6 Things to Know About the Fed Rate Cut

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The focus needs to be on the middle class engine, not Wall Street or individual sectors such as the auto industry. Focusing on the middle class engine will pull these vertical sectors of our economy along as we recover from the economic turmoil.
Housing statistics provided by the US Census Bureau were used to support my plan for moving the economy forward. The Census Bureau statistics tell us that the adjusted median home value virtually doubles every 30 years.
The plan will use the current value of real estate along with the projected future value of real estate to help facilitate loaning money to real estate owners allowing them to continue to own there homes and investments. The loan origination will come directly from the federal government and provide the low interest rate, for example 2 percent. The numbers are better as the loan rate gets closer to zero.
These loans will take into account the current real estate value and projected values up to 30 years out. These loans will also take into account the applicants ability to pay back the loans.
The federal government can use Fanny Mae and Freddie Mac to provide low interest loans. This plan will also go a long way toward making a large portion of the high risk mortgages good.
Example of how the program should work:
A person owning a primary home, a vacation home and an investment home as an example requesting a loan would have their current home values defined. Current valuation based on property taxes could be used as a way to quickly define home values. Assume a 30 year period for the loans in the examples. Each of the 3 properties will be eligible to be used as collateral in 3 separate loans. The loan amount to be funded could be up to 80% of the expected value of the real estate 30 years out.
Assume a single family home in MA current value $325,000. A vacation home in Florida current value $175,000. An investment home in Florida current Value $140,000. Based on the doubles in 30 years formula the projected values of the 3 homes will be $650,000, $350,000, and $280,000 30 years out. Loans based on 80% of the projected values of each home will be $520,000, $280,000 and $224,000 for a potential total loan amount of $1,024,000.
The monthly loan pay back amounts based on a 2% interest rate are $1,922.02, $1034.93 and $827.95 for a total monthly mortgage of $3,784.90.
Also based on Histoical information the property values would cover the outstanding balance of the loans in less than 8 years.
A program such as this will get the economy quickly moving forward again.

Steve Willis of MA 8:17AM January 01, 2009

I was asked by my sister what will happened if her second loan
was charged off by her lender.Does she need to make payments
or is another collection agency be assigned to collect the whole amount.

emelina of CA 7:52PM December 30, 2008

I think it's time the government rewarded the SAVERS in this country instead of those who just spend, spend, spend, often beyond their means. Why not give folks with incomes of under $100,000 an extra 3-5% on their savings accounts as a way to encourage a reversal of our dismal lack of savings in this country. Why must the fed always place the non-saver's burdens on the backs of those that do save.

susan of MI 12:08PM December 20, 2008

Those should be regulated and capped. Plus the over limit charges, monthly member fees and late fee charges with out a grace period are other forms of credit card companies posing as loand sharks.

Mini Schiro of WI 6:09PM December 17, 2008

Luke Mullins: Sorry, but your article is not "balanced". You purport to write on how the rate cuts "affect us". What about seniors who have seen the return on our CD rates decline steadily? Interest rate cuts may help SOME of the population, but they certainly do not help those who are retired and living on the income generated from CDs and other "safe" investments. How about including US in your comments? Why are all the economic articles only geared to the so-called "producing" generation - which, quite frankly, has caused much of the current financial mess due to their living beyond their means and general deficit-spending practices they no-doubt learned from their government? Why not gear something to OUR generation - you know, the RESPONSIBLE generation - the generation Tom Brokaw called "the greatest generation", the generation to did not spend more than we earned?

Chris McCarthy of NJ 10:43AM December 17, 2008

4% is the number we should always have as a goal for our economy, 4% unemployment, 4% growth, 4% interest rates, 4% savings rate, etc... if 4% is set as a standard goal our economy will run very well yet not as robust as some would desire. The challenge America faces is satisfaction with a fair return and/or profit versus the over-the-top, must have it all mentality. We should be saving our money and borrowing off our savings with revamped lending rules to build a firm economic foundation. With 0% money being loaned to banks, the only reason America isn't in hyper-stagflation is due to lack of money supply. Things can turn very bad is any stimulus package is passed under our current conditions. We must have a goal!!!

Ray Fisher of NM 10:42AM December 17, 2008

The previous posters comments were so RIGHT ON TARGET that I want to repeat them ...
What happenned to raising the loan limits for Freddie mac and Fanny mae.Congress let those increased limits expire. What stupidity. Get it back on the table. The real estate market needs this, as well as, lowering of the fixed rate mortgage rates. It is also about time that Congress set max linits on what banks charge for credit cards. The rates allowed are loan sharking.
Consumers do not want to get burned with adjustable rates

common sense of WA 11:10PM December 16, 2008

The sooner interest rates get to 1%, directly to the homeowner on their primary home, the sooner the economy will begin its healing. Only then will we have the ability to pump liquidity back into our local markets. Our approach must be systemic and can only be achieved with the assistance of the government or we will conitinue to face more bitter financial destruction. Our ability to recover can only happen when we accept that interest rates are what got us into this tail spin (the "resets" from 2% to 6%) and low interest rates can stabilize us. The low interest must reach the homeowner if we are to level off and start growth again. We do not want to take pay cuts, we do not want our home values to decline, and we do not want a long term financial burden from never ending bail out plans.

MTD of CA 11:09PM December 16, 2008

i like cheese and boobs

george w bush of FL 11:02PM December 16, 2008

All trouble essets can be cleared if we can workout some kind of lease to owene or put on arent with some targeted months to to own by the person who stay.OR to decrease inflated value sale at zero percent keeping same value for 20 years payments.

mukesh desai of NJ 8:43PM December 16, 2008