Federal Reserve

Believe It or Not, Banks Start To Loosen Up In Underwriting

After a half-decade of tightening mortgage guidelines, banks are starting to “loosen up”.

The Federal Reserve conducts a quarterly survey of its member banks and, last quarter, not a single responding bank reported having tightened its mortgage guidelines for prime borrowers.

A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.

53 banks responded to the Fed’s survey and none said that mortgage guidelines “tightened considerably” or “tightened somewhat” between September and December 2011; 50 said that guidelines remained “basicaly unchanged”; 3 said that guidelines “eased somewhat”.

Mortgage applicants sometimes remark that the mortgage approval process can be challenging. Last quarter’s Fed survey hints that looser standards are coming. 

Not since before the recession have banks lowered mortgage approval standards like this and it bodes well for this year’s Northwest Indiana housing market. Real estate agents report that 1 in 3 home sale contracts fail with “declined mortgage applications” as a leading cause.

Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations. This can spur the housing market forward.

Make note, though. “Looser standards” should not be confused with ”irresponsible standards”. It remains more difficult to meet bank standards as compared to 5 years. Today’s underwriters are more conservative with respect to household income, overall assets and credit scores. 

Even as compared to one year ago:

• Minimum credit score requirements are higher
• Downpayment /equity requirements are larger
• Maximum allowable debt-to-income ratios are lower

For buyers and refinancing households gaining approval, though, the reward is the lowest mortgage rates in a lifetime. Mortgage rates in Northwest Indiana and Chicago Illinois suburbs continue to fall, helping home affordability reach new highs.

If you’re in the market to buy a new home or refinance one, there is no better time than the present.

Quick general rule of thumb when keeping an eye on mortgage rates.

Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Go Up

Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Go Down

If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Federal Reserve

The Week Ahead for Mortgage Rates: January 9, 2012

Mortgage markets improved last week, pushing mortgage rates in Indiana lower for the second straight week. Conforming fixed and adjustable-rate mortgage cut new, all-time lows, and FHA mortgage rates did the same.

In a holiday-shortened trading week, stronger-than-expected U.S. economic data and ongoing weakness within Europe drove investors into the U.S. mortgage-backed bond market. When demand for bonds is high, mortgage rates improve.

The Refi Boom continues.

Since beginning their descent last February, mortgage rates have shed 114 basis points en route to reaching 3.91%, the current, “average”, 30-year fixed rate mortgage rate nationwide and a new all-time low, according to Freddie Mac and its mortgage market survey.

If you’re among today’s home buyers or would-be refinancers, on a $200,000 mortgage, the 1.14% rate drop represents a monthly mortgage payment savings of $135 — $1,623 per year.

Larger loans save more, smaller loans save less.

This week, with little economic news set for release, mortgage rates are expected to take their cue from the 8 Federal Reserve members scheduled to speak in public, and from whatever news may bubble up from the Eurozone.

The Federal Reserve said it will communicate its vision for the U.S. economic more openly and more often so Wall Street will be watching the Fed members’ speeches this week, in search of clues about the Fed’s 2012 roadmap.

For example, there has been speculation that a new round of stimulus would be introduced at the Fed’s next meeting later this month. If, after listening to this week’s speeches, investors sense it will happen, mortgage rates may be susceptible to an increase in Schererville and everywhere else.

We’ll also be watching the Retail Sales report this week, due Thursday. Retail Sales are a reflection on consumer spending and consumer spending accounts for roughly 70% of the U.S. economy. If Retail Sales make gains, it may spark stock market gains at the expense of mortgage bonds.

This, too, would result in higher mortgage rates.

You can’t time the mortgage market, but with mortgage rates this low, it’s hard to go wrong. Complete the “Live Rate Quote” form to the right to get a live rate quote today.

The economic calendar this week has the following key economic and financial reports.

This is The Week Ahead for Mortgage Rates: January 9, 2012.

Quick general rule of thumb when keeping an eye on mortgage rates.

Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Worsen

Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Improve

If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Federal Reserve

Federal Reserve Announces New Twist to Stimulate Economy

The Federal Open Market Committee (FOMC) gathered for the 6th of eight scheduled meeting for 2011.

Since the last FOMC meeting in August, the economy failed to add any new jobs and the unemployment rates has remained above 9 percent. Growing fears of another recession have been fueled by the poor performance throughout every sector of the economy.

