First, a little topical context. As of the last week in August, the average 30 year mortgage rate is hovering just below 6.10%. Only two and a half months ago the rates were closer to 6.5%. What caused such a precipitous move in rates? Keep in mind the several year campaign by the Federal Reserve to reduce liquidity by increasing the short-term cost of borrowing money. To better understand the recent events and get an inside view of the mortgage industry, visit The Truth About Mortgage.com, written by a former account exec at a mortgage company. Maybe the root causes of the recent events in the mortgage industry don’t really interest you, but understanding how to interact with lenders when you wish to borrow money is imperative and access to a mortgage dictionary is an educational must.

Are you a bit more interested in the undercurrents of the mortgage industry? Let me start by finishing my first story - why rates have fallen so quickly recently. In the previous five years or so lending in the subprime markets had expanded greatly - these are loans that are higher risk and normally would not have been made. As the housing market started to lose its footing last year, subprime lenders started to look more risky. This risk - perceived or real - triggered a host of problems in the markets for lending and borrowing money. These problems had a snowball effect and a quick moving contagion affected many of the subprime lenders.

The Truth About Mortgage details the recent history of lender closings, mergers and layoffs - ’tis not a pretty list. It is a bit difficult to measure the true magnitude of the impact of these closures, but it is sure to have an impact. This cull of the mortgage lender herd does seem to be more of a massacre, but the pendulum will eventually swing in the opposite direction again. There are grumblings about a possible recession and the markets are all but certain of a Fed rate cut at the next meeting in September and possibly several more before the end of this year. If 30 year rates are just above 6% for a 30 year mortgage today, what will they be if the Fed cuts rates a half point or even a full point by the end of the year?