Will The Fed Act Again?

Well, the Federal Reserve Committee will meet once again on Wednesday October 31st. What will they do; keep rates unchanged, 1/4 point reduction, 1/2 point reduction? Time will tell but most analyst (80%) are predicting at least a .25% reduction and some think perhaps another half .50% will be taken and needed.

For the first time in a long time the continued housing slump and credit crunch is really making an adverse impact on our overall economic market. Just today Merrill Lynch announced that it would be forced to "write-down" over $7.9B; most of which was due to the housing crisis and the delinquency attached to it. Also, announced today was the "national" existing home sales report which reflected the lowest level in almost 8 years.

Add to the above the dilemma concerning record gas prices, increased unemployment, higher utility costs and this does not make for a healthy economy. It seems even the market is expecting further Federal help has today's 30 year mortgage rates are 6.125% down over .25% from a week ago. However, the problem is not mortgage rates or our nationally high inventory of homes. Rates could be at 3.0% but if buyer's cannot access the money to utilize the rate, what difference does it make! The credit crunch needs to be addressed, loans that could be done 1-2 years ago are now no longer available. Now with that being said, I am not a proponent of opening the flood gates of Sub-Prime and Alt-A products like we saw toward the late 90's. However, there are "tweaks" we can do to our product offerings that I believe will help "qualified" borrowers. For example; stated income loans with some verified assets, good scores and some reserves should be made available again. Also, some sub-prime (i.e. 600+ fico's, full-doc, 95% ltv) there is a need and market for this product. The problem with the above is that investors of these types of loans have gotten burned and pulled out of the market. What is needed to get them back?

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