I don’t think Fed cuts will be a magic bullet by any stretch of the imagination. Rates are only one sliver of the big picture. However, if you take the position that increasing foreclosures are one factor in driving values down, than any action that impacts the number of foreclosures is going to be relevant. Working under the assumption that a huge % of current and impending foreclosures are due to loan re-casts, rate cuts that lower the re-cast loan index will obviously reduce the level of increased payments. The deeper and more frequent the cuts, the lower the re-cast payments, the less borrower distress, and fewer foreclosures.
Some cases will be essentially unsalvagable, others are not. In any event, a .25 easing is not likely to have sweeping impact. It’s going to have to go deeper, and it’s going to have to get there pretty soon. Even if it does, it’s only a sliver of the big picture.
