Interest Rates may have hit bottom according to the Federal Reserve

The fed made it's quarterly speech yesterday. It appears they are taking the stance of no further rate cuts. The market is now on its own. If you are waiting for interest rates to go any lower, they wont. If you think Obama is going to win the election you better refi now. I don't think interest rates are going to go any lower at this point.

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Bush is ready to start Mortgage Aid Plan

The Bush administration is finishing the details of the plan to save thousands of homeowners who are at risk of foreclosure by helping them refi into more affordable mortgage programs. These mortgages will be backed by public funding. The program is aimed at helping homeowners who owe more than their home is worth due to decreasing home prices. The Federal Housing Administration is encouraging lenders to forgive a portion of those loans and issue smaller ones. This plan is similar to the legislation proposed about two weeks ago by Barney Frank who is the chair for the House Financial Services Committee.

Nearly 9 million homeowners currently have negative equity in their property. This is a serious problem. If a homeowner did have equity they could refinance. Current mortgage guidelines are prohibitive to finance a home that has negative equity.

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Raise the conforming loan limit to help out the Real Estate market

Ben Bernanke lowering the federal reserve rates every few weeks wont be enough to put life back into the real estate market. The problem as from what I can see it is that the conforming loan limits in most areas are to low for Fannie Mae and Freddie Mac. I live in Maricopa County where the conforming loan limit is $417,000. If you live in Scottsdale your home may sit for awhile on the market due to the fact that housing prices are much higher in these areas. The problem is that once you go over the $417,000 threshold you get into jumbo mortgage rates. Rates on Jumbo Loans can be 2% or more higher than for a comparable non conforming loan. This prices most people out of the market for higher priced homes, not to mention that you will need to bring in a heftier down payment to be able to qualify. We must get these limits down to get the mid level properties moving again.

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Why Federal Reserve Rate Cuts wont help you

The Federal Reserve cut their discount rate to lenders by 75bps this week. Notice that I said to lenders and not consumers. Rates did not drop by .75% for mortgages. They went down about .25%. The only group that really benefits from this type of activity are the financial institutions. The move really allows lending institutions to make more money to try and sure up any liquidity issues.

Don't be lured by sneaky advertising trying to make you think that mortgage interest rates have dropped like a rock. The truth is that they haven't. All that I am saying is Caveat Emptor.

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Fed cuts their rate 75bps on March 18, 2008

The federal reserve did it again lowering their funds rate 75bps. I still think it is going to take more stimulus action than just fed rate cuts to get the credit markets running smoothly again. At this point why not just drop it to zero.

Are Fed Rate Cuts Helping the Economy?

The Federal Reserve rate cut that is expected this afternoon may help stimulate a sluggish economy. However it may do little to break open the troubled credit markets and hands down the mortgage market.

I think with the amount of work that the fed has done already, it should be clear that more measures other than the fed may be needed. It's hard to believe that the fed alone could bail out our economy and sluggish mortgage market. Senator Charles Schumer, chairman of the Economic Policy Subcommittee, told CNBC Tuesday, "Everyone knows we need to do more to stabilize housing." I would concur, I think peoples biggest fears right now are those over home prices and the real estate market. Senator Schumer also called for easing up of capital requirements for Fannie Mae and Freddie Mac and threw out the idea of tax credits for homebuyers.


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Fed Drops the fed funds rate by an quarter of a point

The Federal Reserve Chairman Ben Bernanke announced today on a Sunday meeting that the central bank rate will be lowered a quarter of a point to 3.25% from 3.5%. The action was meant to provide additional liquidity to banks and lending institutions. The JPMorgan merger with Bear Stearns was also announced as well.

Should we just let the market handle the mortgage meltdown or should the government continue to act?

Hold on to your hats, this may not have any impact on mortgage interest rates at the consumer level. If you look at what this years fed cuts have done for mortgage interest rates, you will see that there really hasn't been any significant lowering of rates at all. Don't get lured into any fancy advertising that alot of the banks and lending institutions will be running.

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Paulson's mortgage bailout is a farce

According to a recent survey conducted , the majority of Americans are opposed to a mortgage bailout program. A government sponsored bailout would be unfair and very costly to American taxpayers. It is unfair to ask people who made prudent financial decisions to pay for those that did not. You could not create a bailout that would be large enough to stop the impending home price correction and the impact it will have on the economy.

Present home prices are disconnected from real estate fundamentals. It is not right for prices to be higher than the level of affordability in so many different areas. It is just natural that prices correct at a later date.

The majority of subprime borrowers are not falling behind because their loans are now adjusting; they are getting behind because they got into more house than they could afford right from the start.

Most experts agree that the plan will not save enough homeowners from foreclosure. Home prices will drop about the same as without the plan.

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The Fed endorses new rules to halt shady lending

The Federal Reserve endorsed new rules today that would give consumers taking out new home mortgage new protections from dishonest lenders. The proposal is expected to apply to new mortgage loans made by all lenders which would include brokers and banks. The plan is expected to be finalized sometime next year. The Fed is proposing:

1. Forcing lenders to make sure that subprime borrowers set aside reserves for taxes and insurance.

2. Taking away loan programs that do not require proof of income.

3. Prohibiting lenders from failing to consider a borrowers ability to repay a mortgage.

4. Restricting lenders from penalizing specific non prime borrowers with low income or bad credit - who pre pay their mortgage early. This would only apply to loans.

“Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities, and indeed, the economy as a whole,” said Federal Reserve Chairman Ben Bernanke. He also added “They have no place in our mortgage system.

The Feds response has taken on greater importance given the subprime meltdown in the credit and housing markets. This crisis has raised the odds that the economy might be he headed for a recession.

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Federal Reserve Myth about Interest Rates

Just because the Fed cuts the Fed Funds Rate, your interest rate will not necessarily follow. Mortgage interest rates on first mortgages have more to do with how the stock market is doing that what the Federal Reserve is doing. For instance, the Fed cut their rate by 1.25% in 2008 so far. If this had translated across the board to mortgage rates, you would be able to get a mortgage for under 5%. This is not the case however, rates are closer to 6.5% now. If you have a second mortgage, you have probably noticed that your rate has dropped. The fed rate is tied into the prime rate of interest which home equity lines or heloc mortgages are tied into.

You gotta think that someone is making money off of this. I can tell you that it is not the little guy. Do buy into bank advertising that rates are down since the Fed cut rates. The reality is they are not.

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