A recap of last week’s postsby Tim Manni
I think the Fed’s renewed interest in buying up mortgage-backed securities is the real hidden gem from Wednesday’s meeting, and might just be the beginning steps for an expansion of HARP to help refinance more underwater borrowers.
If there is anything the UBS story tells us–and if there are any lessons from past takes of “rogue” traders–it’s that banks should not be allowed to be in the leveraged betting business. That may seem unfair, but only if you think that mortgage rates should be higher because banks are allowed to gamble.
As expected, the Federal Reserve announced this afternoon that they are moving forward with their latest economic policy dubbed “Operation Twist,” which may lead to even lower mortgage rates.
What is Operation Twist?
Essentially, the Fed is purchasing more longer-term securities in an attempt to keep downward pressure on long-term interest rates, such as mortgage rates.
Many market observers are expecting the Federal Reserve to announce a new form of economic policy this afternoon following their two-day FOMC meeting.
What type of economic policy? Well, that remains to be seen.
On Monday, we provided some analysis of a few possible strategies the Fed could announce today, but at the moment, most of us are expecting that the Fed will announce plans to “buy longer dated Treasury securities in a bid to hold down interest rates.”
Two weeks ago we discussed the issue of whether and how new appraisal standards would impact mortgage rates. There were a number of interesting comments, so let’s take a look at them:
Joel says the new standards from Fannie Mae, Freddie Mac and the FHA will have one sure impact: “Only thing this will do is increase the costs of appraisal.”
After a long time in Washington, my conclusion is that no matter what rules or legislation are being proposed, the first response is always to say that changes will result in higher consumer costs.
Unfortunately, “mortgage rates fall to new record lows,” loses its potentially profound significance when it’s virtually the same headline week in and week out.
As HSH.com’s resident expert Keith Gumbinger writes in the latest Market Trends newsletter, besides mortgage rates, what else is left to cheer about?
“Delinquencies, foreclosures, underwater homeowners, borrowers with sub-par credentials and more have been a continuing story for years now, and there is little abatement in those areas. Even record low mortgage rates have limits in how much assistance they can offer…”