Imperfect Credit Solutions

Economic Insights

Fed Cuts 75 Basis Points

March 19th, 2008 5:12 PM

The Federal Reserve this afternoon announced a 75bp rate cut for federal funds, from 3% to 2.25%. The vote was 7-2, with Fisher and Plosser dissenting - they 'preferred less aggressive action at this meeting.' The Board of Governors simultaneously approved a 75bp cut in the discount rate, bringing it down to 2.5%

The markets had expected a more aggressive rate cut of a full point, but the main indexes pulled back only mildly in the immediate wake of the announcement.

The FOMC statement:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.

Sincerely,

Heath B. Lefort

Posted by Heath Lefort - Personal Financial Advisor on March 19th, 2008 5:12 PMPost a Comment (0)

Subscribe to this blog

My Rates have been recently revised!

March 17th, 2008 9:36 PM

Investors poured their money into bonds today due to one of the top investment banks Bear Stearn loosing roughly 80+% of its stock value. Investors do not trust the financial markets right now. The Federal Reserve meets tomorrow and I expect the Federal Reserve to cut 75-100 basis points off the short term prime rate to bring investor confidence back into the market. I expect long term mortgage rates to go up tomorrow due to this cut.

If you are in the market to refinance or purchase a home in the next 3-6 months, its important to get your loan in a position of approval so I can execute your rate when the market dips during these volatile periods.

Posted by Heath Lefort - Personal Financial Advisor on March 17th, 2008 9:36 PMPost a Comment (0)

Subscribe to this blog

NEW FHA & FNMA LOAN LIMITS TO HELP HOMEOWNERS – ECONOMY

March 6th, 2008 2:39 PM

NEW LOAN LIMITS TO HELP HOMEOWNERS – ECONOMY

New FHA Mortgage Limits

Effective March 6, 2008, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750 (Limits). Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790.

The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed with HUD’s publication of the increased loan limits today, and it lasts until December 31, 2008.

By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA's refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated with exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

"This is not an easy crisis to address, and there is no silver-bullet, but I know that we can help hundreds of thousands of people keep their homes, and we can calm the waters," said HUD Secretary Jackson.

In January 2009, FHA's maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.

Sincerely,

Heath Lefort

Posted by Heath Lefort - Personal Financial Advisor on March 6th, 2008 2:39 PMPost a Comment (0)

Subscribe to this blog