Rates falling?

[mvalenti]

Since the Feds cut rates by .5 percent will this reduce the rates in the mortgage industry?

[florida man]

No.

This big cut means the vultures can create a mini bull market again. This will surely mean lower prices on bonds, thus higher yields, and higher mortgage rates.

Lenders are SUPPOSED to lower their prime on helocs etc to 7.75% , but doesnt affect fixed rate 30yrs.

[Greg]

The Federal Discount Loan is still much more expensive than other funding avenues. It is what I would call an emergency loan. If a lender uses it then they pay a higher rate than most other avenues for funding. So that means the cost of funds is higher and rates are higher. It is like a last ditch effort to stay in business. Those who use this funding will have lower cost of funds so they may drop rates.

I think it is an avenue for sub-prime and alt-a to come into the picture again for many lenders who lost funding sources.

[Erik]

Actually I think it's more generally used to cover nightly reserve requirements and is typically super short term like a night or two. Either way, it is definitely more expensive than borrowing from another bank, which is what usually happens. Banks don't like borrowing from the Fed because when they do it's sort of like asking for an audit on reserves.

[florida man]

greg

as much as there is cheaper money, there is also WAY too many houses on the market, driving prices down, so I dont know how many lenders are going to open up the alt a vault again until they see concrete evidence of home price stabilization.