Economists and financial analysts worldwide have been on the edge of their seat waiting to hear how the FOMC intends to prevent another recession while keeping a lid on inflation.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners even 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 will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Household spending has been increasing
• Inflation has moderated from earlier peaks
• Longer-term inflation expectations have remained stable

Negative economic factors:

• Economic growth remains slow
• Overall labor market conditions continue to weaken
• Unemployment rate remains elevated
• Household spending has flattened
• Investment in nonresidential structures is still weak
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

1. extend the average maturity of its holdings of securities
2. reinvest principal payments from its holding of agency debt and agency mortgage-backed securities in agency mortgage-backed securities
3. maintain the target range for the federal funds rate at 0 – 0.250%

The Federal Reserve also elaborated on how they will extend the average maturity of its holdings of securities.

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.

What does all this really mean to Northwest Indiana and Chicago Illinois home buyers and homeowners?

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

This new initiative (aka. Operation Twist) by the Federal Reserve appears to be a re-balancing of short-term debt and long-term debt on the Fed’s portfolio. The Fed is attempting to refinance their debt overall a longer time frame as to minimize the cash flow crunch in the same manner as consumers who refinance short-term debt into longer-termed mortgages.

At the end of the day, will the Fed have enough money to accomplish their objectives of paying bills while paying down the existing debt? Only time will tell. In the mean time, the Federal Reserve will take advantage of the low interest rate environment as well.

Likewise, home buyers and homeowners in Northwest Indiana and Chicago Illinois should capitalize on low home loan rates now before they end. Call or text me at 512-522-7284 to discuss your home loan options!

Federal Reserve

Federal Reserve Vows to Keep Low Rates Through Mid-2013

The Federal Open Market Committee (FOMC) gathered for the 5th of eight scheduled meeting for 2011.

The biggest announcement since the last FOMC meeting in June, which there have been many, is obviously the downgrade of the US credit rating by Standards & Poor’s over the weekend.

This downgrade has devalued the US dollar and has had immediate impact on stocks worldwide. Combine our domestic woes with the debt crisis in Europe and it is no surprise why stock investors are running scared.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners even 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 will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Business spending on equipment and software continues to expand
• Longer-term inflation expectations have remained stable
• Underlying inflation has moderated from earlier peaks

Negative economic factors:

• Household spending has flattened
• Investment in nonresidential structures is still weak
• Overall labor market conditions deteriorating
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

1. maintain the target range for the federal funds rate at 0 – 0.250%
2. maintain its existing policy of reinvesting principal payments from its securities holding

The Federal Reserve also elaborated on how long a near zero percent Fed Funds Rate would last.

Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

What does all this really mean to Northwest Indiana and Chicago Illinois home buyers and homeowners?

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

Even with the US credit downgrade, mortgage bonds are in high demand forcing home loan rates lower. It is hard to forsee how mortgage rates could get any lower based on everything that is happening domestically and worldwide. One hint of good economic news and mortgage rates could reverse course instanteously.

Therefore, home buyers and homeowners in Northwest Indiana and Chicago Illinois should take quick action to capitalize on low home loan rates before they end. Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Federal Reserve

Fed Wants More Stimulus Despite Positive Economic Signs

The Federal Open Market Committee (FOMC) gathered for the 1st of eight scheduled meeting for 2011.

Since the last FOMC meeting in December the US economy has been providing positive signals on the scope and pace of a jobless recovery. The stock market has enjoyed a nice rally since the beginning of 2011 as well.

The biggest announcement from the December FOMC meeting was the Federal Reserve’s commitment to Quantitative Easing (QE2). There has been plenty of debate since the December 14th FOMC meeting about the effectiveness QE2.

Why should home buyers and homeowners in Northwest Indiana even 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 will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Household spending picked up late last year
• Business spending on equipment and software is rising
• Longer-term inflation expectations have remained stable
• Underlying inflation have been trending downward

Negative economic factors:

• Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
• Business spending…investment in nonresidential structures is still weak
• Employers remain reluctant to add to payrolls
• Housing sector continues to be depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 11-0 in favor of:

1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
2. maintain its existing policy of reinvesting principal payments from its securities holdings
3. intends to purchase $600 billion of longer-term Treasurys by the end of the 2nd quarter 2011

The Federal Reserve reaffirmed it’s commitment to Quantitative Easing 2 and is prepared to see it through to the end. The FOMC also acknowledged that the economic recovery is continuing, but not at a pace sufficient to improve the labor market.

