Below is a collection of articles, news, and announcements associated with our industry.

Posts Tagged ‘Federal Reserve’

Special Update: Fed to Reduce Bond Purchases

Friday, December 20th, 2013

Anyone watching mortgage rates couldn’t miss the news this week that the Fed will begin to “taper”, or cut back on their purchases of MBS and Treasury bonds.  All eyes are on the impact this will have on interest rates.  Their plan to purchase $10bb less per month signals the Fed’s growing confidence in the economy.  Important to note though is that this means they will still purchase $75bb per month in MBS and treasuries for the time being, which still amounts to considerable economic stimulus. 

Much less publicized, but more immediately significant for interest rates, were two other announcements.  The FHFA announced a .1% increase in the guaranty fee for mortgages delivered to Fannie Mae and Freddie Mac, effective in the spring, which amounts to an automatic .1% increase in interest rates.  Also, Fannie Mae announced new Loan Level Pricing Adjustments (LLPAs) for loans delivered to them, also beginning in the spring.  LLPAs are based on loan characteristics such as credit score, LTV,  loan purpose, occupancy, number of units, product type, etc.  These adjustments will also increase the cost of borrowing for homeowners.  The net effect is that interest rates will likely rise a bit in the near term, so take advantage of current rates while you can.

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Blog Talk Radio Show Summary November 15, 2010: What has Gone Wrong?

Thursday, November 18th, 2010

Mortgage rates have moved higher (mortgage security prices have moved lower) and strangely enough QE2 deserves much of the blame.  The Fed intended for the opposite to happen.  As they purchase their $600 billion in long-term Treasury securities, the Fed expected the added demand would drive prices higher and rates lower, not only for Treasury securities, but for mortgage backed securities as well.  Things have not happened as planned.  The Fed began their Treasury purchases on Friday and  MBS prices fell 27/32nds.  The Fed continued their Treasury purchases today and MBS prices are down another 16/32nds.  So what has gone wrong?

Some of the issue is that MBS prices rose considerably in the weeks preceding the Fed’s announcement that they were going to buy $600 billion of Treasury securities.  The much anticipated announcement had already accomplished much of the expected end result before it even started.  After the announcement, sentiment toward the benefits from the plan shifted.  Investors worldwide began to doubt the Fed’s ability to control rising inflation when it begins.  Foreign investors recalculated their required returns after seeing the value of the dollar fall to recent lows.  Political power in the US shifted from the Democrats to the conservative Republicans and Tea Party members.  And several economic measures announced right around the time of the Fed’s announcement were stronger than expected.  All of this combined to suggest to investors that inflation may heat up and any further quantitative easing plans were unlikely, forcing a sell off in Treasury and mortgage backed securities, resulting in higher long-term interest rates.

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:

Listen to internet radio with David Lykken on Blog Talk Radio

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

Tune in every Monday at 1:00pm(et)  for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending

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Blog Talk Radio Show Summary October 25, 2010: How Much Quantitative Easing (QE II)

Wednesday, October 27th, 2010

 

Have you noticed an extra bit of volatility in MBS prices lately?  Do you know the cause?  Last week we saw mid-day price changes four out of the five days.  Three were favorable, fortunately, and one was unfavorable.  We saw unfavorable price changes Monday afternoon, this week.  There are always several factors weighing in on investors as they decide what they will pay for mortgage-backed securities.   The primary factor right now seems to be the Fed’s plan for more quantitative easing (QE II).  QE II will have the Fed buying Treasury securities, adding liquidity to the market to stimulate lending, to promote economic growth, to reduce the value of the dollar,  to make exported goods cheaper to foreign buyers and to make imported goods cost more, to create higher inflation.  New demand for Treasury securities should improve demand for MBS as well, driving up prices.  Too much QE II could add too much liquidity and reduce the value of the dollar too far, increasing inflation too much and driving up the yield required on MBS, reducing prices.

No longer is there a question of whether the Fed will buy more Treasury securities, but the question is how much and over what period of time.  There seems to be a wide range of answers to this question.  Even within the Fed, there are differing opinions.  One Fed member does not think any additional quantitative easing is needed.  Another thinks they need to shock and awe the market.   A plan promoted by several Fed members would have the Fed announce small amounts of purchases, like $100 billion at a time,  with a plan to reconsider and recalibrate at each next Fed meeting.  Investors have stated they expect anywhere from $500 billion to $1 trillion in Fed purchases.  Each new piece of economic news can cause investors to reconsider their expectations and therefore the price they are willing to pay for MBS. Whatever the answer, some investors are going to be surprised.  The answer is expected to come at the conclusion of the Fed’s next meeting on November 3rd at 2:15 ET. 

