Mortgage rates stabilized last week, ending their multiple-week run of increases, according to the latest issue of HSH’s Market Trends Newsletter (emphasis added):
The turn of the calendar put an end to a weeks-long rise in mortgage rates. As the holiday period falls behind us and we return to more normal market activity, it’s not unusual to see a change in direction for mortgage rates.
In the days ahead, will the private Mortgage-Backed Securities (MBS) market cease to exist? Will loan modifications wind up destroying the long-standing playing field between lenders and second lien holders? Will the Fed ever be able to exit the mortgage market?
These questions have all come to mind because of unintended consequences brought on by the Making Home Affordable Modifications program. The program that was structured to assist failing homeowners has managed to create a host of uncertainties in its wake. A recent editorial in the Wall Street Journal wonders if the MBS market will be next.
According to National Mortgage News (NMN), the White House is still “mum” on whether or not lawmakers will vote to extend or expand the $8,000 first-time homebuyer tax credit.
If you’re still unsure about taking advantage of the credit, the clock is ticking. All the way back in August we warned borrowers that, with the November 30 deadline fast approaching, they needed to act A.S.A.P. “The mortgage process usually takes anywhere between 45 and 60 days,” advises HSH VP Keith Gumbinger.”
Over the last two days White House Press Secretary Robert Gibbs has addressed reporters’ questions regarding the credit’s extension. Yesterday, Gibbs confirmed that a decision hasn’t yet been made, and, according to NMN, Gibbs had the same to say during this morning’s briefing.
Minutes ago, the Federal Open Market Committee (FOMC) released a statement following their two-day meeting, which solidified most of, if not all, analysts’ expectations.
MBS/Debt Purchases Extended
Perhaps the biggest development was that the Fed announced that they will ease their purchases of mortgage-backed securities and agency debt by the end of the first quarter of 2010, not by year’s end as previously stated. Conforming rates should remain low for a while yet, but the Fed’s reduced demand might serve to nudge rates up. The decision to push their exit strategy back signals that private markets may not quite be ready to operate on their own by December.
The release following the conclusion the Fed’s Federal Open Market Committee (FOMC) meeting today revealed the Fed’s plans to begin winding down one of their many facilities (emphasis added):
…the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.
According to the latest issue of HSH’s Market Trends Newsletter, “The Fed, and Record Rates (again),” the conclusion of the Fed’s two-day FOMC meeting sent conforming mortgage rates down once again to historically-low levels.
“Without usual policy tools at its disposal, the Fed again weighed heavily into mortgage and bond markets. At the close of its meeting Wednesday, The Fed announced an extension of its plan to buy up Fannie and Freddie-issued debt and mortgage-backed securities offered by the GSEs as well as Ginnie Mae (FHA-backed product) and detailed a long-rumored plan to start purchasing certain Treasury securities.”
Dare I say it’s not the bank’s fault? According to RealtyTrac.com, lenders are taking over delinquent properties at double the normal rate. The point is, banks are becoming flooded with more loan modifications than they can effectively handle. In most cases, banks no longer “own” the loan having sold it the investor; the investor owns the mortgage, while the bank or other entity merely services the loan — collecting monthly payments, communicating with the investor, etc.
The non-profit organization HOPE NOW says they have helped prevent nearly 2.5 million foreclosures since July 2007; but critics say that isn’t enough to keep up with the problem. So why are banks struggling at an even slower pace to combat the mass rise in foreclosures?
HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.
