FOMC Minutes and Tid Bits

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Yesterday the Fed released minutes from last month’s FOMC meeting. The minutes reveal the committee is debating easing or ceasing the purchase of mortgage backed securities before the end of this year. 

A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.

The Fed cannot continue to keep mortgage rates at their manipulated lows forever. Industry experts estimate that if the Fed was not involved with keeping mortgage rates low with the buying of mortgage backed securities, rates would be closer to “jumbo” rates (about a full point higher in rate).

Other points I of interest from the minutes – at least to me :)  

…some participants were concerned that the recent increase in the payroll tax could have a significant negative effect on spending, particularly on the part of lower-income consumers.

Effective the beginning of this year, did you notice your pay check is 2% less? Congress allowed the expiration of the payroll tax cut to expire during the “fiscal cliff”. During 2011 and 2012, Americans caught a break and only paid 4.2% of their incomes for social security; we’re now back to paying 6.2%. If your monthly gross income is $5000, then your monthly take home pay is $100 less than what you had before this payroll tax.

If you’re a home owner who has not refinanced in the last year, you may want to contact your local mortgage professional to see if it makes sense. Reducing your mortgage rate can help off set the payroll tax and reduce the amount of interest you’re paying on your mortgage.  Click here if you would like a rate quote for homes located anywhere in Washington state.

Participants remarked on the ongoing recovery in the housing market, pointing variously  to rising house prices, growth in residential construction and sales, and the lower inventory of homes for sale. A number of participants thought it likely that higher home values and low mortgage rates were helping support other sectors of the economy as well, and a couple saw the housing market as having the potential to cause overall growth to be stronger than expected this year…

In the greater Seattle area, home prices continue to increase and I’m hearing from home buyers that they wish there was more inventory to chose from. If you’ve been considering selling your home, this could be a good time to meet with a real estate agent. If you need me to refer one to you, I’m happy to do so! 

….Nonetheless, it was noted that mortgage credit remained tight and the fraction of homeowners with mortgage balances exceeding the value of their homes remained high.

Those seeking a mortgage, whether it’s for refinancing or buying a home do need to qualify and it is a “full doc” process. However, it’s not impossible. You need to be prepared to provide all income and asset documents, have steady employment and good credit. If you are considering buying a home (or even refinancing) in the next 12 months, I recommend starting with a preapproval now. 

Home owners who are still upside down with the loss of their home equity may still be able to take advantage of today’s low rates if:

  • they qualify for the Home Affordable Refinance Program (HARP 2.0). This is eligible for conforming mortgages securitized by Fannie Mae or Freddie Mac prior to June 1, 2009 on primary residences, second homes or investment properties. Or…
  • the existing mortgage to refinance is FHA, an FHA streamlined refinance may be possible for primary residence or investment properties. Or…
  • the existing mortgage is VA or USDA. 

If you are looking at buying a home or refinancing anywhere in the state of Washington, I’m happy to help you!

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