Fed to Keep Mortgage Rates Sweet and Low

iStock-000020911287XSmallThe Fed made no changes to the Fed Funds rate… no surprise there. However, the Fed did surprise the markets today announcing they are not tapering their purchasing of mortgage backed securities. From today’s press release:

…Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.  [Read more…]

What may impact mortgage rates this week: July 22, 2013

This week’s calendar is looking a little light as far as economic indicators that are scheduled to be released. Mortgage rates have been improving following Ben Bernanke’s dovish comments to Congress last week.

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What May Impact Mortgage Rates this Week: July 15, 2013 [with mortgage rates]

This week, mortgage rates continue to be bumpy and with Ben Bernanke speaking tomorrow on Capital Hill, we may additional volatility. Here are some of the scheduled economic indicators to be released this week:

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Mortgage rate update for the week of February 25, 2013

This week is packed with economic indicators that may impact the direction of mortgage interest rates. Mortgage rates have been slowly inching higher since the end of last year. Rates are still very low and you can still get a 30 year in the 3’s – the rate just cost more than it did a month ago.

Here are a few of the economic indicators scheduled to be released this week:

Tuesday, February 26: S&P/Case-Shiller Home Price Index, New Home Sales and Consumer Confidence

Wednesday, February 27: Durable Goods Orders and Pending Home Sales

Thursday, February 28: Initial Jobless Claims, GDP – Gross Domestic Product and Chicago PMI

Friday, March 1: Personal Consumption Expenditures and Core PCE, ISM Index and Consumer Sentiment Index (UoM)

Tomorrow, Fed Chairman Ben Bernanke will be in front of Congress to begin his two day testimony on monetary policy. In addition, $85 billion in automatic budget cuts are set to go into effect on Friday unless Congress takes action.

Remember, mortgage rates are based on mortgage backed securities (bonds) and when stocks are performing, mortgage rates tend to rise. This is because investors will trade the safety of bonds for the possible higher return available from stocks.

The only way to secure today’s mortgage rate is by locking it! You can see examples of “live” mortgage rates I’m quoting by following me on Twitter @mortgageporter or Facebook/WashingtonMortgagePro.

If I can help you with your refinance or home purchase on property located anywhere in Washington state, please contact me.

Mortgage rate update for the week of January 14, 2013

This week is packed with economic reports that may impact the direction of mortgage interest rates. Mortgage rates are based on mortgage backed securities (bonds). When the Fed minutes revealed hints that the FOMC may stop purchasing mortgage backed securities last week, mortgage rates ticked slightly higher. However Japan is hinting of buying US bonds, which is helping rates trend lower this morning.

Signs of inflation or the economy recovering may also cause mortgage rates to trend higher. Here are some of the economic indicators scheduled to be released this week:

  • Mon, January 14: No scheduled data – however, Ben Bernanke is speaking this afternoon on monatary policy.
  • Tue, January 15: Producer Price Index (PPI), Retail Sales and Empire State Index
  • Wed, January 16: Consumer Price Index (CPI) and the Beige Book
  • Thurs, January 17: Initial Jobless Claims, Building Permits, Housing Starts and Philadelphia Fed Index
  • Fri, January 18: UoM Consumer Sentiment Index

NOTE: Monday, January 21, 2012 our office will be closed in observance of Martin Luther King Day.

As I write this post (8:24 am pst) the DOW is up 5 at 13493 and MBS for the FNMA 30 year is up slightly.

If you would like a mortgage rate quote for your Washington state home, please click here. I’m happy to help!

Ben Bernanke says mortgage underwriting standards are too tight

In his speech at Operation HOPE Financial Dignity Summit yesterday on the challenges of the housing market and mortgage lending, FOMC Chairman Bernanke expressed concerns that mortgage underwriting has become “overly tight”. 

“…Some tightening of credit standards was an appropriate response to the lax lending conditions that prevailed in the years leading up to the peak in house prices. Mortgage loans that were poorly underwritten or inappropriate for the borrower’s circumstances ultimately had devastating consequences for many families and communities, as well as for the financial institutions themselves and the broader economy.

However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.’

Borrowers who have recently purchased a home or closed on a non-streamlined refinance would most likely agree with Ben Bernanke’s views on underwriting guidelines. And for the most part, I do too. Today’s home buyer will often find every aspect of their income, assets and credit scrutinized. For example, Form 4506 (which was once used primarily for stated or no-income verified loans) is now pulled on every mortgage in process to obtain a copy of the tax transcripts for the the past two years. Any discrepancies between the 4506 and income supplied must be addressed, which often leads to the borrowers having to provide complete tax returns instead of just their W2’s. If a borrower has deposits on their bank statements that are not easily identified, they can expect to show proof of where that deposit came from. Credit reports may disclose information that the borrower may need to address as well beyond the good old “inquiry letter”. Now they disclose information about activity associated to a borrowers address that may or may not relate to the borrower. Don’t get me wrong, loans are closing however the process for some can require a great deal of patience and paperwork.

“When lenders were asked why they have originated fewer mortgages, they cited a variety of concerns, starting with worries about the economy, the outlook for house prices, and their existing real estate loan exposures. They also mention increases in servicing costs and the risk of being required by government-sponsored enterprises (GSEs) to repurchase delinquent loans (so-called putback risk).”

“Putbacks” are also referred to as “buy-backs”. And buy-backs tend to roll down hill to the source that originated the mortgage, including  banks and correspondent lenders like Mortgage Master Service Corporation. This happens when the loan (borrower) is not performing. The lender will go over the loan documents with a fine tooth comb to try to find fault in the underwriting so they can justify sending the loan (forcing a buy-back) to the originating lender. This is why many borrowers are having to over-document their finances.

The Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices indicates that lenders began tightening mortgage credit standards in 2007 and have not significantly eased standards since.

Ben Bernanke and the Fed cannot control the underwriting guidelines and overlays that banks have for mortgage lending. I certainly do not want to see the loose underwriting of the subprime era return. However I do agree that for the most part, underwriting has become pretty tight and I would welcome more “common sense” for well qualified borrowers.

Mr. Bernanke needs to brush up on Frank Dodd and how it will continue impact the mortgage industry and underwriting guidelines.

Your thoughts?

Santa Ben and the FOMC Deliver Lower Rates

Just in time for the holidays, the FOMC surprised everyone by cutting the Fed Funds Santaben rate to a range of zero to 0.25%.  This 0.75-1.00 reduction is more than the widely anticipated 0.50% rate cut.  The Fed also reduced the Discount Rate by 0.75% to 0.50%.

Bernanke and the FOMC didn’t stop with the giving there…they reiterated their commitment to buying mortgage backed securities which keeps mortgage interest rates low.

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