Daily news: Will Fed Cut Interest Rate ?

Few years ago, when housing market was at the top, many people with low income and bad credit, were able to apply for mortgage and buy they first home, which they can not afford. Why? Who created this possibility ? Feds? Fannie Mae? Freddy Mac? Snow ball was rolling, back then, it was cheaper to buy house, than rent, due to Interest Rate was low. As i remember, it was possible to get 1.25 Rate for 1 year (one year adjustable), after one year it jump to 5.5% rate.

But, because of this low initial rate, many buyers were able to buy house, when they can not afford.

Another side of this issues: there was so many mortgage brokers/ lenders with very great mortgage programs, which were able to get mortgage for those people with 500 Fico Score ( credit score, worst 425 , best 800). That, in my opinion, was the worst mistake.

"Why rent, if i can buy and own my American dream. "

Most of those mortgages were Adjustable Rate Mortgage. ( temporary rate, which will change after period to higher rate ).

When Adjustable Rates expired, and many homeowners got they new mortgage statement, they were shocked. For those families 200-300 hundred dollars increase were huge expense. People start loosing houses. Snow ball start rolling from the hill down.

We just talk about personal issue related with housing meltdown. But there is another side of this: Financial Institutions

Many financial institutions were buying mortgage back securities and Credit Papers related to mortgages. And when housing show ball start rolling, huge amount of mortgage and financial copanies lost millions of dollars. People dont' pay mortgage, finanacial institutions don't make money.

Well, Housing Bubble here, and it is not the same as Stock Market 2000, but it will take time to fix this issue.

Would Federal Reserve Cut rate will help? Yes and No.

It will help for cunsumer pay less interest rate on credit cards, get a better price for your next car lease. Less money to pay on those things, more money to be able to pay mortgage and other things.


that's my view.

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