Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »

CNN is trailing yet another doom-and-gloom report. This one, which will be out later today, predicts that we’re less than three weeks away from yet another miserably depressing milestone. Read the rest of this entry »

To much fanfare, the Federal Reserve cut interest rates on October 29th. That was supposed to be this week’s Halloween treat for the markets. The trick came the next day, when Freddie Mac’s survey of mortgage rates revealed that 30-year rates had risen sharply for the week. 

So what gives? A clue to why market rates moved contrary to the federal funds rate could be found in two other pieces of news:

• The housing market continued to be weak, as one survey of major housing markets saw prices extent their slide to 25 consecutive months
• The U.S. dollar showed signs of weakness which were exacerbated by the cut in federal funds rates.

For the time being then, despite the Fed’s actions, things got tougher for borrowers rather than easier. This highlights some realities of what the Fed can and cannot do.

Read the rest of this entry »

Don’t expect major intervention from the government in the housing crisis if the Federal Reserve Bank has any say in the matter. According to a study by Fed economist William Emmons, intervention would result in keeping home prices artificially higher, allow builders to keep turning out more dwellings, and exacerbate the existing oversupply. Allowing market forces to cause prices to fall keeps builders in check and will allow the supply to eventually match the demand for homes.

And the current rash of foreclosures? “Unpleasant but essential,” claims Mr. Emmons. Without the ability to foreclose on loans and sieze collateral, lenders would have to charge rates characteristic of unsecured debt, such as credit cards. The ability to take the house back lowers the risk of making the loan and keeps mortgage financiang less expensive for all of us.

Have any ideas about how mortgage lending could be improved? Give us your opinion here!