How Will the New Federal Reserve Bank Interest Rate Cut Affect Most Consumers in About a Year or Two.!??
Let see why and how. Before we get into the discussion of why FED doesnt really care about consumers but the banks, allow me to BRIEFLY explain some issues regarding mortgage loans. Have you noticed that during the past several months the FED dropped the Short Term rate and the rate it lends money to the bank? If you have not, go back and read to the news from September 2007 through the recent rate drop of 3/18/08. First the FED (the central bank-Federal Reserve Bank) dropped its lending rate to the bank. This was done so that the Banks will pay less in finance charges to the FED (so that their losses could be reduced). It wasnt designed for the consumers (you and I) to benefit. The banks do NOT and mostly they wont drop rate just because their own borrower rate is reduced. Although, loan repayment calculator they drop their lending rates to us when they get a break, but the realistic part of FED dropping that rate a couple of times was to benefit the banks. As you know the banks are losing money in billions due to their own Bad Business Practice methods(in short-hereinafter BBP), which is now called Subprime rate issues. Let see what did the banks do to bring themselves to this point (losing billions and having high foreclosure rates). Banks BBP arose from the following methods among all others 1. They provided Stated Income a.k.a. No Doc. or No Income Verifying loans to every Tom, Dick and Harry who under normal circumstances would have not qualified for a mortgage loan. These are the people who did/do not have the income to pay the monthly mortgage payments under normal circumstances.
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