Daly Report: The Fed Steps Up BIG!

Mortgage and Lending with Heroic Financial Services


Dear Friend,

Welcome to my blog I am sure you will find a benefit by the time you get to the end of this quick read.

The mortgage business has definitely held the spotlight this summer.

We all saw the headlines………

            Sub-prime Meltdown

            Liquidity Crunch

            Lenders going under left and right!!

It seemed like every day this summer we would open the papers or watch the news to find 2-3 major news stories about the “Mortgage Crisis.” How many of these do you think were positive, light-hearted messages? I think it would be safe to say, “Absolutely NONE!”

However, there is a bright light at the end of the tunnel!

The worst is behind us and we are now moving towards a more steady and realistic mortgage and real estate environment. It will probably be another month or two before we get back to normalcy, and a full year or two before we see the entire market shift back towards a positive light.  However, we have weathered the worse of the storm, and the volatility of the last 6 months is most likely behind us.

For this month’s newsletter I wanted to talk about the most recent MAJOR news story to hit the presses. This is big news for all consumers; however, I feel stories like this are often misunderstood and therefore, not appreciated.

So, that being said, I just wanted to shine some light on the situation.

My goal is to bring some unbiased truth to a subject the media has trampled to sell their wares.  Please feel free to reply to this blog with suggestions, opinions, or any other questions or comments…really anything you feel you want to say. I appreciate any and all feedback!

Call me at 619.464.5880 ext. 308, or reply to me at briand@creativelenders.net at any time.


Effects of the Recent Actions of the Federal Reserve Board – 0.500% Cut to the Federal Funds Rate on September 18, 2007


As you probably know by now, the Federal Reserve Board cut the Fed Funds Rate by 0.500% on Tuesday, September 18, 2007.

This lowered this inter-bank overnight lending rate from 5.25% to 4.75%.

What does this mean? – Well, basically, this opens up more liquidity in the banking/credit world, which has been the major issue for the past two months. Money has been tight, so programs have gone away and rates have gone up for non-conforming loans (those above the $417,000 loan limit place by the government). This allows struggling banks/lenders to borrow money from stronger, well-positioned banks at a lower cost. The idea is this rate reduction will allow money to move more freely and hopefully entice more investment in areas where it has been lacking (ie: mortgage backed securities better known as wall street investors).

So let me tell you what this means for YOU!

This makes money available to you as the consumer for less cost thus saving you money in interest. This also frees up some monthly disposable income for the majority of U.S households, providing an increase in consumer confidence and providing the economy some needed stimulation.

Okay, here is the scoop.

This rate reduction will have an almost immediate impact on any loan/debt attached to the Prime Rate (Prime Rate = Fed Funds Rate + 3%).


The following are products you most likely have, that are affected by this change: 

Home Equity Line of Credit (HELOC) – these are directly related to this rate cut. Your rate will go down and you will save money on interest fees you pay.
Other Unsecured Credit Lines – Business and equipment loans which will benefit small business owners thus stimulating our economy and helping jobs and wages.
Student Loans

Variable Rate Consumer Credit Cards – Just in time as the government required higher minimum payments, you get a break by having lower payments because of rate reduction but still get to pay off more of the debt faster.


If you utilize one or more of these debt instruments I suggest you look at your contracts to make sure you will be receiving a payment break in the near future.  

Call me at 619-464-5880 ext 308 and I can show you how to make sure you are benefiting from these changes.

In addition to interest savings on any debt instruments attached to Prime, this rate cut will also cause a slow and steady rate decrease in all instruments attached to the LIBOR Index in the following months.

THIS IS GREAT NEWS! A large chunk of adjustable rate mortgages (ARMs) are attached this index…

…meaning thousands of homeowners dealing with adjusting rates will FINALLY get a break!

Impact on a national level.


These decreases may seem small to you, but check out how this small change can greatly impact our economy –

According to Forbes, the average US household carries an average of $9,200 in credit card debt.

For my example, I will add a conservative average of $4000 per household of home equity debt carried in a HELOC and student loans.

Total debt per household attached to Prime = $13,200.

For my example, I will use a conservative number of 120 million households in America.

