Mortgage News in the Carolinas
Geoff Brown
This user hasn't shared any profile information
Posts by Geoff Brown
A Simple Explanation Of The Federal Reserve Statement (March 13, 2012)
067 days
by Geoff Brown
in Federal Reserve
Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
For the fourth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote.
The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.
In its press release, the Federal Reserve noted that the the U.S. economy has “expanded moderately” since the FOMC’s January 2012 meeting, adding that growth is occurring despite “strains in the global financial markets” that pose “significant downside risks” to long-term outlooks.
The Federal Reserve now expects moderate economic expansion through the next few quarters and a gradual easing in the national Unemployment Rate.
The Fed also noted that :
- The housing sector remains “depressed”
- Labor conditions have “improved further”
- Household spending has “continued to advance”
With respect to inflation, the Fed said that rising oil and gasoline prices will “push up” inflation temporarily, but not over the long-term.
At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at “exceptionally low” levels through late-2014, and to buy mortgage-backed bonds in the open market.
Immediately following the FOMC’s statement, mortgage markets worsened slightly, pressuring mortgage rates higher in and around Charlotte.
The FOMC’s next scheduled meeting is a two-day event slated for April 24-25, 2012.
The Fed Meets Today : Protecting Your Housing Payment
068 days
by Geoff Brown
in Federal Reserve
The Federal Open Market Committee meets today, its second of 8 scheduled meetings this year. As a home buyer or would-be refinancing household , get ready for changing mortgage rates.
The Federal Open Market Committee is the 12-person sub-committee within the Federal Reserve that votes on the nation’s monetary policy. Led by Federal Reserve Chairman Ben Bernanke, the FOMC’s most prominent role is as steward for the Fed Funds Rate.
The Fed has said repeatedly that it intends to keep the Fed Funds Rate near 0.000 for an “extended period of time”, through 2014 at least.
Unfortunately, this doesn’t mean that Charlotte mortgage rates will remain low as well. Mortgage rates are not set by the Federal Open Market Committee. Mortgage rates are set by Wall Street.
As proof that the Fed Funds Rate is distinct from mortgage rates, consider that, since 2000, the difference between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate has been as wide as 5.25% and as narrow at 0.50%.
If the Fed Funds Rate was tied to mortgage rates, the chart at right would be linear.
That said, the FOMC can influence mortgage rates.
After its meetings, the FOMC issues a standard press release to the public which reflects the group’s overall economic outlook. When the FOMC statement is generally “positive”, mortgage rates tend to rise in response. This is because investors often assume more risk in an improving economy and this can harm bond market prices — including those for mortgage-backed bonds.
Conversely, when the Fed is generally negative in its statement, mortgage rates can improve.
Since the FOMC’s last meeting, there has been little about which to be negative with the U.S. economy. Housing and manufacturing are improving; employment is higher; and global markets are regaining their respective footing. The Fed may make note of it. Or, it may not.
Regardless, mortgage rates are expected to move so consider locking your mortgage rate ahead of today’s 2:15 PM ET statement.
There too much risk in floating.
FHA Drops Upfront Mortgage Insurance Premium To 0.01% For Qualified Borrowers
072 days
The FHA is making more changes to its flagship FHA Streamline Refinance program.
Beginning mid-June 2012, certain current, FHA-backed homeowners will be able to refinance their existing FHA mortgage into a new one, without having to pay the government-backed group’s new, costly mortgage insurance premium schedule.
Earlier this week, the FHA rolled out its new MIP schedule.
Beginning April 9, 2012, new FHA mortgages are subject to a 1.75% upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium of up to 1.25% for loan sizes up to, and including, $625,500; or 1.60% for loan sizes exceeding $625,500.
Upfront MIP is typically added to the loan size as a lump sum. Annual MIP is paid via 12 monthly installments. Both add to the long-term costs of homeownership.
However, the FHA’s new MIP schedules will not apply to all FHA-backed homeowners equally. Homeowners whose FHA mortgages were endorsed prior to June 1, 2009 will benefit from a different, less costly MIP schedule.
For these homeowners in search of a streamline, the MIP schedule is as follows :
- Upfront MIP : 0.01% of the loan size
- Annual MIP : 0.55% of the loan size, with no adjuster for loan sizes over $625,500
The new schedule is detailed in FHA Mortgagee Letter 12-04 and it lowers the cost of FHA Streamline Refinancing for long-time, FHA-backed households in Carolinas and nationwide to almost nothing.
As a real-life example, an FHA-backed homeowner whose $100,000 mortgage dates to 2008 could refinance via the FHA Streamline Refinance program and pay just $10 in upfront MIP, with a corresponding annual MIP payment of just $550, or $45.83 monthly.
By comparison, every other FHA-backed homeowner with a $100,000 mortgage pays $1,750 in UFMIP and as much as $1,600 in annual MIP.
The new streamline refinance MIP schedule is in effect for FHA mortgage applications with case numbers assigned on, or after, June 11, 2012. It is not available for loan applications made prior to that date.
There are lots of dates and deadlines in the FHA’s new streamline program. If you’re too early — or too late — you could miss your optimal refinance window. Talk with your loan officer, therefore, and put a plan in place. You’ll be glad to be prepared.
Mortgage Rates Expected To Rise On A Strong Job Report
073 days
by Geoff Brown
in The Economy
With home affordability at an all-time high, buoyed by the lowest mortgage rates ever, it’s been a terrific time to buy or refinance a home using a mortgage.
The good times may not last, though, so today marks an ideal time to lock a mortgage rate. Friday brings risk. Here’s why.
Since 2010, weak economic conditions have been a primary catalyst for low mortgage rates in Carolinas. Over the last 12 months, though, manufacturing output has been rising, consumer spending has been climbing, and business investment has increasing.
In other words, the economy is improving. However, it’s the jobs market that’s believed to be the economic recovery keystone. When jobs come back, analysts say, so does the economy.
Assuming that’s true, a recovery may already be well underway.
According to the Bureau of Labor Statistics, the U.S. jobs market has grown for 16 straight months now, adding 2.5 million net new jobs along the way. It’s one reason why the February jobs report matters so much to housing.
Rate shoppers would do well to pay attention.
Friday, at 8:30 AM ET, the government will release its Non-Farm Payrolls report for February. Wall Street expects the report to show 210,000 new jobs were created in February, a figure slightly higher than the rolling, 6-month average for job growth. This would be a positive economic indicator.
If the analysts are correct, mortgage rates are likely to rise on the news, harming home affordability.
Furthermore, affordability could be harmed by a lot if the number of net new jobs created exceeds the 210,000 tally expected. It’s not a far-fetched scenario. Wall Street’s “whispers” put the actual jobs figure somewhere between 250,000-300,000. A reading lije this would cause mortgage rates to spike and would add money to a prospective monthly mortgage payment.
If the idea of rising mortgage rates makes you nervous, consider taking your nerves out of the equation. Call your loan officer today. Lock your rate ahead of Friday’s Non-Farm Payrolls release.
