The Federal Reserve announced this morning that it was cutting the federal funds rate by 50 basis points to 1.5%. This move was coordinated with other central banks worldwide in an attempt to shore up global financial systems.

The banks involved in the coordinated interest rate cut were the European Central Bank, the Bank of England, the Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank of Canada. Although Japan was not involved in the interest rate cut, the Bank of Japan expressed their support for this move.

Here is the Fed statement in full:

Release Date: October 8, 2008

For release at 7:00 a.m. EDT

Joint Statement by Central Banks

Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.

Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. 

Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.

Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures. 

Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation. 

The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability. 

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. 

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent.  In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston.

Information on Actions Taken by Other Central Banks
Information on the actions that will be taken by other central banks is available at the following websites:

Bank of Canada   
Bank of England  
European Central Bank
Sveriges Riksbank (Bank of Sweden)
Swiss National Bank (51 KB PDF) 

Statements by Other Central Banks
Bank of Japan (65 KB PDF) 

 If you have a sizable cushion to depend on in these hard times, as I hope you have built up over the years, then this means you are going to earn less money in interest from your bank.

We all pray that this rate cut and the many other dramatic actions taken by the Fed, the Treasury and Congress will keep this recession from turning into a depression.

We are still within range of an average recession and bear market, as the stock market is down 38% year over year. The cumulative average bear market loses 34% in value. As with all averages, sometimes the market loses less and sometimes it loses more. Let’s hope we are at the bottom and will be moving up from here.

Bonds are an investment that allows you to loan money to a government or a corporation. In return, they promise to pay you a coupon, or interest, on the money you loaned them. After a predetermined period of time, the debtor agrees to repay the full principal.

Bonds are considered fixed income investments, because the coupon is agreed upon before hand and it does not change with changing market conditions. This is not true of the value of the bond, but it is true for the coupon. Bonds are particularly useful in low interest environments when inflation is low. To learn more about investment bonds visit the site ABC Bonds.

The Federal Open Market Committee met yesterday and decided once again to hold the federal funds rate steady at 2%. Here is the statement they released to explain their decision:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

It looks like inflation is too high for the Fed to feel good about cutting rates again, even though the stock market turmoil made them give another cut serious consideration. The previous rate cuts in the last 9 months have not really begun to affect the economy overall. It usually takes 12 months or more for an interest rate cut to make itself felt across a broad spectrum of the economy.

As inflation edges ever closer to 6%, I believe it is only a matter of time until the Fed starts raising rates again. If the economy stabilizes this will probably happen in the middle of next year.

If you are thinking about refinancing your mortgage, then the next 3-6 months will be the time to do it. With the federal takeover of Fannie Mae and Freddie Mac, interest rates have fallen in the last 2 weeks. Interest rate increases are on the horizon. If you refinance now, you will be glad you did 12 months from now.

As expected, yesterday the Federal Reserve held the key interest rate at 2% as it attempts to stike a balance between inflationary pressures and an even further slowing of the economy.

The recent drop in oil prices, thought to be the main driver of upward inflationary pressures,  helped to shore up the Fed’s decision to stay put for another 2 months.

The Fed explained their decisition to hold interest rates at 2%:

Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.

Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability. (Read more)

NEW YORK (CNNMoney.com) — The Federal Reserve left its key short-term interest rate unchanged Wednesday at 2%, marking the first time in the nine months that it did not cut rates.

The central bank also raised alarms about inflation. But experts said it is still unclear what the Fed will do with interest rates at its next meeting Aug. 5 and for the remainder of the year.

The widely expected move Wednesday comes at a time when many economists and consumers are focusing on the rising price of oil and other commodities. The central bank has a mandate to fight inflation, which it typically does by raising rates.

In fact, Dallas Federal Reserve Bank president Richard Fisher voted for a rate hike at the meeting. The other nine members of the Fed’s policy-making committee were in favor of no change to interest rates.

In a statement, the Fed said it still expects inflation pressures to ease later this year, but cautioned about the upward pressure on prices caused by rising oil and other commodity prices.

In light of continued increases in those prices, the Fed said “upside risks to inflation and inflation expectations have increased.”

Some Fed watchers said the Fed had no choice but to talk tougher about inflation.

“The Fed is talking hawkish because it’s all they can do,” said Rich Yamarone, director of economic research at Argus Research. “It can’t cut rates due to the rising inflation environment and it can’t raise rates due to the frailty of the economy and financial markets.”

The central bank’s statement said that the rate cuts it has already made should help lead to improved economic growth ahead, although it cautioned the economy is still weak due to tight credit, a weak housing market and high energy prices.

The fed funds rate is an overnight bank lending rate used as a benchmark to set the rates that consumers pay for many types of loans as well as the prime rate used to peg the rates paid on certain business loans.

The central bank slashed its federal funds rate seven times since last September in an effort to keep the economy from weakening significantly in the wake of the housing slowdown and credit crisis rattling Wall Street and Main Street since last summer. (read more…)

April 21, 2008

Dear LendingTree Customer:

We want you to know that some loan request forms our customers sent to LendingTree may have been seen by lenders without our consent. These lenders then used the forms to market their own mortgage loans to our customers. While we don’t believe that the forms were used for any other purpose, we want you to know what happened and what we did to correct this situation, as well as what you can do to monitor your credit records.

What Happened and What We Did

Recently, LendingTree learned that several former employees may have helped a handful of mortgage lenders gain access to LendingTree’s customer information by sharing confidential passwords with the lenders. When we learned of this situation, we quickly contacted the authorities, and LendingTree is helping with their investigation. We promptly made several system security changes. We also brought lawsuits against those involved.

