A Simple Explanation Of The Federal Reserve Statement (March 16, 2010 Edition)

Written on March 16, 2010 by Kevin Sandridge in Florida Mortgage News
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Putting the FOMC statement in plain EnglishToday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”.  It also said that business spending has “has risen significantly”.

This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.

It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism.  This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.

The economy is not without threats, however, and the Fed identified several:

  1. High unemployment threatens consumer spending
  2. Housing starts are at a “depressed level”
  3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation is within tolerance limits

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.

Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates in Lakeland are unchanged this afternoon.

The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.

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Lakeland Mortgage Rate Update: Locking Your Rate Per Today’s Fed Meeting

Written on March 16, 2010 by Kevin Sandridge in Lakeland mortgage
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Fed Funds Rate (Feb 2007 - March 2010)The Federal Open Market Committee adjourns from a scheduled 1-day meeting today, its second of the year.

The FOMC has held the Fed Funds Rate in a target range of 0.000-0.250 percent since December 16, 2008, and the voting members of the Fed are expected to vote “no change” again today.

However, no change in the Fed Funds Rate doesn’t necessarily mean no change in Lakeland mortgage rates.  This is because the Fed Funds Rate is a different interest rate from the rates Lakeland home buyers get from a loan officer.

  • Fed Funds Rate : Short-term rate at which banks borrow from each other
  • Mortgage Rate : Long-term rate of interest a homeowner pays on a mortgage

Mortgage rates are more responsive to what the Fed says as compared to what the Fed does.

After each FOMC meeting, Fed Chairman Ben Bernanke & Co issue a formal press release to the markets.  At roughly 400 words, the statement is a brief commentary on the strengths, weaknesses, and threats for the U.S. economy.

Wall Street watches the statement with great interest and this is why mortgage rates are often volatile on the days of an FOMC adjournment. One mention of a word like “inflation” and traders rush to dump their mortgage bond positions.

Inflation is the enemy of mortgage rates.

After the Fed’s last meeting in January, it told us that the economy had “weakened further”, led by steep declines both in housing and employment. Global demand was off, too.  The negative tone of the Fed’s statement caused mortgage rates to fall to near an all-time low.

This month, expect a less gloomy message.

Since January, there’s been a modest rebound in housing, employment appears more stable, and Retail Sales just posted huge gains.  If the Fed alludes to improvement in any or all three, mortgage rates will likely reverse and zoom higher.

We can’t know what the Fed today will say so if you’re floating a mortgage rate and wondering whether to lock, the safe approach would be to do it today, prior to 2:15 PM ET.

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Lakeland Mortgage Update – Week of March 15, 2010

Written on March 15, 2010 by Kevin Sandridge in Lakeland mortgage
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The FOMC meets this week -- mortgage rates will be volatileThe Lakeland mortgage market worsened last week with little economic news to push markets in either direction. Momentum trading and rebalancing of portfolios drove mortgage rates higher, on average.

FHA and conventional mortgage rates in Florida rose last week, marking the first time that’s happened this month.

Mortgage rates have been on impressive run lately and mortgages are priced far better than what most experts predicted.  Weaker-than-expected economic data is one reason why.  Lack of economic data may be another.

This week, however, data returns.

  • Monday : Industrial Production and Home Builder Index
  • Tuesday : Housing Starts and Building Permits
  • Wednesday: Consumer Confidence
  • Thursday : Producer Price Index and Initial Jobless Claims
  • Friday : Consumer Price Index and Continuing Jobless Claims

And, as if all that weren’t enough to spook you, the Federal Open Market Committee meets for a scheduled, 1-day event Tuesday.

The Federal Reserve is expected to vote to hold the Fed Funds Rate in its current target range near 0.000%, but that doesn’t mean mortgage rates won’t change. Markets are responsive to the FOMC’s post-meeting press release and any clear talk of economic strengthening should drive rates higher.

Wall Street is in Wait-and-See Mode and this week will give it plenty to look at.

If you’re floating a mortgage rate, or waiting to lock, be prepared for wild swings in mortgage rates — especially leading up to Tuesday afternoon’s FOMC adjournment. The Fed adjourns at 2:15 PM.

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How To Refinance When Your Lakeland Home Is Underwater

Written on March 12, 2010 by Kevin Sandridge in Florida Mortgage News
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Making Home Affordable logo

As is the case with many across the country, a good number of Lakeland, Florida homeowners are facing situations where they’d like to refinance their homes, yet owe more than they are presently worth.

The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help Florida homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

  1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
  2. Your home must be a 1- to 4-unit property
  3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
  4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage.  If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

HARP is complex enough that you’ll want to talk with a human before taking a proper next step.

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Foreclosures Per Capita | February 2010

Written on March 11, 2010 by Kevin Sandridge in Florida Mortgage News
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According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.

Foreclsoures Per Capita February 2010

It’s a small improvement from January and a just 6 percent increase over February 2009.

On a per-capita basis, foreclosure density varied by state:

  • Nevada : 1 foreclosure filing per 102 homes
  • Florida : 1 foreclosure filing per 163 homes
  • Arizona : 1 foreclosure filing per 163 homes
  • California : 1 foreclosure filing per 195 homes

Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.

For today’s Winter Haven home buyers, foreclosures represent an interesting opportunity.

Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It’s one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn’t always mean less costly.  A foreclosed home may be in various stages of disrepair and they’re often sold as-is, as policy.

Buying new or used can be cheaper than buying broken-down.

Therefore, if you’re in the market for a bank-owned home, make sure you know what you’re buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to pipes or the property’s structure, for example, may not be so obvious on a walk-though and you’ll want to know about it before you buy.

Also, foreclosed homes are federal tax credit-eligible. Buyers must be under contract by April 30, 2010 and closed by June 30, 2010.

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