Mortgage rates rise in wild week

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The wild week in Washington and on Wall Street was wicked on mortgage rates, too. They went up.

The benchmark 30-year fixed-rate mortgage rose 16 basis points, to 6.32 percent, according to the national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.43 discount and origination points. One year ago, the mortgage index was 6.49 percent; four weeks ago, it was 6.6 percent.

The benchmark 15-year fixed-rate mortgage rose 27 basis points, to 6.11 percent, and the 30-year, fixed-rate jumbo rose 22 basis points, to 7.58 percent. The benchmark 5/1 adjustable-rate mortgage rose 31 basis points, to 6.38 percent.

The biggest part of the week’s rate increase came Friday, the day after a near-panic roiled lending markets all over the world as they scrounged for cash. Also on that day, details began to emerge about the Treasury Department’s plan to buy hundreds of billions of toxic loans from banks.

Mortgage rates’ march upward continued Monday, as lawmakers laid out their objections to Treasury Secretary Henry Paulson’s $700 billion bailout plan. Rates pretty much leveled off as Paulson and Federal Reserve Chairman Ben Bernanke trooped to Capitol Hill to sell the gigantic bank rescue package to skeptical senators and representatives.

Keep homeowners at home

Bernanke and Paulson explained that the poor housing market is behind all the financial turmoil. Banks hold hundreds of billions of dollars in bonds that are backed by mortgages that were given to too many homeowners who can’t afford their homes. No one knows just how toxic these mortgage-backed securities are. As a result, banks are reluctant to lend to one another for fear that they won’t be repaid if their lending partners are suddenly toppled by bad mortgage debt.

The solution, according to Paulson and Bernanke, is for the federal government to buy these problematic mortgage-backed securities with the aim of strengthening the banks financially and restoring confidence in them.

When lawmakers pressed Bernanke and Paulson about reducing foreclosures, the Bush administration’s main money men said that the root of the problem isn’t foreclosures, but credit availability.

“Not every homeowner will stay in their home,” Paulson said. “But there’s a huge effort being made so that everyone who wants to stay in the home, and can afford to stay in the home, remains in the home. What this plan will do is keep credit available.”