Fed: Give Borrowers Time to Change Their Minds
The Federal Reserve released a proposal Monday to give mortgage applicants three days to change their minds.
The proposal was part of a 930-page document that clarifies and finalizes the new financial reform law.
The Fed’s document says that for closed-end loans secured by real property or a dwelling, a creditor must:
• “Refund any appraisal or other fees paid by the consumer (other than a credit report fee), if the consumer decides not to proceed with a closed-end mortgage transaction within three business days of receiving the early disclosures (fees imposed after this three-day period would not be refundable); and
• “Disclose the right to a refund of fees to consumers before they apply for a closed-end mortgage loan.”
The Fed says this proposal will make it easier and cheaper for consumers to comparison shop. It also acknowledged that borrowers who want to close a transaction in a hurry would be handicapped because most lenders will delay sending out an appraiser for a few days.
Other proposals affecting home buyers included:
• A ban on yield-spread premiums, which encourage mortgage brokers to push buyers toward more profitable mortgages.
• A requirement for lenders to tell borrowers when their mortgage is sold or transferred.
• An explanation of the effects of balloon payments, adjustable loan payment fluctuations, and minimum payments on loan balances.
Source: Bankrate.com, Holden Lewis (08/17/2010)
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European Buyers Could Provide Opportunity
With Europeans fleeing instability, now could be the right time for the Federal Reserve to sell off some of the $1.7 trillion in mortgage-back securities and Treasury bonds it purchased to offset the financial meltdown, says Harvey Rosenblum, the Dallas Fed’s head of research.
Rosenblum said the Fed didn’t go into the crisis with a plan to get out, but he called the influx of foreign investors a “wonderful opportunistic situation. … What better time to sell it off in small quantities,” he said.
Source: Reuters News, Ann Saphir (06/03/2010)
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Fed: Low Rates Likely Through 2010
Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted this week in at least two presentations. These indications came one week after the Fed shut down its program to buy mortgage-backed securities, which had kept rates at or near record lows in recent months.
In a speech Thursday, Fed Governor Daniel Tarullo said, “The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, “in due course,” but he also noted that low rates “help offset the lingering restraining effects on economic activity and prices.”
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
“It’s an uncertain type of market,” says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
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Investors to Pick Up Slack in Mortgage Backs
The Federal Reserve ends its purchase of mortgage securities this week and private investors are expected to step in.
The change probably won’t push mortgage rates up very much. Analysts expect they will rise less than a quarter of a percentage point in the next three months. That gain would increase a monthly payment on a $250,000 mortgage by $30.
In a statement released March 12, Freddie Mac predicted that mortgage rates would average 5.2 percent on a 30-year fixed loan after the Fed stops buying. Fannie Mae put the rate slightly higher at 5.13 percent.
Source: Bloomberg, Kathleen M. Howley (03/30/2010)
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Fed: Interest Rates to Remain Low
Investors breathed a sigh of relief Wednesday when Federal Reserve Chair Ben Bernanke told Congress that interest rates are likely to remain low for an extended period. The economy, he said, “still requires support for recovery.”
Investors see these low rates as a boon to a recovery of employment and business.
Bernanke’s announcement also took the edge off the news Wednesday that housing sales hit a new low in January.
“Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there,” said Jim McDonald, chief investment strategist at Northern Trust in Chicago.
Source: The Associated Press, Tim Paradis (02/24/2010)
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Fed Plans to Pull Back Money
Federal Reserve Chair Ben Bernanke released a formal proposal Wednesday to collect the trillions of dollars that the Federal Reserve has spent to prop up the economy.
Bernanke emphasized that the economy still needs the support of easy money, but he warned that the Fed will soon have to “tighten financial conditions” and raise interest rates. He didn’t specify how much, although he offered some reassurance that the increase won’t be dramatic immediately.
In his report, Bernanke said the Fed plans to sell securities while simultaneously offering to rebuy them at some point.
He also said the Fed plans to sell the equivalent of certificates of deposit to banks and financial firms and take a piece of the banks’ reserves in return.
The release of Bernanke’s proposal initially rattled the stock market but later stocks crept up again.
Source: CNNMoney.com, Jennifer Liberto (02/10/2010)
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Real Estate Recovery Slow, Fed Says
The economy is improving, but recovery in real estate is slow, the Federal Reserve said Wednesday in its beige book report.
The federal tax credit drove an increase in home sales, the report said. But it emphasized that most of the transactions involved lower-priced homes, while prices remained low and residential construction was weak.
The report also said the commercial real estate market remains soft and that there’s a significant excess supply. It pointed to New York and Kansas City as places where the commercial real estate business is worsening.
Source: The New York Times, Javier C. Hernandez (01/13/2010)
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Fed: It’s Time the Market Stands on its Own
April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent, Boston Fed President Eric Rosengren said Saturday.
