Tag Archives: Federal Reserve

About 4.2 million eligible borrowers should expect to receive a check ranging from hundreds of dollars to $125,000 in the next few months as part of the new agreement that replaced the Independent Foreclosure Review (IFR), regulators announced during a call Wednesday. Suzanne Killian of the Federal Reserve and Ted Wartell of the OCC explained Rust Consulting, the paying agent, will send the 4.2 million borrowers a postcard notifying them of eligibility at the end of this month, and then additional correspondence and a check should follow in 4-8 weeks.

As the industry prepares to implement the Consumer Financial Protection Bureau's (CFPB) new ability-to-repay rules, Federal Reserve Governor Elizabeth Duke warns new consumer protections may come at a cost to the industry as lower-quality-credit borrowers are precluded from the housing market. As the broader economy continues to improve, household formation will increase, according to Duke, ""but if credit is hard to get, these will be rental rather than owner-occupied households.""

The evidence is clear that the recovery in housing is finally under way, but the question that remains open is whether the positive trends in housing are sustainable, Federal Reserve Board Governor Elizabeth A. Duke said in a speech at the Mortgage Bankers Association's Mid-Winter Housing Finance Conference. In her view, the recovery does appear to be sustainable. ""I do not believe that a flood of houses on the market from households that are currently underwater or from bank REO is likely to materialize or to be sufficient to outpace growing demand,"" she said.

Perhaps the most important piece of economic news in the last few days was not the continued drop in the unemployment rate or the positive blurbs in the Beige Book or even the Dow reaching a new record high, but Thursday's quarterly Flow of Funds report. According to the report for Q4 2012, household assets grew to $79.5 trillion in the fourth quarter, an increase of $1.3 trillion--not too shabby. Household financial assets were up $784 billion to $54.4 billion but home equity (the value of household real estate less loans against that real estate) grew $452.8 billion, the result of two moving parts: real estate values (which increased) and household mortgage liabilities, which dropped.

Mortgage debt for U.S. households was roughly unchanged quarter-over-quarter, according to the Federal Reserve Bank of New York's Household Debt and Credit report. Mortgage debt stood at $8.03 trillion in Q4, making up the largest component of household debt. At the same time, overall consumer debt increased by $31 billion to $11.34 trillion, a slight 0.3 percent increase from the third quarter.

The Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board announced the release of amendments to their enforcement actions against 13 mortgage servicers over mortgage servicing and foreclosure practices. The amendments memorialize foreclosure agreements made between the regulators and 13 servicers. According to the release, 4.2 million borrowers are covered by the amendment and should expect to receive compensation ranging from hundreds of dollars up to $125,000. Rust Consulting, Inc., the paying agent, will contact borrowers by the end of March of this year with payment details.

Federal Reserve Chairman Ben Bernanke underscored benefits of the Fed's quantitative easing policy while also pointing to associated costs and risks in his written testimony to Senators Tuesday. According to Bernanke, the benefits of the purchase and policy accommodation are clear. ""Monetary policy is providing important support to the recovery while keeping inflation close to the FOMC's 2 percent objective. Notably, keeping longer-term interest rates low has helped spark recovery in the housing market and led to increased sales and production of automobiles and other durable goods,"" he said.

With the increase in home and equity prices, Capital Economics suggests net household wealth may be on its way to rising above pre-recession levels later this year, which will lead to a boost to GDP. In a recent report, the firm forecasts the S&P 500 equity price index will end 2013 close to the current level of 1,500 and expects home prices to rise in the neighborhood of 5 percent. In turn, the growth in household wealth, the analytics firms says, could lift GDP by around 0.7 percent.

The percentage of banks reporting stronger demand for mortgage loans dropped in the first quarter from the fourth quarter last year, the Federal Reserve reported Monday and a slightly greater percentage are lending standards. The results in the quarterly Senior Loan Officers Opinion Survey are consistent with anecdotal reports that mortgage loans are becoming easier to obtain. In the case of ""traditional"" mortgage loans, 1.5 percent of respondents reported ""somewhat"" tighter standings, 4.6 percent reported standards easing somewhat, and 1.5 percent reported standards easing considerably.

The act of securitizing mortgage loans can lead to riskier lending, and ultimately more defaults, according to a study posted by the Federal Reserve Bank of New York. About 60 percent of outstanding mortgage debt in the United States is traded in the mortgage-backed securities (MBS) market, ""making the U.S. secondary mortgage market the largest fixed-income market in the world,"" according to Fed researchers. While admitting the MBS market ""is an important innovation and has several merits,"" the study finds a darker side to the market.