Reverse Mortgage Guide

Today’s emergency rate reduction by the Federal Reserve is great news if you have a home equity loan tied to the prime rate. That’s a lot of people — but that is not all people and certainly the rate reduction has little to do with mortgage rates in general or reverse mortgage borrowers in particular.

How come?

The Fed is cutting short-term rates. Mortgages are long-term financing.

No less important, the Fed has little sway over the LIBOR index, an index based in Europe and a benchmark increasingly used with ARM financing in the U.S.

It’s remarkable to hear supposedly-intelligent people explain how we “might” have a recession. The issue is not whether we will have a recession, it is just how awful the next few years will become.

The President wants to have a $145 billion stimulus package. This is a useless effort because it will not reverse our balance-of-payments outflows (about $60 billion a month when last I checked, but maybe more now), our federal deficit (remember that Clinton left office with a string of surpluses), our drooping employment levels or our lack of an energy independence policy. But I bet that a few select corporations and rich folks will do well if the President’s plan is approved without change.

This entry was posted on Tuesday, January 22nd, 2008 at 5:45 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.