TARP Funds Affect Mortgage Rates?

Recently Goldman Sachs, Morgan Stanley and JP Morgan applied to repay TARP funds.  This is great news as it is signs that the economy could be recovery, but is it?  The three financial institutions that are applying to repay TARP funds are probably the three best financial companies on Wall Street; especially after the subprime mortgage crisis.  The problem that we are likely to see is that Bank of American and Citi will now try to follow the lead of these three financial institutions.

Unfortunately, there is very little chance that Bank of America and Citi can repay their TARP funds as they have been very careless with their decisions in the past.  They have gobbled up companies that were heavily involved in subprime and they have not been honest with their shareholders.  With that being said, we can only hope that they are honest with their shareholders on the time frame it is going to take to pay back their TARP funds.

How is this going to affect mortgage rates?  Well, if the economy is getting better, it is likely that we will start to see mortgage rates come back up as the Fed is likely to stop buying mortgage backed securities.  The problem with making this assumption is that these were the three best financial institutions so they may not have needed the high amount of TARP money that they received.  The only way we can predict where future mortgage rates are headed is to see where new housing supply is and that remains very high.  If new housing supply remains high, it is likely that rates will continue lower.