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THE MORTGAGE MARKET, WHAT WENT WRONG?



THE MORTGAGE MARKET, WHAT WENT WRONG?

Daily Real Estate News | August 22, 2007
Mortgage Crisis: What Went Wrong?
Nearly 2 million mortgages are scheduled for rate increases this fall, which is expected to send foreclosures soaring.

President Bush has blamed the failure of borrowers to read the fine print. But many experts say the problem runs much deeper. The mortgage business has long been a tug of war between a social commitment to broad homeownership and the efforts of private financial operators to earn money.

Robert Kuttner, co-editor of The American Prospect and a senior fellow at Demos, a New York-based think tank, says the government should resume directly subsidizing starter mortgages and construction of homes for moderate-income buyers. He says these programs need to combine careful credit assessment with counseling, rather than relying totally on the private mortgage industry. He says he also would prevent irresponsible, speculative lenders from selling mortgages in the secondary market.

“We've now had an experiment in the claims made for mortgage deregulation, extending over three decades, and deregulation flunked," Kuttner says. "America needs to restore a system in which government supports homeownership — and makes sure that mortgage lenders serve as responsible creditors, not predators.”

WHAT IS THE FED DOING FOR THIS DWINDLING MARKET?

Daily Real Estate News | August 20, 2007
Fed Cuts Discount Rate, Promises More
In an effort to stabilize financial markets, the Federal Reserve last Friday cut the discount rate that it charges to make direct loans to banks from 6.25 percent to 5.75 percent.

The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year, but it sent a strong signal in its public statement that it was prepared to cut that rate as well.

In making the reduction the Fed stated, "the downside risks to growth have increased appreciably." The Fed did not refer to inflation, which was the concern that previously kept it from cutting the federal funds rate.

"They provided a much needed response to the growing market turmoil today, but they will have to do more," says Mark Zandi, chief economist at Moody's Economy.com.

The move to cut the discount rate will not have a major impact on consumer interest rates in the way that cutting the federal funds rate triggers an immediate drop in banks' prime lending rate, the benchmark for millions of consumer and business loans.

However, Friday's move was expected to help with a severe cash crunch facing many businesses, including mortgage companies, which are having trouble getting loans for short-term financing needs.

Source: The Associated Press, Martin Crutsinger (08/17/07)

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Glenn G. Fradera

Phone: (561) 450-5449
Home: (954) 415-3526
Cell: (954) 439-4184
Fax:(561) 495-5227
taynos52@gmail.com
 

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Glenn G. Fradera   |   Sunshine Properties   |   4997B W. Atlantic Ave., Delray Beach, FL 33445
Phone: (561) 450-5449   |   Home: (954) 415-3526   |   Cell: (954) 439-4184   |   Fax:(561) 495-5227
taynos52@gmail.com   |   taynos52@icloud,com   |   taynos@aol.com
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