With a 0.500% decrease in interest rate charges, the average US household will save $66 annually ($13,200 x 0.500%) 

This equates to nationwide annual savings (and new disposable income) to $7,920,000,000!!!…Not Bad…and I am using very conservative numbers. ($66 x $120 million households)…


Take the above numbers and then apply your numbers to the equation and you’ll see that you are saving money.

It is my job to show you how to make money with the money you are now saving…Things like real retirement (not part time job retirement), college for your kids (not working through college), or even that tropical vacation you have been wanting to take.

Economists are predicting the Fed to continue to cut this benchmark rate…

The conservative are forecasting a low of around 3.750%, or 1.000% below current levels….

HOWEVER, many others are predicting the economy to continue to struggle, and therefore forecasting the Fed will continue to cut the Fed Funds Rate ALL THE WAY DOWN TO 1.000% (a four decade low, set by Fed Chairman Alan Greenspan back in 2001). That is another 3.750% below current levels!!! Imagine the savings!

Personal commitments.

As your trusted advisor, I have to include some financial advice somewhere in this newsletter…so here it is.

When you determine exactly how much you will be saving by this interest rate reduction, why not make an agreement with yourself to add this amount to your monthly/annual savings contributions.

I guarantee if you do not calculate and become aware of these savings, this money will disappear in your daily purchases, and you will never feel the effect of this change…Sorry, I had to say it. 

I have to be blunt here so you know how important it is to me that you don’t loose this opportunity that has been presented to you.

In addition to these small savings on the individual level, this rate reduction will slowly help increase the liquidity available in the credit market. This will allow banks and lenders to  loosen up their lending guideline

So, if you have been a victim of the recent pullback in lending…

and have been unable to qualify for the loan you need, you may find some relief soon if you can wait it out.

Opportunity Knocks.

Normally, decreases in the Fed Funds rate have a negative impact on new fixed home mortgage rates (rates tend to rise)….this is because decreasing this rate tends to increase inflationary pressures in our economy (more disposable income). This deteriorates the prices of bonds (mortgage backed securities), which increases the interest rates attached to those bonds (home mortgage rates)...

BUT…because this rate cut provides much needed assistance with the current credit crisis, the bond market feels this to be positive step in the right direction, and therefore mortgage rates fell sharply the last few weeks (investors expected the cut, and rates have benefited). Home loan rates are again near the low points of last year!!!

If you have been thinking about making a change, now may be the best time! Don’t hesitate and let these rates slip away. Call me at 619.464.5880 ext. 308 for a free, quick phone consultation.

If anything, this is a great time to evaluate where you are now, and where you want to be in the future, to determine if you are utilizing the right strategies to get you there FASTER and WITH LESS WORK! Always work SMARTER…not harder!!!

In Closing.

A lot still has to happen to see a full recovery in the real estate and credit markets…but there are still VERY GOOD options for those who qualify for them.

Conforming Loan rates are near historic lows. so if you have been thinking about making a change, please give me a call to go over your situation and discuss your options. Again, please feel free to contact me with any questions, comments, objections, or suggestions you may have…and remember that I am always here if you ever need anything.

Until next time, take care of yourself and your families. I will be in touch.



Brian Daly

Production Manager / Certified Mortgage Planner TM

Creative Lending Solutions – 8679 La Mesa Boulevard

La Mesa, CA 91941 – http://www.creativelenders.net

Office: 619.464.5880 ext. 308 – Fax: 619.639.0355


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Comments (2)

Brad Andersohn
Retired Executive Director of Education at eXp - Boulder Creek, CA
ActiveBrad - 707.646.1876

I see this is your first post on Active Rain.  Congratulations!!  I just wanted to welcome you to a fantastic Real Estate Industry Network! 

Welcome aboard, I hope you'll continue to blog, and invite others.  Wishing you all the success the industry has to offer.


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I hope you'll find these to be useful tools in helping you get started here on Active Rain.  You will meet many wonderful people here!! Again, welcome to Active Rain, the best place for your Blog!

Sep 20, 2007 03:36 PM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in 2016!

    Much has changed since your last visit to ActiveRain.  I encourage you to take another look at the website. 

    Surf some blogs, leave some comments. 

     Post a Blog!

              Best to you!

May 06, 2016 12:43 AM