For Immediate Release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.

DON'T BORROW TROUBLE® VENTURA COUNTY CAMPAIGN LAUNCHED TO HELP CONSUMERS AVOID PREDATORY LENDING

Oxnard, CA – At a press conference here today, a coalition of private and public organizations headed by the Real Estate Fraud Advisory Team (R.E.F.A.T.) and Freddie Mac (NYSE: FRE), are kicking off the Don't Borrow Trouble® campaign in Ventura County, Calif. This public education campaign is aimed at preventing predatory lending practices and protecting home ownership in Ventura County.

The coalition urges consumers to call the Don't Borrow Trouble Ventura help line at 211 for calls made from a landline within the 805 area code. For callers using a cell phone, dial 800-339-9597. The hotline is staffed by trained professionals who can offer free assistance to individuals seeking information about purchasing a home, refinancing, consolidating debt, taking out a home-equity loan and mortgage foreclosure prevention. Individuals can also be referred to appropriate legal or financial experts.

Freddie Mac is the principal sponsor of Don't Borrow Trouble's expansion throughout the United States and has brought the campaign to more than 50 locations across the country. The Don't Borrow Trouble campaign also uses brochures, radio and television public service announcements and workshops to educate consumers who are most vulnerable to predatory lending practices, including the elderly, minorities and low- to moderate-income individuals. By combining advertising, face-to-face consumer education and housing counseling, the campaign helps consumers avoid abusive lending practices, such as exorbitant interest rates, excessive fees and pressuring tactics.

In addition to the helpline, a key feature of the Don't Borrow Trouble Ventura County campaign is the availability of consumer educations workshops utilizing Freddie Mac's CreditSmartÒ multilingual financial education curricula. CreditSmart is designed to educate consumers about credit and money management, provide insight into how lenders access credit histories, explain the role of credit in achieving financial goals and foreclosure prevention.

"We welcome Freddie Mac's Don't Borrow Trouble campaign to our community," said Dean Maulhardt, mayor pro tem of the City of Oxnard. "We support this campaign for a very good reason: We have always viewed real estate fraud and predatory lending practices not only as wrong and illegal, but also as obstacles to our efforts of providing needed housing in our community. Removing barriers has been part of our proactive efforts in providing housing opportunities for our residents."

"One of the most effective strategies to combating predatory practices in the real estate industry is to raise public awareness of the risks people face and to arm them with information so they may avoid becoming victimized in their pursuit of home ownership," said District Attorney of Ventura County, Greg Totten. "Through our partnership with Freddie Mac, our Real Estate Fraud Advisory Team will be able to increase our educational outreach efforts within our communities and coordinate the delivery of crucial services to those at risk of losing their homes as a consequence of predatory practices."

"Guarding our local citizens against predatory and abusive lending practices is one of the most important services the County can perform for its citizens," said Supervisor John Flynn. "We do this by supporting Freddie Mac's Don't Borrow Trouble – Ventura County campaign, one of the most effective means of counteracting this terrible wrong perpetrated against honest, hardworking people.

"On behalf of my colleagues on the Board of Supervisors, I congratulate and applaud the Real Estate Fraud Advisory Team in utilizing this program and making great strides in educating the public to be aware, to be informed and to be cautious."

"United Way of Ventura County values its support of our county's 2-1-1 program. The new and exciting ‘Don't Borrow Trouble' program is certain to provide important benefits for residents of our county," said David M. Smith, president and chief executive officer, United Way of Ventura County.

"The Real Estate Fraud Advisory Team views the Don't Borrow Trouble –Ventura County campaign as one more very important tool to help us combat real estate fraud in our county," said Jim Keith, co-chair of R.E.F.A.T. and VCCAR Board member.

