Even though yesterday’s Fed rate cut initially saw a boost to the stock market, that was short-lived. Worries that the economy is heading into a recession are overcoming any benefits the Fed rate cut may have bestowed on the market. Indeed, even with last week’s emergency Fed rate cut, some expect that March could see another cut. Reuters reports on the results of the Fed rate cut:

This overshadowed the Fed’s move on Wednesday to slash its
key fed funds rate by 50 basis points to 3 percent — the lowest
since June 2005 — following last week’s emergency 75 basis
point cut to halt a sharp slowdown in an economy struggling with
a housing slump and credit crunch.

The Fed rate cut will probably help your credit card interest rates, as well as affect your HELOC or ARM. It may even slightly affect first time mortgage rates. But sit tight on your retirement portfolio. That will need longer to recover.

As one might expect in this era of resetting ARMs, 2007 foreclosures were up dramatically. Even a mortgage rate freeze is unlikely to help stem the tide to any great effect. Indeed, efforts by political leaders to fix the economy have been falling woefully short. Inman News reports on the staggering increase in 2007 foreclosures:

The number of households in foreclosure
increased 79 percent in 2007, with about one of every 100 U.S.
households at some stage of the foreclosure process, according to the
latest numbers from data aggregator RealtyTrac.

Even though the Bush Administration and House leaders agreed on an economic stimulus package last week the included an increase to the conforming loan limit, it still has to be approved by the Senate. And that is far from a done deal. At least one senator is raising questions about the wisdom of allowing Fannie Mae and Freddie Mac to take on great loans. Inman News reports on the latest in the quest for raising the conforming loan limit:

The National Association of Realtors has
estimated that raising the conforming loan limit to $625,000 would
prevent 140,000 to 210,000 foreclosures and prop up home prices by 2 to
3 percentage points.
But critics say increasing the limit could hurt Fannie and Freddie’s
mission of helping low- and moderate-income families and put them at
greater financial risk.

The economic stimulus package announced last Thursday has most people buzzing about the tax rebate. However, the Bush Administration and House leaders also agreed on something else: temporarily raising the conforming loan limit. The Seattle Times reports that this conforming loan limit may be raised, temporarily — and only in certain markets — from $417,000 to more than $700,000.

Conforming loan limit

The conforming loan limit is what is considered a "conventional loan" in terms of amount. Anything above that is considered a "jumbo loan." In order to make it possible for more people to get loans that Fannie Mae and Freddie Mac (the quasi-governmental loan buyers) to purchase, the conforming loan limit has been raised. Leaders hope this will help stimulate the housing market.

But it may just encourage more irresponsible lending.

Getting "free" money is always fun. Earlier this week an emergency Fed rate cut offered the chance to save money on interest charges. And yesterday an announcement was made that most Americans will receive a tax rebate. However, it is important to note that someone will have to pay for this sometime, and it is also important to start carefully considering how you will spend your money. I suggest paying down debt or saving/investing it.

Getting "free" money is always fun. Earlier this week an emergency Fed rate cut offered the chance to save money on interest charges. And yesterday an announcement was made that most Americans will receive a tax rebate. However, it is important to note that someone will have to pay for this sometime, and it is also important to start carefully considering how you will spend your money. I suggest paying down debt or saving/investing it.

One of the consequences of the subprime lending crash is that bond insurers, those that underwrite bonds, will be threatened by their mortgage losses. As more and mortgage lenders report subprime writedowns, it is apparent that some of these financial institutions are being threatened in other areas of their holdings as well. MarketWatch reports on hopes of raising capital to shore up bond insurers:

During afternoon trading, the Financial Times reported that Dinallo
pressed the banks to provide $5 billion in immediate capital to support
the bond insurers and to ultimately commit up to $15 billion. Neutstadt
declined to comment on the report.

Have a history of sales? Like to work from your home? Love our site? Well then, Shakadoo may need you.

We are looking for experienced and motivated individuals to add to
our sales staff. If you think you might be a good fit or know someone
who who would be, email your resume to us here at  sales@shakadoo.com

Yesterday’s emergency Fed rate cut means good news for those with adjustable rate mortgages. Those with ARMs will see lower rates (instead of higher), and that may help them in terms of payments when the mortgage reset takes place.

Even more prominent, however, is the number of refinance home mortgages taking place right now. Across the country, people are taking out second mortgages as rates fall. The Boston Herald reports on an increase in refinance home mortgages:

“We’re seeing a nice spike in refinancings,” said Joe Bartolotta of
Boston’s Eastern Bank, which yesterday cut its benchmark mortgage rate
a quarter-point to 5.5 percent.

While long-term mortgage rates aren’t greatly influenced by the Fed rate, the current economic conditions and the dramatic cut are both playing a roll in lower mortgage rates.

Today’s big news is that an emergency Fed rate cut has been enacted in an effort to slow what is expected to  be a disastrous day on the stock market and for the U.S. economy as it heads into recession. The target overnight lending rate has been dropped to 3.5 percent from 4.25 percent this morning, ahead of the scheduled meeting at the end of this month. Bloomberg reports on the emergency Fed rate cut:

“While strains in short-term funding markets have eased
somewhat, broader financial market conditions have continued to
deteriorate,” the Fed said in a statement in Washington. The
FOMC took the action “in view of a weakening of the economic
outlook and increasing downside risks to growth.”