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr:

Listen to internet radio with David Lykken on Blog Talk Radio

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

Tune in every Monday at 1:00pm(et)  for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending

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Blog Talk Radio Show Summary August 16, 2010: Online Mortgage Industry Resource

Friday, August 20th, 2010

Lykken-on-Lending (LoL) has partnered with HousingMatrix, an online resource of information for the housing industry.  HousingMatrix now hosts the  LoL  library of the most recent recorded program as well as all prior programs.  HousingMatrix is a site you should explore if you have not been there before.  If the information you seek has to do with housing, you will find it at HousingMatrix.

Mortgage rates have continued their move lower this week, reaching a new low this morning.  Last Tuesday’s Fed announcement helped push mortgage rates lower and then the announcement on Friday that July’s inflation remains very low helped as well.  The Fed announced that they were keeping the Fed Funds rate between .25% and 0% and that they expect to keep it at this very low level for an extended period of time.  This was as expected.  What was a bit of a surprise was that they expressed a concern that the pace of the economic recovery was slowing and they announced a new policy to add a little stimulus to the economy.  The new policy deals with what they will do with the cash the Fed receives from payments on their portfolio of Treasury and mortgage-backed securities.  Until now the Fed has been taking the payoff proceeds out of circulation.  Now they will use the money to buy new long-term Treasury securities. 

Listen to internet radio with David Lykken on Blog Talk Radio

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

Tune in every Monday at 1:00pm(et)  for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending.

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More Fed MBS Purchases?

Monday, August 9th, 2010

A couple of months ago, Fed Chief Bernanke was answering questions about the Fed’s plan to sell its MBS portfolio. He stated that the Fed would eventually return its balance sheet to normal by selling the $1.25 trillion in MBS it had bought to stimulate the economy, but that it would not take place soon. While some Fed officials were pushing for a faster start date, investors believed that the MBS sales were likely to begin early in 2011. As the economic outlook has grown weaker, however, the Fed’s likely plans have changed. Rather than discussing a start date for Fed tightening moves, Fed officials are now outlining options and conditions for adding further monetary stimulus.

In particular, the Fed had been planning to allow the MBS in its portfolio to mature without replacing them. Due to defaults, refinancings, and maturities, some MBS “roll off” the Fed’s portfolio over time. Until recently, investors expected the Fed to let its portfolio slowly shrink in this fashion, which would represent a minor amount of monetary tightening. Tuesday, though, a Wall Street Journal article suggested that Fed officials are considering whether to replace those securities to stimulate the economy. With the next Fed meeting scheduled for August 10, investors will be very alert for signs of change. According to a CNBC report ,  Fed officials are unlikely to announce a major policy shift at the August 10 meeting. Instead, they are expected to wait and see how the economy performs.

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

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BlogTalkRadio Podcast – June 14, 2010

Thursday, June 17th, 2010

Stock Market VolatilityThis week on BlogTalkRadio/Lykken-on-Lending:

What drives mortgage rates?  Inflation and uncertainty.  Inflation is not present right now and according to the majority of the Federal Open Market Committee members it is not expected to be much of a concern for the near future.  Uncertainty, though, is alive and well.  Continuation of the recent economic improvement in the US is considered anything but certain.  Global economic growth has been a question mark.  The ability of several European nations to satisfy their debt obligations is uncertain.  This uncertainty has resulted in tremendous volatility in the stock market, which has caused tremendous volatility in mortgage-backed securities prices. Daily, global headlines suggest to  investors its time to shift assets to more or less risky investments.  That is what happened last week.  After reaching the highest level of the year, mortgage-backed security prices were beat down on Thursday based on headlines from Australia, China, and Europe, all which suggested improving economic conditions.  Investors sold low risk bonds and bought higher risk stocks.  The Dow gained 270 points.  MBS prices lost 25/32nds.   This pattern has been in place now since April when the European debt crisis raised its ugly head.  Look for volatility in mortgage-backed security prices; and therefore, mortgage rates to remain high as long as the economic outlook remains so uncertain.

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :

Listen to internet radio with David Lykken on Blog Talk Radio

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

Tune in every Monday at 1:00pm(et)  for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending

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BlogTalkRadio Podcast – May 24, 2010

Tuesday, May 25th, 2010

BlogTalkRadio SummaryMortgage rates made a nice move lower last week.  In fact, they have moved lower each of the last four weeks, to the lowest level of the year.  Many of us thought mortgage rates would head higher after the Fed stopped buying mortgage-backed securities (MBS) at the end of March.  Mortgage rates did move higher just prior to and just after March 31st,   but new circumstances entered the market in April.   Uncertainty has pushed investors out of riskier assets like stocks (the Dow is well off its recent highs) and into less risky assets like government insured MBS.  Several things are contributing to this uncertainty.  The European debt crisis and a tightening monetary policy in China have made investors very uncertain about future economic growth in the US.   In addition, the passage by the Senate of a financial reform bill has many investors questioning how freely banks will make capital available to US businesses to finance their expansion.  This uncertainty combined with very low inflation rates have made MBS an attractive alternative.

