Taken from a previous posting 8/22/2007 for the Oahu Real Estate Blog by Yvonne Jaramillo Ahearn.
I won't pretend to be an expert in United States financial policy and ecomomics (nor in mortages either, though I can always refer you to some people who are experts in this). I have as many questions as you do about what is going on as a result of the collapse of sub-prime lending and the recent cut in the discount rate by the Fed.
I have, however, been looking into this, to answer some of my own questions, and have found some interesting and helpful articles and commentary on the subject. I will share these with you:
May 30, 2007 - The Subprime Mortage Crisis Will Fix Itself (Steve Berger, Ludwid Von Mises Institute Website)
August 7, 2007 -How Credit Got So Easy & Why It is Tightening (Ip & Hilsenrath, Wall Street Journal Online)
August 13, 2007 - How Did the Mortage Crisis Rise? (Associated Press on Yahoo News)
August 17, 2007 - Federal Reserve Cuts Discount Rate to Steady Market (PBS Online Newshour Transcript)
August 17, 2007 - Fed Cut: Easier on Home Borrowers Too (Les Christie, CNNMoney.com)
As detailed in the last two sources, some people seem to think that the Fed's latest move in cutting the discount rate could help mortgage interest rates (especially on Jumbos) by encouraging banks to lend more money to mortage borrowers, others see this as a signal of the Fed's its willingness to cut the Federal Funds Rate at some point in the near future, which will help mortgage rates.
Latest news:
August 22, 2007 - Top 4 Banks Tap Fed Discount Window (Dan Wilchins, Reuter's)
Also, as of today, "Federal Reserve officials are cautiously optimistic that the series of steps they have taken to stabilize markets have started to work. Officials acknowledge conditions are far from calm, and markets could easily take a turn for the worse. But they cite stable stock prices, a pickup in issuance of jumbo mortgages and other factors as evidence that in recent days conditions have improved, though gradually, instead of worsened.
Many on Wall Street are more pessimistic, and believe the Fed will still have to cut interest rates sharply, perhaps starting in the next week or two." - source Wall Street Journal Online.
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