Federal Reserve

New Rules for Mortgage Transfers – Are You Confused Yet

With all the media buzz about Fannie Mae and Freddie Mac reform on Capitol Hill today, you may have missed an important press release from the Federal Reserve that will affect all homeowners with a mortgage. The press release was the issuance of a final rule amending Regulation Z about the notification of mortgage loan sales or transfers.

What exactly is Regulation Z?

Regulation Z, also known as the Truth in Lending, seeks to promote the informed use of consumer credit by requiring disclosures about its costs and terms. It seems that the government solution to every issue is the big “D” word. That’s right, more disclosures.

Stop! Do you know who owns your mortgage loan right now?

Unlike the Servicing Disclosure Statement that discloses who will be collecting your payments, the new rules for mortgage transfers will help disclose the legal owners of your mortgage.

The Federal Reserve is determined to make sure that every homeowner who has a home loan (i.e. first mortgage, home equity loans and/or home equity lines of credit) on their primary residence to receive proper notification. Within 30 days of the sale or transference of your home loan, the new company who has acquired your home loan must disclose…

• New Owner’s Identity, Address and Telephone Number
• Date the Loan was Transferred
• Contact Information of the Agent Authorized to Act on Behalf of the Owner

Why would you want to know who owns your mortgage?

The Federal Reserve believes it would be in the your best interest to know the actual owners of your home loan who can handle certain issues, including payment disputes and loan modifications.

Sounds great in theory. Unfortunately, the owner of the mortgage may or may not be the servicer of the home loan. A Chinese company, for instance, may own your mortgage but your loan payments are paid to Chase.

Who do you call when you have issues or questions about your mortgage?

If you’re like the vast majority of homeowners you only deal with your loan servicer. At the end of the day, you as the homeowner simply want to know to whom do you send your payment.

Another discrepancy with the new disclosure for mortgage transfer is the fact that it DOES NOT apply to loans on second homes, vacation homes, investment properties nor business properties.

Regardless of who owns or services your home loan, the terms of the recorded note cannot change. If you would like the personal touch through the home buying process and mounds of new disclosures, contact us.

Can The US Economy Be Kept Afloat by Today’s Fed Actions

In case you missed it, the Federal Open Market Committee (FOMC) met today to discuss monetary policy. Today’s meeting was the 5th of eight scheduled meetings and sixth overall for 2010.

Financial analysts and economic forecastors worldwide have attempted to estimate what the Federal Reserve will or will not change in their policy statement prior to the meeting. Often times it comes down to a single word that has been inserted or left out of the policy statement.

Why all the scrutiny of words? What’s the purpose of these meetings and why should home buyers and homeowners in Northwest Indiana care about the FOMC meetings?

First of all, the FOMC meetings provides a bird’s eye view of what the Federal Reserve believes to be important factors impacting the overall economy.

Second and more importantly, the press release from the FOMC meetings provides guidance to the financial markets on how the Federal Reserve Banks intend to control the supply and demand of money. It is this monetary policy that can and will dictate future economic growth.

According to FOMC Statement Press Release from today, the FOMC has a unique spin on the economy.

Positive economic factors:

• Household spending is increasing gradually
• Business spending…is rising
• Underlying inflation has trended lower

Negative economic factors:

• Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
• Business spending…weak investments and reluctant to add to payrolls
• Bank lending continues to contract

Based on the Federal Reserves interpretation of the economy, they voted 9-1 to do the following:

1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
2. support price stability by reinvesting in longer-term Treasury securities (new clause)

What does all this mean?

The Fed is 100% committed to keep interest rates low until they are confident that the economy is en route to a full recovery. Thankfully, home buyers and homeowners in Northwest Indiana still have time to take advantage of historic low mortgage interest rates.

Mortgage Rates Improve With Help of Fed Talk But Will You

According to Freddie Mac, mortgage rates made new all-time lows this week and the good news is that rates look poised to fall even more.

Since the Federal Reserve’s release of its June 2010 meeting minutes Wednesday, mortgage rates are dipping even more and one of the main reasons why is because of some choice Fed words.

If you’ve never seen a Fed Minutes release, it reads academic. The document is page after page of stats, facts and figures about the U.S. economy, accompanied by an in-depth recap of the intra-Fed member debates that shape the nation’s monetary policy.

At 7,333 words, the June Fed Minutes is the unabridged version of the more well-known, post-meeting press release. The corresponding press release was just 360 words.

As it turns out, Wall Street didn’t like what it read in the minutes.  Specifically:

1. The Fed expects below normal growth through 2012
2. The Fed’s outlook for employment has dipped
3. Credit conditions are easing only slowly

Furthermore, the Fed said its action may be needed if the economy were “to worsen appreciably”.

Overall, the economic optimism the Fed displayed earlier this year appears to be waning. The economy is moving forward — just not as quickly as expected. That should bode well for mortgage rates and home shopping in Crown Point.

Mortgage rates were down Wednesday afternoon and Thursday and remain historically low. However, all it would take to reverse rates is a run of positive news on jobs, growth, and consumer spending.

If you know you need to lock a mortgage rate in the near-term, it may be a good time to make the call. Lock your mortgage rate and move on.

It’s Not What The Fed Did, But What The Fed Said Today

Today, in its first meeting in 5 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains within its target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since April, “the economic recovery is proceeding” and that the jobs market “is improving gradually”. Business spending “has risen significantly”, too, with the exception of commercial real estate.

Today’s statement is the 8th straight press release in which the Fed shows optimism for the U.S. economy, dating back to June 2009.  Since that time, the Fed has terminated all of the programs it created to support the economy through the economic crisis.

The recession is widely believed to be over.