What does all this really mean to home buyers and homeowners in Northwest Indiana?

The Federal Reserve is running out of options and tools to keep interest rates at historic lows. The rising trend in home loan rates since the last FOMC meeting in December 2010 is proof that worldwide bond markets are becoming numb to the FOMC’s influence. Therefore, home buyers and homeowners in Northwest Indiana should take quick action to capitalize on low home loan rates before they end.

Federal Reserve

Federal Reserve Confirms Economic Recovery with Caution

As the year comes to an end, the Federal Open Market Committee (FOMC) gathered for the 8th and final schedule meeting for 2010.

Since the last FOMC meeting in November the US economy has been providing mixed signals on the scope and pace of a jobless recovery. The biggest announcement from the November FOMC meeting was the launch of a second round of Quantitative Easing (QE2). Many questions have been circulating since November 3rd about the effectiveness QE2.

Why should home buyers and homeowners in Northwest Indiana even 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 will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the committee had this to say about the economy.

Positive economic factors:

• Household spending is increasing at a moderate pace
• Business spending on equipment and software is rising
• Longer-term inflation expectations have remained stable
• Underlying inflation have continued to trend downward

Negative economic factors:

• Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
• Business spending…less rapidly than earlier, while investment…continues to be weak
• Employers remain reluctant to add to payrolls
• Housing sector continues to be depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 10-1 in favor of:

1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
2. maintain its existing policy of reinvesting principal payments from its securities holdings
3. intends to purchase $600 billion of longer-term Treasurys by 2nd quarter 2011 ($75 billion per month)

The Federal Reserve reaffirmed it’s commitment to Quantitative Easing 2 and is prepared to see it through to the end. The FOMC also acknowledged that the economic recovery is continuing, but not at a pace sufficient to lower the unemployment rate.

What does all this really mean to home buyers and homeowners in Northwest Indiana?

The Federal Reserve is running out of options and tools to keep interest rates at historic lows as worldwide bond markets are becoming numb to the FOMC’s influence. Therefore, home buyers and homeowners in Northwest Indiana should take quick action to capitalize on low home loan rates before they end.

Federal Reserve

What Does the Fed’s Quantitative Easing 2 Mean to You?

In the statement released after its November meeting, the Federal Reserve announced that it will purchase a further $600 Billion of longer-term Treasury securities by the end of the second quarter of 2011, in what is known as another round of Quantitative Easing (or QE2).

To help you understand what this means to the economy and to you, let’s break down the details, starting with what QE2 is and the reasons behind this move by the Federal Reserve.

What is Quantitative Easing?

Quantitative Easing is the concept of the Fed becoming a heavy buyer of Treasuries and Bonds. This is done to artificially cause those security prices to move higher under the increased demand. That demand should, in turn, cause interest rates to move lower with the hope of stimulating the economy.

What other impacts might Quantitative Easing have?

Quantitative Easing 2 will almost assuredly hurt the US Dollar, which helps make US exports more affordable abroad as well as make imports appear relatively more expensive. Such a shift helps large multi-national companies, which have a large influence on the economy and the major Stock market indices.

Of course, the Fed can’t outright say it is trying to weaken the currency. After all, haven’t many members of Congress and the Administration been bashing China for currency manipulation?

But the point is, even if Quantitative Easing 2 doesn’t have a direct impact, the drop in currency value can be very beneficial to corporations and Stocks.

How can Quantitative Easing 2 impact home loan rates?

While Stocks should benefit from another round of Quantitative Easing, Bonds may have a different reaction. And that brings us to the heart of what you need to know: What does Quantitative Easing 2 mean to Bonds and home loan rates?

With another round of Quantitative Easing, Bond prices should initially improve because Quantitative Easing 2 includes large Bond purchases.

But…the key word is “initially.” That’s because, even if Bonds show signs of initially improving, the eventual softening of the Dollar, rising commodity prices, and rise in Stock prices could become a drag on Bonds, which would negatively impact home loan rates.

The bottom line is, Quantitative Easing 2 and a weaker US Dollar may make our exports more attractive to foreign buyers, but it may ultimately drive rates higher. That’s an important point to consider if you’re thinking about refinancing or purchasing a new home.

The reality is, home loan rates are still near historic lows, but won’t be forever.

