Mortgage Crisis Worsens: Democrats Call For Action

The mortgage market is in deep trouble. American Home Mortgage has gone bankrupt, mortgage fears on Wall Street are harming corporate profits.

Mortgage companies are trying to reassure investors and customers that they will not be the next mortgage company to face insolvency.

Now Chris Dodd, chairman of the Senate banking committee, and Chuck Schumer, chairman of the Senate subcommittee on housing are calling for action to be taken to save the mortgage market, saying that Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, should play a bigger role in stabilising the mortgage industry.

Surprisingly, mortgage applications rose 8.1% last week, but will this be enough to save the mortgage market?

Central banks could lower interest rates to help to mortgage market as this would also boost the housing market. However, the Fed said that they are keeping interest rates the same and the Bank of England are holding interest rates as is the European Central Bank.

Market analyst Sam Kirtley of The Gold Prices Newsletter said that the government and central banks have to make a decision:

“They have to decide whether they are going to save housing or whether they are going to save the US dollar. Raising interest rates would save the US dollar for the time being, but it would crush housing. Lowering the interest rates would send the dollar down, but give housing a big boost. Many politicians will favour lower rates as this is more popular with the voters as it gives housing a boost as well as other US businesses as American imports appear cheaper with a lower dollar. Any lowering of interest rates will spark a big rally in gold prices and gold stocks and if the rates are raised, housing will crumble and so investors will turn to gold as a ‘safe heaven’ and gold will rise.”

Would you like to see the government doing more to help the housing and mortgage market?

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