Fear of a worldwide perception that the U.S. government is simply printing money to use to purchase mortgage-related securities is a big reason the Fed has pulled back, analysts say. If that fear caused a sell-off of U.S. government bonds, it would push borrowing costs substantially higher and derail the economic recovery.
“We are still in uncharted waters,” Fed Vice Chairman Donald Kohn said in an unrelated speech Saturday. “We will need to be flexible and adjust as we gain experience.”
Source: Reuters News, Pedro Nicolaci da Costa (01/08/2010)
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Fed Commits to Holding Down Interest Rates
The Federal Reserve said Wednesday that it would keep short-term key interest-rate target between 0 and 0.25 percent for an “extended period” – interpreted by many analysts to mean months.
Officials said in a statement after the close of its December meeting that the economy has “picked up,” unemployment is “abating,” and financial conditions have “become more supportive of economic growth.”
The Fed also said Wednesday that it will complete its purchase of up to $1.25 trillion in mortgage-backed securities by March, a decision that could negatively affect the availability of mortgages.
Source: The Wall Street Journal, Jon Hilsenrath (12/17/2009)
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Fed: Economy Improving, Commercial Still Weak
The U.S. economy has “improved modestly” since early October, the Federal Reserve said Wednesday in releasing its monthly “beige book” survey of regional economic conditions.
The Fed said residential real estate sales increased everywhere but the Northeast. Also, fewer homes overall were being built.
The report also said commercial real estate was worse than the residential market, with conditions reported to have weakened in virtually all districts, with “rising vacancy rates, downward pressure on rents, and little, if any, new development.”
Overall, the Fed reported that the labor market remained weak in most areas, but it noted improvement in some areas and an uptick in retail sales.
Source: The Wall Street Journal, Sudeep Reddy (12/03/2009)
Fed May Stay in Mortgage Securities
The Federal Reserve isn’t going to go cold turkey from its program to buy mortgage-backed securities, said James Bullard, president of the St. Louis Fed, on Sunday.
The Fed’s purchases of mortgage-backed securities are seen by many as key to keeping rates low and stabilizing the market. The Fed announced earlier this month that the program would end in March.
Bullard said he would like to see the program sustained at a low level as an option for stimulating the economy.
“If the economy came in very weak, let’s say, in 2010—weaker than expected—we would have the option of doing further quantitative easing,” Bullard said. “If the economy came in stronger than expected and inflation expectations started to ratchet up a little bit, we could maybe sell off some of these assets and remove some of the accommodation from our quantitative easing program.”
Source: Bloomberg, Michael McKee and Steve Matthews (11/23/2009)
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Low Mortgage Rates Could Be Ending
Home loan rates below 5 percent are about to disappear, predicted Denis Salamone, COO of Hudson City Bancorp, the nation’s largest thrift.
“I don’t think the market will stay this low for many more months,” Salamone said Tuesday.
Salamone said that despite the Federal Reserve’s decision to keep short-term rates low, if the Fed buys fewer mortgage-backed securities, loan rates will rise.
It will take another 12 to 24 months to sell off excess inventory and until that happens, housing prices may continue to fall, Salamone said.
Source: Reuters News (11/17/2009)
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Federal Reserve Keeping Key Interest Rates Low
The Federal Reserve announced Wednesday that it is keeping its key interest rate at or near zero and will continue to do so as long as the economy remains weak.
Analysts predicted that the Fed would leave interest rates low for at least six more months.
The Fed said that it would continue its program to buy $1.25 trillion worth of mortgage-backed securities by the end of March, a sign that it intends to continue to drive down the cost of mortgage loans.
Source: The New York Times (11/5/2009)
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Fed Calls Housing Upturn a Good Sign
The Federal Reserve’s “Beige Book” report, released Wednesday, points to housing as a bright spot in the economic landscape and applauds banks that lent to first-time homebuyers.
It calls commercial real estate a consistently weak sector, weighed down by business closures and the difficulty in refinancing.
In a separate report Wednesday, the U.S. Labor Department said the number of jobs fell in 43 states and the District of Columbia, with the unemployment rate rising in 23 states.
Industries with the strongest economic gains were residential real estate and manufacturing.
Source: Washington Post, Neil Irwin (10/22/2009)
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One-Third of Home Mortgage Applicants Denied
Nearly one third of people who applied for a mortgage last year were denied, the Federal Reserve reported Wednesday.
The denial rate was up 29 percent from 2006 when approvals were highest. Last year’s denial rate was twice as high for African-Americans and Hispanics as it was for whites.
FHA insured more than 50 percent of all loans to African-Americans and 45 percent to Hispanics. Nearly 17 percent of African-Americans and 15 percent of Hispanics got high-priced loans, compared to 7 percent of whites.
The Mortgage Bankers Association said lenders weren’t discriminating by race, but making decisions base on credit score and the size of the down payments.
The data, collected from nearly 8,400 lenders, is required under the Home Mortgage Disclosure Act of 1975.
