Austin Real Estate Blog

“Fed to Investors: More Cuts Coming” from CNN Money

The Federal Reserve hinted Wednesday in minutes from its latest meeting that more interest rate cuts might be needed if the deterioration in the credit markets leads to deeper problems for the housing sector and overall economy.

But the news from the Fed on Wednesday did little to soothe Wall Street, which kicked off 2008 more concerned about a recession and rising inflation. The Dow fell more than 220 points, or 1.7 percent, while the S&P 500 and Nasdaq fell 1.4 percent and 1.6 percent, respectively. The central bank lowered its key federal funds rate – an overnight bank lending rate that affects how much consumers pay for credit cards, home equity lines, auto loans and other forms of credit – by a quarter of a percentage point on Dec. 11 to 4.25 percent.

“Bush to Revive Push for Housing Remedy” from The Wall Street JournalPresident Bush’s top communications adviser, Ed Gillespie, says the White House plans to pressure Congress to take action to help stabilize the struggling housing market–although it remains uncertain what steps the administration will take. Observers point to legislation that has yet to pass on Capitol Hill, including bills that would permit low-income, adjustable-rate mortgage borrowers to refinance into fixed-rate loans through the Federal Housing Administration and that would allow Fannie Mae and Freddie Mac to purchase loans worth more than the current conforming-loan limit of $417,000. However, the White House would approve an increase in the limit only if Congress passes legislation to reform the government-sponsored enterprise s to create a new regulator with power over the size of their mortgage portfolios. Additionally, notes Mortgage Bankers Association Senior Vice President Steve O’Connor, “If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to.” Doing so could better position state housing authorities to help borrowers refinance their mortgages and avoid foreclosure.