Mortgage Paradigm Shifts on Capital Hill

There is a new movement on Capital Hill regarding help for distressed homeowners. What is happening is that Republican efforts to block homeowners with mortgage assistance is coming to an end. The worry over helping people who made poor buying choices went out the back door with the $30 billion push to prevent a Bear Stearns BK. It has also been clear that for months the FHASecure program has not produced the relief for home owners.

The final legislation is not finished yet, but it appears that thee will be ten billion dollars for states to make loans to homeowners. The states will be able to use several billion to convert at risk mortgages into fixed rate loan programs with better than market rates. This can only happen if the lenders are willing to take a loss. The lender loss will be 15 percent of the mortgage balance. This may be a better deal than what the banks would get if they were to go it alone.

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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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