Actually, today’s Fed move will not help home loan rates to improve. The Fed's program will allow lenders an avenue to sell their current loan production and future loans that we originate. This move will inject more cash into the banking system to try to limit the damage from the broadening credit crunch.
The Fed will lend up to $200 billion in Treasury securities for 28 days to primary dealers in the bond market. The new term securities lending facility will accept as collateral many kinds of mortgage-backed securities, including federal agency debt, Fannie Mae and Freddie Mac residential-mortgage-backed securities, and AAA-rated private-label residential mortgage-backed securities. Securities that are not highly rated are not accepted. The Fed hopes the action will give bond dealers comfort that they'll be able to find financing, Fed senior officials told reporters. The move was not an effort to prop up any particular firm, they said. The latest move could make monetary policy more effective by easing specific market stresses, the Fed staffers said. The odds fell for an extremely aggressive 75-basis point cut in the federal funds target rate at next week's meeting of the Federal Open Market Committee. Financial markets welcomed the announcement, with U.S. stock markets and the dollar rising. This Fed’s move is seen by the markets as the best idea yet to correct the current recession worries and will provide financing for an asset class (residential mortgage-backed securities) that is under severe pressure and which the Fed cannot finance through regular operations. Will, and should, the Fed do more? Joseph Brusuelas, chief U.S. economist for IDEA Global, said "...the government needs to take bolder action, including an explicit guarantee of Fannie Mae and Freddie Mac, enact a bigger fiscal stimulus program, and perhaps bail out the monoline insurers and some second-tier banks that will likely fail". My question is how much will that guarantee cost our consumer? As we know FHA loans require a 1.5% of the loan amount in up front mortgage insurance premium paid in the loan and a monthly insurance premium paid for a minimum of 5 years or 78% value in the home, whichever is longer. Because rates are currently a .50% lower than conventional financing this is a good deal. We will have to wait and see what the new programs will bring in fees. What I know for sure is that it was a good move by the Fed to take some of the pressure off the financial markets today. | 
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