Mortgage Market Report for Tuesday January 22, 2008

Mortgage Market Report For Tuesday January 22^nd, 2008

Last night a special meeting was held by the Fed. The Fed decided to cut the Fed Funds Rate by .75% to 3.5%. This will help those loans tied to the prime rate and most other ARM loans initially. Stocks took this on the chin as the stock futures were trading significantly lower as foreign countries fear a US recession.

This morning's Fed is the deepest one day Fed Cut since 1984. In addition this was the first inter-meeting Fed action since September 17, 2001, It should also be noted that the vote to cut wasn't unanimous.

Here is the brief statement from the Fed delivered this morning.

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent. The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets. The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully. Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

The Fed Funds Futures have priced in the 50bp cut at next week's meeting, which could lessen the impact of the latest intermeeting rate cut.

Stocks took a beating at the open this morning, and at one point traded at the worst levels since January 2000. But the sell off would likely have been far worse if the Fed had not stepped in.

This morning's stock sell off has caused Mortgage Bonds to rally higher with prices at the best levels since June of 2005. Additionally, LIBOR which was 5.15% just a few weeks ago, is now 3.71%. In this sea of fear, this is some good news.

Treasury Secretary Hank Paulson is also in the news this morning saying he, Paulson said he will move to carry out an economic stimulus plan "as soon as possible." Paulson stated he is optimistic a plan can be implemented with Congressional approval "long before winter turns to spring."

We will continue to Float, but we need to be prepared to lock should things change. Stocks are very volatile and significant gains in stocks can be at the expense of Bonds.

Thank you for listening to contactherrick.com. We will have another report for you, your family, your friends and your important business contacts tomorrow.

A quote from Benjamin Franklin

"Energy and persistence conquer all things."

Thank you

Roger Herrick

Mortgage Broker

www.ContactHerrick.com