Dave Lykken hosted today’s show from the exhibit floor of the MBAs National Secondary Market and Expo.  He reported that the conference was well attended and the mood was generally upbeat.  Senate Bill 3217 was the topic of conversation at the conference.  Attendees were pleased by the amendment to the risk retention provisions of the original bill.  There was almost unanimous belief that the provisions of the bill restricting how loan officers are compensated will become law without significant revision.

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :

MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. For additional information or to sign up for a free 2-week trial subscription, visit www.MBSQuoteline.com or call (800) 627-1107.

Tune in every Monday at 1:00pm(et)  for up-to-the-minute information on interest rates, loan programs and “hot” industry news related to the mortgage industry. Dial: (646) 716-4972 or log in at: www.blogtalkradio.com/lykken-on-lending

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Increased Fed Support for MBS Sales

Friday, April 23rd, 2010

Friday morning, CNBC reported that support is growing among Fed officials to begin sales of mortgage-backed securities (MBS) from the Fed’s portfolio. In a program which ended March 31, the Fed purchased $1.25 trillion of MBS to help lower mortgage rates and boost the economy. According to CNBC, “at least” six members of the Fed’s policymaking committee support near-term MBS sales if the economy continues to improve. The selling could begin as soon as the third or fourth quarter of this year. Fed Chief Bernanke still views the likely time frame to begin MBS sales as next year, but his recent comments have indicated a willingness to keep more options open. With the next Fed meeting taking place on Wednesday, the 2:15 et release of its statement will take on added significance. If the Fed actually conveys an intention to begin to sell MBS soon, mortgage rates would be likely to rise on the news.

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BlogTalkRadio Podcast – Apr 19, 2010

Thursday, April 22nd, 2010

MBS prices are down 3/32nds this morning.  Leading Indicators were released at 10:00 a.m. et and were a little stronger than expected.  Last week was another good week for mortgage rates.  Mortgage rates fell about 10 basis points during the week.  The Fed Beige Book painted a pretty picture for mortgage rates, slow growth and low inflation.  CPI confirmed the low inflation part as it reported prices in March rose at a 1.1% annual rate.  Volatility continued during the week.  Volatility has persisted since the end of the MBS purchase program on March 31st.  As the Fed is no longer a consistent big buyer, the market is functioning more naturally and that includes reacting more significantly to economic announcements and changing sentiment.

Mitch Kider, of Weiner Brodsky Sidman Kider PC, joined the show to discuss the result of a recent Department of Labor ruling which changes an interpretation of labor laws as it relates to loan originators (LOs) and overtime.  The new ruling overrides previous rulings that allowed LOs to be exempt from overtime as they were considered to be performing administrative duties.  Now their duties are not considered administrative and the labor laws says, if they do not meet the definition of an outside salesman, they should receive overtime.  This raises many questions.  Do LOs need to begin to fill out time sheets?  When are LOs not working? Aren’t they selling all the time?  How do you measure the amount of overtime to pay?  How far back do companies need to go to determine if overtime is due?  Mitch will join the show again next week (Monday @ 12:00 p.m.) to answer these an other questions on this subject.

We would like to hear from you.  Has your company already begun to pay LOs overtime?  Do LOs really want to work stated hours and document their time?

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :

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BlogTalkRadio Podcast – Apr 12, 2010

Thursday, April 22nd, 2010

MBS prices are up nicely this morning, up 9/32nds.  No economic data was released this morning.  The Dow is also up.  It is above 11,000 for the first time in 18 months.

Last week was a great week for the mortgage market.  MBS prices improved about 24/32nds during the week.  Most of the improvement followed a very strong 10 yr Treasury auction.  Strong demand and foreign participation fueled a rally in Treasury prices, which spilled over to MBS prices.  Also kind to MBS prices during the week were the minutes from the 3/16 Fed meeting.  The minutes showed that the Fed was nearly unanimous in their belief that Fed funds rates need to stay very low for an extended time and that inflation was not a concern.   Next week will be full of significant economic announcements.  On Wednesday both CPI and Retail Sales for March will be released and on Thursday Industrial Production will be released.

Glen Corso, Executive Director of the Community Mortgage Banking Project, joined the show to discuss further the need to voice concerns about the 5% risk retention provisions in the current Financial Reform bill before the Senate.  Glen described that passage of the bill with this provision in its current form will be detrimental to community mortgage bankers and their customers.  Glen proposed a revision to the bill to exempt from the retention provisions soundly underwritten loans.  The Bill is expected to be voted on by the full Senate in late April and Glen encouraged all the listeners to contact their Senators.

Andy Schell, a CPA and a CMB, joined the show to discuss the importance of quality loan level accounting systems and reports.  Too many mortgage bankers have no way of knowing which of their loans make them money and which cost them money.

Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline’s Joe Farr :

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