Freddie Mac reported fixed mortgage rates plunged in the week ending Oct. 14 with new record lows set on 30- and 15-year terms.

The 30-year fixed mortgage rate dropped eight basis points to 4.19% with an average 0.8 point and placing the no point rate at around 4.39%, while 15-years were down 10 basis points to 3.62%.

Credit Suisse believes that rates could drop towards 4% on a QE driven rate rally. In addition, they said, "Primary/secondary spreads have room to compress from 101 basis points currently, suggesting that prepays/supply should remain stable even in a rate sell-off."

If so, refinancing activity could become more responsive. There was already a strong response to lower mortgage rates in the latest report from the Mortgage Bankers Association for the week ending Oct. 8 with the Refinance Index surging 21% to ~5059 - its second highest level of the year.

Wells Fargo, however, said it does not believe that QE will result in significantly lower mortgage rates. They added they expect mortgage rates will increase in the future due to reform and uncertainty related to "lenders' ability to assert their rights in the event of a default." Also, they think additional QE will not help the housing market very much. 

The latest foreclosure data from RealtyTrac suggests as much on the latter point. The foreclosure tracking firm reported foreclosure filings in the third quarter were reported on 930,437 properties, or 1 in every 139 U.S. housing units.

This was a 4% increase from the second quarter, but down 1% from a year ago. For the month of September, foreclosure filings were reported on 347,420 properties, up nearly 3% from July and +1% from September 2009. Of note, bank repossessions totaled a record 102,134 - "the first time bank repossessions have surpassed the 100,000 mark in a single month," said the press release. 

Regarding the latest debacle related to foreclosure documentation which has led many large banks to halt foreclosures, James J. Caccacio, chief executive officer of RealtyTrac warned, " if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows — causing more uncertainty about home prices."

In other mortgage loan terms, Freddie Mac reported 5/1 hybrid ARMs were unchanged at its record low of 3.47, while one-year ARM rates rose three basis points to 3.43%.

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