effort relies on a Federal Reserve partnership with private investors to buy the securities and guarantees to entice buyers.

“We may have $5-to-$10 billion worth of assets that would be available and appropriate,” Koskinen said. “But that’s not our major focus, our major focus now is really implementing the president’s program” to help homeowners avoid foreclosure, he said.

“We will probably end up refinancing 3 million to 4 million borrowers who have mortgages ultimately held by Fannie and Freddie,” he said.

Freddie earlier this month tapped Koskinen, who was non- executive chairman, as interim CEO to replace David Moffett, who left the mortgage-finance company after six months on the job.

The company, which has been operating under government control since September, selected director Robert Glauber to take Koskinen’s previous position, also on an interim basis, and said the board is working with Freddie’s conservator, the Federal Housing Finance Agency, to hire a permanent CEO.