Based on our investigation, we understand that these mortgage lenders used the passwords to access LendingTree’s customer loan request forms, normally available only to LendingTree-approved lenders, to market loans to those customers. The loan request forms contained data such as name, address, email address, telephone number, Social Security number, income and employment information. We believe these lenders accessed LendingTree’s loan request forms between October 2006 and early 2008.

What You Can Do

Again, we don’t believe any identity theft or fraudulent financial activity resulted from this situation. However, we suggest you get a free credit report. Look for any accounts you didn’t open and/or inquiries from creditors that you didn’t initiate. If you see anything you don’t understand, contact the credit bureau. If you see anything suspicious, you may want to file a fraud alert with the bureaus. For more information on how to do this, please refer to LendingTree’s Guide to Protecting Your Credit and Identity.

Where to Get More Information

We regret any inconvenience and apologize for any unwanted mortgage calls you may have received. For more information about this situation, and for more information on what you can do, please refer to the attached Questions & Answers .

Sincerely,

R.L. Harris

MortgageLoan.com has just released a guide to mortgage refinance. This guide was created to help consumers stay ahead of the ever changing landscape of interest rates, mortgage refinance, housing prices and more. Here is an excerpt:

“Our financial circumstances change, and so do the needs of our mortgages,” says MortgageLoan.com’s Managing Editor, Barbara Bayer. “Refinancing is one of the most effective financial management tools at a consumer’s disposal, but too few homeowners understand how to use it effectively and strategically.”

Although many consumers have a “one size fits all” view of mortgages–whether they are first or refinanced–The Guide illustrates many ways that a refinance departs from a typical first mortgage. By understanding the nuances of refinancing, homeowners can use them more skillfully to leverage their overall finances in ways they may not have previously imagined.

Within a few easy-to-grasp chapters, The Guide explains how to lower monthly payments, consolidate debt, and tune up a mortgage structure for optimal performance and savings. It also teaches you how to shorten your loan payoff timeline to save you tens of thousands of dollars in interest over the life of the loan, or use a cash-out refinance strategy to avoid paying steep consumer rates on credit cards, auto loans, tuition, weddings, home improvements, and other major purchases. (PRWEB)

To read more about this free Guide to Mortgage Refinancing click on the above link.

Just a couple of hours ago the Federal Open Market Committee decided to lower the Fed Rate and the Discount rate by 50 “basis points”. This means the Fed rate has gone down to 4.75% and the discount rate is down to 5.25%. This is the first rate cut under the chairmanship of Bernanke and also the first rate cut since early 2006. Here is what the Fed reported:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally.  Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time. 

Readings on core inflation have improved modestly this year.  However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. 

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook.  The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.  

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent.  In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

Mortgage rate data from FreeRateSearch.com shows little difference between fixed and adjustable subprime mortgage rates.

Milwaukee, WI (PRWEB) May 31, 2007 — Consumers holding adjustable rate loans may be tempted to refinance with another adjustable rate loan for a smaller payment, but the savings are not worth the risk, warns mortgage rate search engine http://www.freeratesearch.com/ With an estimated $1 trillion dollars in adjustable rate mortgage (ARM) debt resetting in 2007, and about $650 million of that in subprime loans, many homeowners are at risk of refinancing into another risky ARM unless they know all the options available to them.

According to data released today by FreeRateSearch.com, the gap between the best subprime ARM and 30-year fixed rate loan is too small to justify the additional risk of the ARM. FreeRateSearch.com is a free website that allows consumers to search and compare multiple mortgage loan programs anonymously, and get custom rate quotes for any type of credit.

If you are in a dangerous ARM because you didn’t know a decent fixed rate loan was available, don’t let it happen again

FreeRateSearch.com offers the following example* for a subprime loan customer:

Comparison of Best 2 Year ARM vs. Best 30 Year Fixed
Best 2-year ARM: 7.550% rate, $1,756.60 payment
Best 30-year Fixed-Rate Loan: 7.89% rate, $1,815.28 payment

The difference in payment between best 2-year ARM and fixed rate loan is only $58.58 per month, but the risk associated with the adjustable rate loan is significantly higher. [read more]

(PRWEB)  The Mortgage Bankers Associations report that in the first quarter of 2007 the percentage of subprime ARMs that started the foreclosure process climbed to a record high. Analysts estimate that nearly 2 million ARMs will reset to higher rates this year and next. Option ARMs can become so costly they push homeowners into financial crisis. Homeowners can avoid “Payment Shock”, losing their home, and destroying their credit, by refinancing into a less risky mortgage with an online lender.

Option ARMs initially offer the chance to “qualify” for a more expensive home, minimize monthly payments, and achieve greater flexibility of managing monthly cash flow in the beginning of a loan. However, the initial rates are subject to a periodic change or “reset”. Interest rates on loans, and the monthly payment, could increase dramatically. In some case, Option ARM payments can double overnight. Online mortgage lenders and LoanSpace.Org provide the tools, information, and resources to help homeowner’s with their home and credit.

Option ARMs offer minimum payment, interest only, 15-year amortized, and 30-year amortized options. They can be especially attractive to homeowners who have irregular incomes such as educators who do not work during the summer months, salespeople whose commissions fluctuate, and college graduates about to begin lucrative careers.

Conversely, industry experts and Former Federal Reserve Chairman Alan Greenspan warned that many consumers were using the loans to purchase homes they could not afford. Many consumers gambled on the “housing boom” and purchased expensive homes they could “flip” in a few short years for a quick, big profit. Unfortunately, the hot housing boom has cooled considerable in many areas, and several major markets are experiencing a big drop in home values. Buyers who purchased more home than they could afford or made the minimum payment often wind up in serious financial trouble. [read more]