Federal Reserve

Big Test Ahead for Mortgage Market

The cessation of the government program to buy mortgage-backed securities, set to end in a couple of months, will show whether the White House and Federal Reserve have effectively stimulated the lending market to the point that it is now on solid footing.

If the sector slumps again, home owners could face a new period of distress.

Keeping mortgage rates at record lows was a major component of the economic strategy during President Obama’s first year in office. While it did not garner the kind of headlines that efforts to bail out banks did, the policy did help revitalize home buying in parts of the country and assisted millions of home owners who were able to refinance.

Source: Washington Post, David Cho, Neil Irwin, and Dina ElBoghdady (01/25/10)

© Copyright 2009 Information Inc.

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Federal Reserve

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)

——————–
Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Federal Reserve

How to Tell Mortgage Rates Are Rising

What are the signs that mortgage rates, now at historic lows, are about to go up?

One way to catch a clue is to read the minutes of the Federal Reserve. For instance, the Federal Open Market Committee said in its September minutes that when it came to interest rates, there is “no policy change.” And the minutes said that while the Fed believes “an economic recovery is underway,” it regards a weak economy as a greater risk than inflation. Upcoming meeting minutes are likely to be just as forthcoming if an uptick is in the cards.

Other signs include:

* Declining unemployment: The unemployment rate is sitting at 9.7 percent. If lots of Americans go back to work, an increase in interest rates is likely.
* Rising discount rate: The rate the Fed charges banks that borrow from it directly stands at 0.5 percent. If it rises or the spread between it and the Federal Funds rate widens, then mortgage rate increases won’t be far behind.

Source: BusinesWeek.com, Marc Roth (10/28/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Federal Reserve

Credit Market Makes Economists Nervous

Interest rates are low and home prices are down, but banks continue to be stingy with loans.

At the height of the housing boom, seven out of 10 mortgages were approved. At the end of 2008, only five out of 10 got the green light. During the boom years, homebuyers could qualify for the cheapest rates with a credit score of 660. Today, they need 740 or better.

“Banks are going to be in a defensive posture for several years. Most borrowers can’t meet their criteria,” says Christopher Whalen, managing director at research firm Institutional Risk Analytics.

Consumers cut back borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That made some analysts nervous.

The reduction in borrowing could slow the economic recovery, says David Olson, president of Access Mortgage Research & Consulting.

“If they cut back, it would be catastrophic,” Olson says. “We could have a second downturn.”

Source: The Associated Press, Stevenson Jacobs (09/17/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Federal Reserve

“Worst Is Over,” Fed Chief Declares

Federal Reserve Chair Ben Bernanke declared the worst of the recession over, but warned that some of the economic pain will persist.

He said the unemployment rate, now at 9.7 percent, a 26-year high, is likely to keep rising.

“Unfortunately, unemployment will be slow to come down. It will come down but it may take some time,” Bernanke said. “Obviously, that’s a very serious concern.”

The Fed chief said the economy is weighed down by tight credit, households saving more and spending less, and a still-unstable housing market.

He urged Congress to revamp the financial system to avoid a similar crisis in the future.

Source: The Associated Press, Jeannine Aversa (09/15/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Federal Reserve

Mortgage Brokers Try to Change Appraisal Rules

The National Association of Mortgage Brokers spent nearly $1.1 million in the second quarter to persuade legislators that the new rules for home appraisals discourage sales and push down prices.

The new rules, which took effect May 1, prevent mortgage brokers from ordering appraisals. Only a mortgage lender can order an appraisal, and they must do it in a hands-off way.

The association lobbied Congress, the Federal Reserve, the Federal Trade Commission, and the Department of Housing and Urban Development, according to a filing with the House clerk’s office. In all, the mortgage brokers have spent $1.5 million lobbying in 2009.

Source: The Associated Press

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Federal Reserve

Commercial Market Shows Signs of Rebound

Analysts point out that competition in commercial lending is increasing on the West Coast, which they call a sign that the drought in the commercial loan business is ending.

Citigroup Inc. analyst Darrell Wheeler said there was “aggressive” competition among insurance companies and foreign banks to fund office properties. Other new lending programs include securities sales through the Federal Reserve and opportunity funds that are looking to buy debt-free assets.

“These disposition options would not have existed just two months back, so market conditions are changing very quickly,” Wheeler wrote.

He concluded that with increasing financing “valuations for these assets should quickly recover if the economy is recovering, and we now expect the number of voluntary defaults will start to drop off.”

Source: Reuters News, Al Yoon

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Federal Reserve

Banks Plan to Keep Lending Tight

Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.

About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.

Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.

Source: Bloomberg, Craig Torres

Federal Reserve

Troubled Jumbo Loans Hurt Broader Market

Houses that cost more than $730,000 – the cap for conforming jumbo loans – can be extremely tough to buy, sell, or refinance these days, freezing the high-end market and holding down activity in lower-priced markets, real estate practitioners say.

The slowdown results from lenders’ reluctance to offer mortgages above the amount Fannie Mae and Freddie Mac will insure.

“What you’re seeing are those properties sitting on the market for a lot longer because people can’t get loans,” says David Kerr, an associate with ZipRealty in Marin County, Calif. ” All of what we’re showing is in the $200,000 to $300,000 price range.”

States that are most affected are those where jumbos account for more than 10 percent of all mortgages, including Hawaii, California and New York, as well as Washington, D.C., New Jersey, Maryland, Massachusetts, Virginia, Connecticut, Washington, Nevada, and Florida.

The Obama administration program to refinance underwater mortgages doesn’t offer help to holders of jumbo mortgages, so borrowers who can’t refinance are defaulting in increasing numbers. According to First American CoreLogic, jumbos that are 90 days or more delinquent reached 4.83 percent in March 2009, up from 1.68 percent in March 2008.

“We need to have a market recovery in all segments,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “If the high-end market weakens, those in the middle have to reduce prices . . . All of Middle America is undoubtedly impacted.”

Source: USAToday, Stephanie Armour (07/15/2009)
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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Federal Reserve

Lenders Avoid Loan Modifications

The Obama administration’s $75 billion foreclosure prevention effort is unlikely to succeed because mortgage lenders cannot turn a profit on modified loans, concludes a new report by the Federal Reserve Bank of Boston.

Analyzing 665,410 loans originated between 2005 and 2007 that subsequently became seriously delinquent, the Boston Fed found that only 3 percent of borrowers had their loans modified to lower monthly payments, and about 5.5 percent received workouts that did not result in lower payments.

Also, up to 45 percent of approximately 150,000 borrowers who received some kind of aid ended up in arrears again, but about 30 percent of delinquent borrowers were able to fix their problems without help from their lenders.

Source: Boston Globe, Jenifer McKim (07/07/2009)(06/25/2009)

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Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

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