San Diego Mortgage Rates Report: August 31, 2007 - Don't Hold Out For A Hero

"There will be no bailout for lenders" signaled Fed Chairman Ben Bernanke in his first speech since the credit crisis began.  Bernanke's speech was pretty much what one would expect; he is NOT Alan Greenspan and we may have to hold out for a rate cut to better understand that.  Here is a key quote from his speech:

It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions. But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.

While the majority of economists believe that the Fed will be cutting the Fed Funds rate on September 18, 2007, Bernanke will not be pushed into it.  He stressed the importance of analyzing CURRENT, rather than lagging economic indicators, to more appropriately formulate open market decisions.  We still think he's going to cut rates, just not as aggressively as our colleagues want.

Lock-in all loans at application.  There is much more risk of rates rising than there is to getting an extra .125% lower.  If the situation changes, we'll jump into a nearby phone booth, strap on our capes, and change our advice.