And, although the Fed’s statement acknowledged economic growth, it did highlight lingering threats, too.

1. Employers are still reluctant to hire new workers
2. European debt concerns could spill-over to the U.S.
3. Bank lending is contracting

Also, as expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”, citing that “inflation has trended lower” recently.

Mortgage market reaction has been positive thus far. Mortgage rates in Illinois are slightly improved post-FOMC.

The FOMC’s next scheduled meeting is August 10, 2010.

A Mortgage Rate Strategy Ahead Of The Fed’s Meeting

The Federal Open Market Committee begins a 2-day meeting today, its fourth scheduled meeting of the year, and fifth overall.

The FOMC is the monetary policy-setting part of the government and its primary tool for that purpose is the Fed Funds Rate. 

The Fed Funds Rate is the dictated rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

This is the lowest Fed Funds Rate in history. A rate near zero-point-zero percent renders borrowing by business and consumers cheap which, in turn, promotes investment and growth.

There’s no expectation for the Fed to change the Fed Funds Rate after it adjourns tomorrow, but that doesn’t mean consumers in Munster Indiana should expect mortgage rates to remain unchanged, too.

To the contrary, mortgage rates tend to be volatile when the FOMC is meeting.  This is because the FOMC issues a press release after each meeting and in that press release, it comments on the economy’s unique threats, strengths and weaknesses.

When the FOMC speaks, Wall Street listens. 

The words of the Chairman Ben Bernanke’s press release will be dissected and analyzed.  A single mention of higher-than-expected inflation levels, or better-than-expected growth, and traders will rush to dump their bond positions in favor of equities. 

This has a negative effect on mortgage rates.

Conversely, if the Fed is sour on the economy, mortgage rates may fall.

We can’t know for sure what the Fed will say or do tomorrow afternoon so if you’re floating a mortgage rate and wondering whether to lock, the safe choice is to lock prior to 1:15 PM CST Wednesday.

How Did the Fed’s April Minutes Impact Home Loan Rates

After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.

It’s good news for home buyers and would-be refinancers in Portage Indiana.  Mortgage rates continue to troll along multi-year lows.

“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.

The Fed meets 8 times annually.

Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors.  Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.

The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.

And the extra words matter.

Here’s some of what the Fed discussed last month:

• On Greece : A crisis in Greece could slow U.S. domestic growth
• On housing : Despite government support, growth appears to have stalled
• On its mortgage buyback program : There’s little reason to sell mortgage bonds right now

When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.

Mortgage rates move opposite mortgage bond prices.

Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder.  April’s meeting was no different.

For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing.  Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.

1 in 8 Banks Still Tightened Prime Mortgage Standards

The Federal Reserve says that financial markets “remain supportive of economic growth“. Residential mortgage guidelines, however, continue to tighten.

If you’ve applied for a home loan recently, you probably felt it; extra scrutiny on income, assets and credit scores, among other things.  The hard proof of the changes, however, can be found in the Federal Reserve’s quarterly survey of its member banks.

Every 3 months, the Federal Reserve asks senior bank loan officers around the country whether their respective banks’ “prime” residential mortgage guidelines tightened since the last survey.

For the period January-March 2010, 1 in 8 banks surveyed toughened their qualification standards. 

Only 4% loosened them.

When we account for the Fed’s survey in conjunction with new underwriting standards from Fannie Mae and FHA, it’s clear that getting approved for a mortgage in 2010 is more difficult than at any time in recent memory.

Today’s homeowners and home buyers in Munster Indiana have taller hurdles to leap:

• Minimum FICO scores are higher
• Downpayment/equity requirements are larger
• Debt-to-Income thresholds are smaller

In other words, mortgage rates may stay low throughout 2010, but that won’t matter to homeowners failing to meet the new, minimum eligibility standards as set forth by the lenders.

If you’re among the many people wondering if now is the right time to buy or refinance a home, remember that — along with a probable increase in mortgage rates — mortgage approvals are getting more scarce.

The best home price or mortgage rate in the world won’t matter if you’re ineligible for financing.

The Federal Reserve, Greece and Mortgage Rates…Now What

The Federal Reserve adjourns from a scheduled, 2-day meeting today.  It’s one of 8 scheduled Fed meetings for 2010.

Upon adjournment, Fed Chairman Ben Bernanke & Co. will release a formal statement to the market. In it, the Fed is expected to announce “no change” in the Fed Funds Rate.

The Fed Funds Rate is currently in a target range of 0.000-0.250 percent.

The Fed Funds Rate is an inter-bank lending rate. It’s also the basis for Prime Rate, a consumer interest rate on which credit card payments are based, among other consumer loans.  Prime Rate is equal to the Fed Funds Rate + 3 percent.  Credit card rates, therefore, will likely stay flat today, too.

Mortgage rates, however, should change.  Possibly by a lot.  The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).

The reason mortgage rates will change today is because, in its statement, the Federal Reserve will highlight various parts of the economy, identifying strengths, weaknesses and probable threats to growth. 

These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip –  mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.

It’s a difficult time to be shopping mortgages in Northwest Indiana.

Further complicating matters is Greece’s recent debt downgrade to junk status. A small contagion fear is budding worldwide and, as a result, the flight-to-quality has picked up steam. Mortgage rates are down because of it but could reverse higher at any moment.

Therefore, if you’re actively shopping for a mortgage today, it may be prudent to lock your rate ahead of the Fed’s announcement and any major market reversal. Mortgage rates may fall today, but there’s very little room for them to fall.  This is, however, a lot of room for them to rise.

The Fed adjourns at 2:15 PM ET.  Call your loan officer to lock your rate.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

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