The Explanation of the Fed Rate Cut.

In Fed action, the Federal Reserve acknowledged the
impact of the credit crunch as they temporarily cut
the Discount Rate by 0.50 today to 5.750%.

The Discount Rate is the rate at which the Fed lends
money directly to banks, credit unions, savings and loans
and large lenders.

The Federal Reserve left the Fed Funds rate unchanged
which is the rate charged to banks for overnight loans.
Typically, the Discount Rate is 1.00% above the Fed Funds Rate which makes it more desirable to borrow from Banks rather then the Fed.

The current liquidity crisis has made this difficult so
what the Fed has done by lowering the Discount Rate is made more liquidity available at a reduced rate.

Additionally, the Fed has extended the borrowing period to
30 days from overnight and this will be renewable by the
borrower. This allows lenders to use the discount window
for 30 days before selling into the secondary market.
Hopefully within this time, the credit markets will calm
and buyers of mortgage backed securities will come back to
the table.

所有跟帖： 

• Two changes. -CALoanAgent- ♂ (313 bytes) () 08/17/2007 postreply 10:46:15

• So no changes to HELOC or mortgage Rate yet(EOM) -CALoanAgent- ♂ (0 bytes) () 08/17/2007 postreply 10:47:12

• thanks -表情符号- ♀ (0 bytes) () 08/17/2007 postreply 10:48:42

• In addition, prime lending rate to regular consumers -冬里- ♀ (33 bytes) () 08/17/2007 postreply 10:48:44

• did read this news in Yahoo. -内嫁老婆- ♀ (0 bytes) () 08/17/2007 postreply 10:51:38