"Predatory lending practices attack the heart of our communities. These practices can strip away home equity and trap unwary borrowers in a dismal cycle that ultimately replaces homeownership with foreclosure," said Dwight Robinson, senior vice president of Freddie Mac. "Don't Borrow Trouble is a proven method to help stop predatory lending, keep families in their homes, build wealth and strengthen communities. These organizations should be commended for banding together and combining their resources to educate consumers on the perils of predatory lending practices."

Predatory lending practices strip equity away from homeowners by repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance; packing a loan with single premium credit insurance products like credit life insurance and not adequately disclosing the inclusion, cost or any additional fees associated with the insurance; or charging excessive rates and fees to a borrower who qualifies for lower rates and fees.

Members of the Don't Borrow Trouble Ventura County campaign are: Real Estate Fraud Advisory Team; Cabrillo Economic Development Corporation, City of Oxnard, Consumer Credit Counseling Service, Freddie Mac, United Way of Ventura County, Ventura County District Attorney's Office - R/E Fraud Prosecution Unit, Ventura County Coastal Association of Realtors® (VCCAR), Ventura County Superior Court Self-Help Legal Access Centers, Ventura County Bar Association – Volunteer Lawyers Services Program, and Walk Your Talk Productions.

Don't Borrow Trouble was pioneered in Boston by Mayor Thomas M. Menino and the Massachusetts Community and Banking Council.

Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than four million renters in America.

Tips for Avoiding Borrowing Pitfalls

Source: Freddie Mac

1. Say NO to "easy money." Borrowers should beware if someone claims "credit problems won't affect the interest rate." Avoid solicitations for loans that sound too good to be true. If it sounds too good to be true, it probably is. If a solicitation is really interesting, get it in writing!

2. Shop around. Borrowers should talk to several lenders to find the best loan for which they qualify. A loan product or lending practice may not seem predatory until compared with a similar loan product offered by other lenders.

3. Understand the loan terms. Borrowers should compare loan terms from different lenders. Understand the best loan terms available in the marketplace and compare the APR (annual percentage rate) of loans from different lenders. The APR takes into account both the interest rate and the points and fees of the loan. A nonprofit housing counselor or a lawyer can review the information with a borrower.

4. Find out about prepayment penalties. Borrowers should know if the loan offered to them has a prepayment penalty. Prepayment penalty should be a choice, not a requirement.

5. Make sure documents are correct. Be cautious of someone who offers to falsify a borrower's income information to qualify for a loan. Borrowers should never falsify information or sign documents that they know to be false.

6. Make sure documents are complete. A borrower should not sign documents that have incorrect dates or blank fields. Be wary of promises that a lender will "fix it later" or "fill it in later."

7. Ask about additional fees. Borrowers should question any items they didn't ask for. Borrowers should also beware if they are told that single premium credit insurance is required get a loan, or that purchasing it will help loan approval. Review every fee and compare different lenders' fees to ensure the most competitive loan terms.

8. Understand the total package. Ask for written estimates that include all points and fees. The situation may not seem abusive until everyone gets to the closing table. If any fees or charges differ from what was previously disclosed, delay the closing until all terms of the loan are clearly understood.

9. Work with credit counselors. A borrower should get all the facts before deciding to combine credit card or other debts into a home loan. Beware of scam credit counseling/ credit consolidation agencies – unfortunately, not all credit counseling agencies are acting in your best interests. Talk to a community-based consumer credit counseling agency or housing counselor before signing the loan documents.

10. Protect home equity. If borrowers are taking equity out of their property, they should take out the minimum amount needed. The equity in a home is a source of wealth, which builds up slowly over time.

11. Get advice first! Talk to a community-based consumer credit counseling agency or housing counselor.

Existing-Home Sales to Trend Up in 2008

WASHINGTON, December 10, 2007 -

Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors®. However, a recovery for new-home sales is unlikely before 2009.

Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.

The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.

“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.

“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”

Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”

New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.

The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.

Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.

The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for November will be released December 31; the next Forecast / Pending Home Sales Index will be released January 8.