American Family Funding, a mortgage lender in Santa Clarita, is explaining the recent drop in the federal fund rate to almost zero, along with two other changes made by the Federal Reserve.

When the coronavirus pandemic began ramping up in the United States in March, the Federal Reserve reduced the federal fund rate to between zero and a quarter percent, according to Fred Arnold, mortgage advisor from American Family Funding. 

Arnold explained that the federal fund rate is the rate in which the Federal Reserve lends money to financial institutions, which was likely lowered in response to the panic response seen nationwide at the start of the coronavirus outbreak. 

“I think the brilliance behind that was, what if everybody goes (and) instead of buying toilet paper and buying all the things they’ve been buying in the supermarket, what if they all run and get cash from their bank?” Arnold said. “(The Federal Reserve) didn’t want there to be a run on cash in the banks, so if banks needed cash to satisfy the needs of their customers they would not run out. Typically banks take the money you deposit with them and lend it out for loans, among other things, and they just don’t have cash sitting there in their vaults.”

The decision has other very positive financial impacts to the consumers, Arnold continued, such as causing the interest rates to drop on home equity lines of credit, car loans and credit cards. 

Related: American Family Funding Partners With Credit Unions To Help Members

Another component of the rate decrease decision was a change to the requirement regarding the minimum dollar amount banks must have in their reserves.

“(This was an) even bigger thing they did,” Arnold said. “Reserve requirements, they reduced that, which was very important because it added to liquidity in the market.” 

The third change made by the Federal Reserve, which Arnold noted won’t be transparent for some time, is expected to benefit mortgage interest rates long-term. 

“They committed to buy $700 billion in treasuries and mortgage-backed securities to cause interest rates to either stay low or not go much higher than they currently are,” Arnold concluded. 

Ed. Note: This article is a KHTS Community Spotlight based on a recent interview with American Family Funding.

American Family Funding a Division of American Pacific Mortgage Corporation NMLS #1850

David Cantrell NMLS #1427091 — Licensed by the Department of Business Oversight Under the California Residential Mortgage Lending Act.

About American Family Funding, Your Resource for Santa Clarita Mortgages

Santa Clarita mortgage lender American Family Funding can help you fulfill your dream of home ownership. A highly rated mortgage lender in Santa Clarita, American Family Funding maintains a focus on community involvement and a commitment to giving back whenever possible. A friendly Santa Clarita mortgages advisor will make the first-time homebuyer experience an easy and stress-free experience — even with bad credit or a low down payment. Unlike some mortgage companies in Santa Clarita or mortgage brokers in Santa Clarita, the home loan officers at American Family Funding also specialize in VA loans, reverse mortgages, refinancing and the STAR Loan Program. If you’re looking for the best mortgage lender in Santa Clarita or a “mortgage lender near me,” contact American Family Funding today. 

American Family Funding
28338 Constellation Road
Suite 900
Valencia, CA 91355
(661) 284-1150
info@affloans.com

American Family Funding – Valencia

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