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Fed Reserve Fall-out 
As everyone probably knows, the Federal Reserve has chosen to reduce both the Fed Funds rate and the Fed Discount rate by .25%. This decrease will translate into a .25% decrease int the Prime Rate, which we will then see in Home Equity Lines of Credit (HELOC) over the next 30 days.

The news was greeted positively by stocks. This morning, however, is a different story. The Dow is down roughly 200 points, while the Nasdaq has been down more than 35.

Mortgage bonds have responded in just the opposite manner. Prior to the release of the news, there was a small rally, but then mortgage bonds experienced a sell-off on the news which caused them to close the day down 33 basis points. This morning, they have recovered half of yesterdays' losses, which translates into a 1/8 - 1/4 point (not percent) increase from lenders.

On purchase transactions, points are paid out of pocket at the time of settlement. On a $100,000 mortgage, one point is equal to 1.0% of the loan amount, or $1,000. A 1/4 point is then equal to $250. If you spread that over 30 years or 360 months, it would cost $0.69 per month.

As you can see, the Fed's action was basically a non-event for mortgage rates. Have a great Thursday.

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Federal Reserve Meeting 
Today is the second day of the Federal Reserve meeting and most everyone is anxiously awaitng their decision regarding the Fed Funds and Fed Discount rates. The Fed releases this info at 2pm. The marketwide opinion is that they will cut rates .25% on the Fed Funds.

At 2pm, they also release their policy statement, which is a glimpse into what we may expect from them in the near future.

Cross your fingers and hope for a double dose of good news.

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Countrywide Posts Losses of 1.2 Billion 
Countrywide announced they would lose 1.2 billon dollars in the third quarter. The loss should come as no surprise, considering that they are the nations largest mortgage lender and have been in the news throughout the last few months detailing the amount of bads loans on their books.

They have drawn down all of their lines of credit, which totalled about $11 billion and then they received an infusion of cash from Bank of America in the amount of roughly 2 billion.

In light of all of this bad news, Countrywide did say they expect to show a profit in the fourth quarter, due to a reduction in labor costs, among other things. If they are able to go from such a huge loss back to profitability in a quarter, I think it bodes well for the mortgage industry and the housing market. I guess we'll see.

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Warren Buffet Speaks 
Warren Buffet, leader of Berkshire Hathaway, shared some of his thoughts this morning on CNBC. Buffet, who is one of the wealthiest men in the world, has pledged over 30 billion dollars to the Gates Foundation, which is a charity founded by Bill Gates and his wife.

Buffet is respected by many as the best investor in the world. He recently made a very large investment in China and believes that the United States needs to maintain a strong give and take with China when it comes to trade. He also said that North Korea would be the one country in which he did not have any interest.

To me, the most uplifting thing Buffet said was that he believes our children will live better lives than we have lived and that our grand-children will live better lives than our children.

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Another Good Friday 
Today was another steady day for mortgage rates. Rates remained unchanged from last Friday, and we did see the mortgage bond market maintain its' positive rate outlook throughout the week.

I hope everyone has a great weekend. We have 2 Halloween parties to attend as a family this weekend, so I will be spending a lot of time dressed as Tic-Toc, the alligator from Peter Pan.

Enjoy.



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