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Two Ways To Play: Mortgage Applications Up?


Strengthen your portfolio in good times and bad.


Editors Note: Terry Woo is out this afternoon. Buzz & Banter editor Matt Theal is filling his considerable shoes.

Less than a week after the Federal Reserve's historic interest rate cut, prospective borrowers have rushed to fill out mortgage-loan applications. According to the Wall Street Journal, mortgage rates have fallen by almost 3 quarters of a percent and bankers have become swamped with applications, as borrowers look to refinance at rates not seen since the 1960s.

Bank of America (BAC), the nation's largest mortgage provider, says applications have doubled in December (it's even moved 300 employees from home-equity loans to mortgages to help with the surging demand). The company's CEO, Kenneth Lewis, predicts housing prices will stabilize by mid-2009.

But despite the rosy picture painted by Bank of America, there are still some unknowns. Most of the applications have been for refinancing, not purchases, and it's still uncertain how many of the borrowers will qualify. Furthermore, loans may also take longer to process due to tighter standards by lenders.

While it's probably too early to call a bottom in housing, at least mortgage bankers are busy again.

From the Bull Pen: Bank of America's acquisition of Countrywide doesn't look so bad now. Bulls could consider buying the stock here with a stop loss below $12.

From the Bear Cave
: Thursday on the Buzz and Banter, Professor Bennett Sedacca said he's shorting the 30-year Treasury by buying the Ultra Short Lehman 20 Year Treasury (TBT). Bears could consider buying the stock here with a tight stop below 35.

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No positions in stocks mentioned.

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