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.

Federal Reserve

Top Real Estate Headlines for Week Ending: October 8th

The weekend is finally here. Before you run off to the Chicago Marathon let’s pause for a moment to review what the top real estate and mortgage headlines were this week according to the National Association of Realtors.

• Another Gain for Pending Home Sales
  Pending Home Sales Index rose for the 2nd consecutive month, thanks to low rates and affordable prices.
• Regulators to Banks: Review Foreclosures
  The Office of the Comptroller of the Currency has told seven big banks to review their procedures in light of problems at other banks.
• 3 Tips for Negotiating Short Sales
  Kathy Mehringer, who educates real estate agents on short sales, offers her 3 best tips for working with lenders on these complex transactions.
• Mortgages Hit Lowest Levels Since 1950s
  The last time borrowers could get rates this low, every tv was black and white and Americans liked Ike.
• Foreclosure Reviews Could Lead to Costly Delays
  If documentation is found to be incomplete, legal challenges could arise.
• 4 Ways to Ramp Up Your Marketing
  Get ideas on how you can enhance your marketing to expand your reach to buyers and sellers.
• Fed Chair: Government May Buy More Debt
  Federal Reserve Chair Ben Bernanke suggested that the Fed is likely to buy more debt, which could further drive down rates on mortgages, corporate financing and other loans.
• Most- and Least-Promising Metros for Investors
  See which U.S. metropolitan areas were ranked as the best and worst places for real estate investment.
• How to Reach the Millennials
  The millennial generation is a growing segment of buyers in today’s market. But they have different views about home ownership, and they also communicate differently than previous generations. Are you talking their talk?
• Good Neighbor Award Finalist Jim Arnhold
  Virginia practitioner harnesses land for charity, giving disabled children a chance to thrive through horseback riding.
• HUD Has Loans for Out-of-Work Borrowers
  The U.S. Department of Housing and Urban Development will offer $50,000 loans to unemployed borrowers who are at least three months behind on their payments, but have a reasonable likelihood of being able to resume payments within two years.
• Helmsley Mansion Sells at Deep Discount
  The Greenwich, Conn., estate of the late hotel magnates Leona and Harry Helmsley sold for $35 million after being listed in 2008 for $125 million.

These were the top real estate and mortgage headlines for the week ending October 8, 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

Top Real Estate and Mortgage Headlines for September 22nd

It’s Wednesday and the first day of fall. The full moon will be bright for the first time in 20 years for the Autumnal Equinox tonight. Here is today’s top real estate headlines according to the National Association of Realtors.

• Federal Reserve Leaves Rates Alone
  The Open Market Committee rejected the idea of buying securities again to bring down interest rates even more than they are.
• GSEs Eye Standards Shift for Appraisals
  The intent of HVCC will be maintained in coming replacement standards for appraiser selection.
• Multifamily Property Market Is on the Mend
  For buyers able to secure financing, interest rates are low.
• Builders Diversify to Survive During Slowdown
  Interior rehabs, fancy additions help builders keep busy while new-home demand stays cool.
• Sellers Quickly Transform Property with Paint
  Basic tips on getting the most from your paint job.
• Owners, Practitioners Think Prices Will Fall
  Sellers continue to think their homes should be priced higher than what’s recommended.

These are the top real estate and mortgage headlines for today, September 22, 2010.

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

Federal Reserve

Can You Hear What The Fed Said That Will Impact Housing

“When E.F. Hutton talks, people listen.” This was true in the 1980′s.

Today however it’s all about what the Federal Reserve had to say from the Federal Open Market Committee (FOMC) meeting, the 6th of eight scheduled meetings and seventh 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 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 had this to say about the economy.

Positive economic factors:

• Household spending is increasing gradually
• Business spending…is rising
• Bank lending has continued to contract, but at a reduced rate in recent months
• 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…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 8-1 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

The Federal Reserve is cautiously concerned about unemployment and falling prices. Accordingly, the Federal Reserve is ready to provide additional support to inject new life into today’s questionable economic recovery.

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.

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.

Federal Reserve

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.

Federal Reserve

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.

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