Source: The Associated Press, Alan Zibel
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Are Lower Rates on the Horizon?
The Federal Reserve is likely to keep interest rates low to help consumers and companies eliminate debt, Goldman Sachs economists wrote in a report released Wednesday.
Some forecasters have said they expect the Fed to raise rates next year, but Goldman economists say they believe the Fed will keep its key rate near zero at least through 2010 and probably longer.
Source: Bloomberg, Simon Kennedy
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Commercial real estate gets worse
The commercial real estate downturn is deepening, threatening to slow the economic recovery.
To try to contain the damage, the Federal Reserve said Monday that it will extend into 2010 a program to help investors buy commercial property loans. But some say that will have limited impact.
“We seem to be nearing the end of the recession but the situation in the commercial real estate market is getting worse,” says Patrick Newport, an analyst at IHS Global Insight.
About $83 billion of office, retail, industrial and apartment properties have fallen into default, foreclosure or bankruptcy this year, says research firm Real Capital Analytics. The default rate for commercial mortgages jumped from 1.62% to 2.25% in the first quarter and should hit 4.1% by the end of the year, says Sam Chandan, president of Real Estate Econometrics. The carnage will likely cut half a percentage point off economic growth this year and in 2010, Newport says.
Fueled by easy credit, developers built too many shopping malls and office buildings from 2004 to 2007. As the economy soured, vacancy rates rose. Property values are down about 40% from their 2007 peak, Deutsch Bank says, and loans for commercial properties have come to a virtual standstill.
By Paul Davidson, USA TODAY
Full story…
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Fed Will Keep Key Rates Low
When the Federal Reserve ends its meeting on Wednesday afternoon, it is almost certain to leave the key rate at or near zero and pledge to hold it there.
That makes it likely mortgages will stay historically low and rates on home-equity and other consumer loans will hug 3 percent.
But it is unclear whether the Fed will continue some programs that have kept mortgages and other consumer debt even lower than the market might expect. One such program involves buying U.S. Treasurys. The Fed is set to buy $300 billion worth of Treasury bonds by the fall. It has bought $235 billion already this year.
“I think they’ll let it expire. It seems the mood turned against Treasury purchases in the last couple of months, and there’s been some skepticism whether it has worked in bringing rates down,” says Michael Feroli, an economist at JPMorgan Economics.
Source: The Associated Press, Jeannine Aversa (08/11/2009)
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Fed Urges More Rules for Mortgage Applicants
The Federal Reserve on Thursday recommended new disclosure rules for home owners that would make the process of getting a home mortgage more understandable.
Mortgage applicants would receive a single-page explanation of key issues concerning their loan and see a graph comparing the interest rate they were being offered to that given a low-risk borrower, the Fed said.
The Fed also recommended new compensation guidelines for mortgage brokers. Under the new rules, brokers would not receive more money for putting a borrower into a high-cost loan.
“Consumers need the proper tools to determine whether a particular mortgage loans is appropriate for their circumstances,” Fed Chairman Ben Bernanke told an open meeting of the Fed.
Source: The Associated Press, Jeannine Aversa
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DON’T FORGET … TILA changes take effect July 30, 2009
Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z). The new requirements apply to loan applications filed on or after July 30, 2009. The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the [...]
Fed says banks tightening mortgage standards
Both traditional and non-traditional loans are harder to qualify for.
WASHINGTON – A larger share of banks has made it more difficult for people to obtain home mortgages over the last three months even as demand has grown, the Federal Reserve reported Monday.
The Fed’s new quarterly survey found that about 50 percent of U.S. banks tightened their lending standards on prime mortgages, up from about 45 percent in the survey issued in early February.
Meanwhile, 65 percent of banks said they tightened standards on nontraditional mortgages, such as adjustable-rate loans with multiple payment options. That was up from 50 percent in the last survey.
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“Even if you had a stellar credit history, banks were reluctant to lend in this environment,” said Richard Yamarone, economist at Argus Research. With unemployment rising, it raises the odds of more people defaulting on their mortgages, he said. More Details.
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Homeowners opt to refinance and save.
The reasons to refinance your home, or buy a new one, just keep getting better.
This week, the Federal Reserve announced it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. It also left the short-term bank lending rate at a record low of between zero and 0.25 percent.
Those announcements have the phones ringing at local banks with people now locking into rates.
“If you can save a point on your mortgage, it’s time to do it,” said Andrew Siders, president of Vista Bank. “Things are moving.”
The anticipation of lower interest rates, coupled with a better week on the stock market, is raising optimism, Siders said. “As government gets more positive, the consumer is going to get more positive.” Full Story.
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Fed moves to help distressed homeowners.
WASHINGTON (AP) — With home foreclosures spiking, the Federal Reserve is taking steps to try to keep some distressed borrowers in their homes.
Under the program, the Fed has a number of options to provide relief, including lowering the amount the homeowner owes on the mortgage, reducing the interest rate or lengthening the term of the loan. Full story
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