Federal Reserve

Top Real Estate Headlines for Week Ending: November 5th

The weekend is just a blink away. Before we get lost in our weekend affairs, let’s take a minute to review what the top real estate and mortgage healdines were this week according to the National Association of Realtors.

• Golder: Stand Up for Home Ownership
  “It’s time to tell the world that home ownership is still the heart of the American Dream,” 2010 NAR President Vicki Cox Golder told a packed ballroom of real estate practitioners in New Orleans.
• September Pending Home Sales Slip 1.8%
  Tight credit and appraisals coming in below a negotiated price continue to constrain the market, but there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures.
• Fed’s Aggressive Policy Sparks Critics
  After the Federal Reserve announced Wednesday that it intended to buy $600 billion in Treasury securities through June, critics warned of inflation and other unintended results.
• 30-Year Mortgage Rates Inch Up
  For the third straight week, 30-year mortgage rates continued their upward climb. The average 15-year rate for the week ended Nov. 4 was 3.63 percent.
• How Election Results Impact Real Estate
  Among other things, 10 of the 12 state attorneys general on the executive committee that have been heading the foreclosure probe lost their re-election bids and won’t be returning to office. What does this mean for real estate?
• Why Reverse Mortgages Are Popular
  Changes to legislation and the housing market are making this financing option attractive for home owners.
• You’re Refinancing Again?
  Owners who refinanced just a year ago might be looking to do it again while rates continue to drop.
• Housing Starts Rise in September
  The U.S. Commerce Department reports that increased spending in commercial projects helped push construction spending up.
• Consumers Put Credit Card Debt Ahead of Mortgage
  A Mortgage Bankers Association panel discussed the shifting priorities of borrowers who now believe paying down credits cards is more important than paying their home loan.
• 3 New Anti-Foreclosure Strategies
  Critics of the government’s Home Affordable Modification Program offer fresh proposals to slow foreclosures.
• Minority Home Ownership Drops Steeper
  While the overall rate of home ownership slipped just 0.7 percent year over year, a much more pronounced slide occurred among the nation’s minorities.

These were the top real estate and mortgage headlines for the week ending November 5, 2010.

Want to know how these national real estate headlines could impact you right here locally in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our collective years of real estate experience in Northwest Indiana guide you to an informed and successful real estate transaction today.

Federal Reserve

What’s Humpty Hump Have To Do With the Federal Reserve

“Stop whatcha doin’, ’cause I’m about to ruin, the image and the style that ya used to. I look funny, but yo I’m makin’ money see, so yo world I hope you’re ready for me.”

These famous lyrics which were sung by Humpty Hump in his infamous 1989 hip hop song “The Humpty Dance” seems so appropriate for what the Federal Reserve had to say from the Federal Open Market Committee (FOMC) meeting, the 7th of eight scheduled meetings and eighth overall for 2010.

Financial analysts and economic forecasters worldwide attempt to guesstimate what the Federal Reserve will or will not say in their policy statement prior to the meeting. Often times it comes down to a single word that has been modified in the policy statement.

What’s the purpose of these meetings? Why all the scrutiny of words?

Why should home buyers and homeowners in Northwest Indiana even 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 will accomplish their dual mandate to foster maximum employment and price stability.

According to FOMC Statement Press Release from today, the FOMC had this to say about the economy.

Positive economic factors:

• Household spending is increasing gradually
• Business spending on equipment and software is rising
• Longer-term inflation expectations have remained stable
• Underlying inflation has trended lower in recent quarters

Negative economic factors:

• Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
• Business spending…less rapidly than earlier, while investment…continues to be weak
• Employers remain reluctant to add to payrolls
• Housing starts are at a depressed levels

Based on the Federal Reserves interpretation of the economy, they voted 10-1 to do the following:

1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
2. maintain its existing policy of reinvesting principal payments from its securities holdings
3. expand it holdings of securities by $600 billion by 2nd quarter 2011 ($75 billion per month)

Ready or not, laugh if you want to, the Federal Reserve is taking bold steps to combat slow employment and economic growth. Only time will tell if the markets were ready for this new round of quantitative easing.

What does all this really mean to home buyers and homeowners in Northwest Indiana?

The Federal Reserve is still committed to keep interest rates low until they are confident that the economy is reaching their ideal, economic target growth rate. Thankfully, home buyers and homeowners in Northwest Indiana still have time to take advantage of historic low mortgage interest rates.

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