Tag Archives: Federal Reserve

A survey of senior loan officers released by the Federal Reserve shows lending standards were mostly unchanged, but demand for residential real estate loans was strengthened. The October survey asked 68 domestic banks and 23 U.S. branches of foreign institutions about the lending standards and loan demand they've dealt with over the past three months. When asked about credit standards for prime mortgages, 59 out of 64 respondents said standards were largely the same. While 34 banks said demand for prime purchase mortgages was about the same, 21 reported ""moderately stronger"" demand, and four said demand was ""substantially stronger"" since July.

As the Federal Reserve launches its QE3 monetary policy, some interpret the plan as a sign Fed Chairman Ben Bernanke has ""gone 'all in' on the U.S. housing market"" and is clinging to hope the housing market can not only recover itself, but also restore the entire U.S. economy. This, at least, is the outlook of Global Markets Intelligence (GMI) Research. The research firm suggests the Fed is turning to the housing market ""as the last, best hope"" for strengthening the overall economy and restoring ""healthy self-sustained economic growth.""

Pointing to slow employment growth and an ""elevated"" unemployment rate, the Federal Open Market Committee said Wednesday the Federal Reserve ""will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month."" At the same time, the FOMC said it would maintain the target federal funds rate at 0 to 1/4 percent and said the ""exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.""

The authenticity of this year's recovery may still be in question, but according to Freddie Mac's Economic and Housing Market Outlook for October, the housing sector is showing strength unmatched in previous years. Over the past several years, housing has either hurt or done little to help GDP. ""However, now we're seeing housing resuming its traditional role of leading the recovery charge and once again being the bright spot in the economy,"" said Frank Nothaft, VP and chief economist for Freddie Mac.

Rep. Barney Frank (D-Massachusetts) is stepping up and speaking out in defense of JPMorgan Chase, calling the U.S. government's lawsuit against the financial institution a case of ""no good deed goes unpunished."" New York Attorney General Eric Schneiderman filed a suit against JPMorgan on October 1 for the alleged misconduct of Bear Stearns & Co. prior to JPMorgan's acquisition of the failing investment bank, and Frank says he has first-hand knowledge that federal officials urged JPMorgan to ""do a good deed"" by taking over an institution which JPMorgan would never have sought to acquire absent that urging.

The Federal Reserve's recently-announced commitment to keep interest rates low until 2015 isn't doing much to persuade consumers to borrow, according to Bankrate's Financial Security Index for October. Seventy-four percent of consumers said they are not interested in taking on debt, while 23 percent said they are more inclined to borrow. Three percent said they did not know. While the Fed's announcement was intended to stimulate economic activity, it may have had the opposite effect, one expert told Bankrate.

Fannie Mae's Economic & Strategic Research Group expects economic growth to ""remain at a sluggish sub-2 percent rate this year."" While the outlook on the economy was uncertain, the assessment for the housing market was more stable. Despite an anticipated dip in home prices for the winter season, the research group maintains the viewpoint that prices hit bottom earlier this year. In addition to the bottoming out of prices, the GSE's research group said record low mortgage rates should encourage more consumers to enter the housing market.

The nation's economy generally expanded modestly from mid-August until the end of September, the Federal Reserve said in its periodic Beige Book report issued Wednesday. The report, the last Beige Book to be issued prior to Election Day, painted a mixed regional picture, with a leveling off of economic activity in New York and a slowing in the pace of growth in Kansas City. Residential real estate proved to be a bright spot amid an otherwise pedestrian report.

Both existing and new home sales are on the rise, but no amount of improvement in the housing sector will bring relief to the overall economy, which continues to struggle, according to Capital Economics. Economists at Capital Economics suggest the Fed's launch of QE3 may bring the 30-year fixed rate mortgage rate even lower. While this may entice more home buyers, ""the bottom line is that housing is unlikely to become a significant driver of GDP growth,"" Capital Economics states.

It's unknown whether or not the Federal Reserve's new stimulus will be able to whip the economy back into shape, but one thing's for sure: It's sent mortgage rates plummeting. Freddie Mac's Primary Mortgage Market Survey showed new record lows in all categories except the 5-year adjustable-rate mortgage (ARM).