FOMC Chairman, Ben Bernanke, is scheduled to speak on the Fed’s new talking points in just over an hour and a half.  I would expect the Chairman to say something like inflation is their primary concern (duh) and that they are slightly concerned still with revelations in the credit markets. At some point we will have all of the information about the derivative action that the hedge funds have been involved in with relation to the MBS market. I don’t expect that will be the case for another couple of months.  However, the news this morning from Freddie Mac that they have suffered a $2B loss in Q3 of 2007 should make a lot of the people out there who have been saying we have all of the information and this problem is only a “sub prime” problem, take notice.  I would expect that many new “revelations” will take place after Thanksgiving and before Christmas when the markets are typically pretty quiet.

Housing start numbers were off this morning as well as the new home permit numbers were down and the only numbers that were up a bit were new multi-family starts in some areas.

tags: bernanke, fed, fomc, freddie mac, mortgage

The Fed will be making an announcement tomorrow and the media as well as everyone else who doesn’t know what they are talking about, are hoping that they will announce a rate cut of some sort. While this will bring increased liquidity into the financial markets, it doesn’t mean the housing market will improve or be saved…or that Jane and John Doe who are losing their house will have a solution to help them. The issue today is that lenders have stopped making high leverage loans (loans with Loan to Value ratios above 80% as an example) to just about everyone. The people that need these loans the most, are the people that 1) have something like this in place and can’t afford it and probably never could and 2) are the ones losing their houses. A FFR cut is not going to help these people as it will have NO effect on lender’s lending policies and standards. As Lonnie said this morning in his email:

Everyone is waiting for the Fed announcement tomorrow and is hoping a Fed rate cut will rescue the housing and mortgage markets. As I stated once before, a rate cut may create liquidity in the financial markets, however, investors still need to believe mortgage lenders are making quality loans.

People need to understand that increased liquidity at this point merely helps people who have credit and the ability to support it, to borrow at cheaper rates. Lending guidelines are still extremely tight and that is not likely to change until the fat is trimmed from the housing market.

tags: bernanke, bubble, fed, fomc, foreclosure, housing market, interest rates