According to the latest issue of HSH’s Market Trends Newsletter, “Short Week, Lower Rates,” the factors that once caused rates to rise sharply have eased off for the moment.

“A few weeks ago, mortgage rates flared higher, climbing from still-economic-emergency levels. The rise came amid what was interpreted to be signals of an improving economic outlook, the potential for inflation, pondering over what the Federal Reserve and Treasury would do and rampant government spending, among other factors.”

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As expected, the Federal Open Market Committee (FOMC) announced that the target for the Federal funds rate will remain between 0-0.25% “for an extended period.” The FOMC also reiterated their commitment to spend up to $1.25 trillion on Fannie and Freddie mortgage-backed securities in order to keep conforming rates inside their current range.

Our “prediction” post this morning speculated on whether or not the FOMC would discuss a possible exit strategy. In exactly the same language as their release after the April meeting, today’s statement said, “The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.”

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Do Americans spend more when they pay with cash — or with plastic? When are banks allowed to raise your interest rate?

To find out the answers to these questions and more, take the credit card IQ test. Eileen AJ Connelly of the Associated Press assembled a 10-question quiz which will test your credit card knowledge as well as gauge your credit score.

1. What’s more important for your credit score? Read the rest of this entry »

The Federal Reserve announced plans yesterday to employ several new and ongoing strategies designed to keep interest rates low and stable for at least the next few months.

We predict that the Fed’s commitment alone to spend up to another $750 billion on Fannie and Freddie mortgage-backed securities could help keep conforming rates stable through year’s end.

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For lenders and borrowers alike, the rules for purchasing a mortgage have changed. Today’s market conditions have done away with below-prime borrowers, and have forced qualified borrowers to adopt new strategies.

Paying up-front points isn’t necessarily a bad thing: Read the rest of this entry »

The holidays didn’t keep mortgage borrowers too busy to deluge lenders with applications. Most were for refinance, unsurprisingly, but the Mortgage Bankers Association reported a decent amount of interest in purchase mortgages as well, noting that “The refinance share of mortgage activity decreased to 82.9 percent of total applications from 83.2 percent the previous week.” Which means that the pace in homebuying is picking up… very slightly.

Unfortunately, a lot of would-be refi borrowers are getting a rude reality check:

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Last week when mortgage rates took a nose dive, financial news outlets across the country contacted HSH Associates for commentary and rate quotes concerning the steepest rate drop since February. In the past week, HSH has been quoted 12 times by major news sources — six alone on November 26 — the day after the conforming 30-year fixed rate dropped 29 basis points.

Be sure to click on and read the “HSH in the News” page of our blog, located in the top right-hand corner of the home page. The page is filled with links and clips of financial news articles from a variety of trusted sources.

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Beginning at the end of last month, reports began to surface about the Federal Deposit Insurance Corporation’s plan to modify approximately two million delinquent mortgages. In the meantime, while other government and private foreclosure initiatives were announced, the FDIC’s plan had seemingly been delayed behind the White House’s opposition to the plan.

Today the FDIC released the details of the plan on their website. How will the effectiveness of this plan differ from the other recently announced initiatives? According to the FDIC there’s a problem: loan modification is a slow process — one that yields too few results. Their solution to speed the process is to guarantee to cover up to 50% of the loss sustained from “redefaults of modified mortgages.” The FDIC’s plan offers lenders an incentive of $1,000 for every modified loan, as opposed to the FHFA’s proposed $800, and will restructure the loan down to 31% of the borrower’s “mortgage debt-to-income ratio,” as opposed to the FHFA’s “industry standard” of 38%. Yet, these modifications are going to be made for non-GSE loans only, meaning jumbos and other non-conforming loans.

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Leaders from twenty nations will convene in Washington today and tomorrow to discuss the state of the global economy, and hash-out future efforts to quell an economic crisis that has affected most of the globe. What makes this meeting interesting is the U.S. is on the cusp of changing leaders — a shift that has many global economies looking for clues to what U.S. economic policies may be in store in the near future.

A clear-cut, decisive strategy to sure up global economies could play very well for the markets, but whether that could be accomplished in less than 48 hours of discussion is unlikely: Read the rest of this entry »

HSH’s latest featured article, “The 1% Solution?,” reports on the latest action by the Federal Reserve and its influence on consumers and the market. As most of you know, the Fed cuts its target for the Fed Funds rate to 1% yesterday:

The Fed’s overnight target rate for the cost of interbank lending of reserves is just that: a target. The actual cost of the money fluctuates both above and below that number as demands for those funds between banks waxes and wanes. These increases and decreases reflect stresses in the marketplace.

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