Mortgage News in the Carolinas
Posts tagged Federal Reserve
After A Pause, Mortgage Guidelines Resume Tightening
0255 days
Mortgage guidelines appear to be tightening with the nation’s largest banks.
In its quarterly survey to senior loan officers nationwide, the Federal Reserve uncovered that a small, but growing, portion of its member banks is making mortgage approvals more scarce for “prime” borrowers.
A prime borrower is described as one with a well-documented payment history, high credit scores, and a low monthly debt-to-income ratio.
Of the 53 responding “big banks”, 3 reported that mortgage guidelines “tightened somewhat” last quarter. This is a tick higher as compared to prior quarters in which only 2 banks did.
46 banks reported guidelines unchanged from Q1 2011.
When mortgage guidelines tighten, it adds new hurdles for would-be home buyers in Charlotte. Tighter lending standards means fewer approvals, and that can retard home sales across a region.
Just don’t confuse “tighter standards” with “oppressive standards”.
While it is more difficult to get approved for a purchase home loan in 2011 as compared to 2006, the same basic rules apply:
- Show that you have a history of paying your bills on time
- Show that your income is sufficient to cover your obligations
- Show that you can make a downpayment
And the good news is that, once approved, you’ll benefit from some of lowest mortgage rates in history.
Last week, the average 30-year fixed mortgage was below 4.250% for buyers willing to pay points, and the average 5-year ARM was below 3.000%. The 15-year fixed rate loan was similarly low.
For as long as delinquency rates remain high, expect mortgage guidelines to continue to tighten through the rest of 2011 and into 2012. Therefore, if you’re a “fringe” borrower looking at a purchase in the fall or winter season, consider moving up your time frame. Changing guidelines may render you ineligible for a mortgage.
Geopolitics Have Mortgage Rates Poised To Change
0383 days
by Geoff Brown
in Mortgage Rates
Among the most challenging aspects of shopping for a mortgage is how rates change constantly. It’s hard to pin them down.
For example, in 2011, mortgage rates have expired every 3-and-a-half hours, on average. That’s fast.
There’s two main catalysts for changing mortgage rates.
The first can be grouped as ”scheduled events”; the planned release of market data which includes the Existing Home Sales report, or a scheduled government statement such as when the Federal Open Market Committee meets. When the outcomes of these event-types either exceed, or fall short, of Wall Street’s expectations, mortgage markets react.
Home buyers and rate shoppers in Charlotte realize this as higher (or lower) mortgage rates.
Then there’s the other type of catalyst — the “unscheduled event”.
Unscheduled events take many forms and are often called “surprise developments”. The Federal Reserve’s plan to inject $750 billion into mortgage markets in 2009 was one such surprise. Most geopolitical events fall into this category, too.
Unscheduled events are often unsettling to Wall Street because investors don’t have specific contingency plans for them like they would if, say, this month’s jobs report comes back exceedingly strong. For example, investors didn’t expect North Korea to fire missiles over Japan in 2008, nor did they expect a volcano to erupt in Iceland last spring.
When unscheduled, unexpected events occur, the market’s first — and natural — reaction is to scramble to make sense of it. Mortgage rates get jostled as a result and can take days to settle back to normal.
We’re experiencing an “unexpected event” right now.
In response to Sunday’s evening’s presidential address, markets are now upended. The dollar is strengthening, oil prices are falling, and stock markets are rising. Each of these items are altering mortgage rates across Carolinas.
Even today, markets remain unsettled.
Therefore, if you’re shopping for a mortgage rate, keep one eye on the news and the other on the rate-lock trigger. During periods of unexpected activity, mortgage rates can change quickly so be ready to shop, and be ready to lock.
Mortgage markets wait for no one.
Your Mortgage Rate Strategy For Today’s FOMC Meeting
0432 days
by Geoff Brown
in FOMC
The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.
The FOMC’s official schedule calls for 8 meetings annually at which it reviews the nation’s economic and financial conditions, and chooses whether to change existing monetary policy.
The group’s last rendez-vous was a 2-day affair, January 25-26, 2011.
Today’s FOMC meeting represents a bona fide risk to home buyers and rate shoppers in Charlotte and across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability.
Rate shoppers learned this the hard way after the FOMC’s last meeting.
In January, Wall Street deemed the Fed’s status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.
This may happen again beginning today.
At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn’t mean mortgage rates will idle, however.
Depending on the verbiage of the Fed’s statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET — just to be safe.
Once the Fed adjourns, you’re at the market’s mercy.
Fed Minutes Show Lower Unemployment And Higher Growth For 2011 and 2012
0457 days
by Geoff Brown
in FOMC
The Federal Reserve released its January 25-26, 2011 meeting minutes Wednesday afternoon. Carolinas mortgage rates have been in flux since.
Fed Minutes are comprehensive recaps of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our nation’s monetary policy. As such, they’re released 8 times annually; 3 weeks after the most recent FOMC meeting.
Fed Minutes can be viewed as the unabridged version of the succinct, more well-known “Fed Statement” that’s released to markets immediately post-adjournment.
Just how much more lengthy are Fed Minutes?
- The January 25-26, 2011 statement contains 395 words
- The January 25-26, 2011 meeting minutes contains 6,916 words
If the Fed Statement is an executive summary, the Fed Minutes is a novel. And, the extra words matter.
When the Federal Reserve publishes its minutes, it’s offering clues about the group’s next policy-making steps. As an example, in the January minutes, the Fed improved its outlook for economic growth; lowered its projections for the Unemployment Rate; and removed its concern for deflation.
In addition, the Fed discussed the potential for food-and-energy-cost-induced inflation, but labeled it as a minor economic risk at this point in time.
Bond markets are mixed on the text of the Fed Minutes.
Although the Fed indicates a willingness to allow inflation to occur, it appears ready to act in case inflation goes too high. One way that the Fed responds to rising inflation is to raise the Fed Funds Rate and many economists believe this will start happening by late-2011 or early-2012.
