As is often the case during the summer, there really was not a great amount of big news in the financial and mortgage world this last week. Markets remained relatively quiet and rates steady. There were some lesser highlights:
A story in the Wall Street Journal quotes sources in the Federal Reserve as stating that a major policy shift may be coming soon. At the end of the first quarter of this year, the Fed enacted their decision to stop buying Mortgage Backed Securities (MBS). The decision was seen, at the time, as an indication that the Fed was pulling back on putting money into the economy as the recovery was starting to take hold. In addition, the decision was seen as a catalyst for rates to start rising. Rates have not followed suit and are still at their lowest levels in history. And the recovery, while continuing, is not as strong as economists would like it to be. The resumption of the Federal Reserve in relation to MBS purchases would seem to indicate that they are not convinced that the recovery is completely solid. The purchases are different from those in the past however. The Fed would only buy new securities as old ones expire. There would be no “new” money in the purchases but rather a maintaining of the current levels.
Attention is now starting to focus on the implementation of the recent financial reform actions. The government has until September 19, 2010 to determine when key legal and regulatory authorities shift from such agencies as the Federal Trade Commission, the Department of Housing and Urban Development and the Fed to the new Consumer Financial Protection Bureau. The official “bureau” must be up and running by early January, 2011 and will be funded with an initial $500 million price tag. All in all, the implementation of the law will be at issue over the coming months.
There is some satisfaction over the new rules as they replace the current Home Valuation Code of Conduct. The current HVCC has been universally criticized by lenders, appraisers and consumers alike as making the appraisal and home buying process too difficult and more expensive. That excitement is tempered by the fact that the new regulation will insure that some of the parts of the HVCC will stay in place. The prevalence of appraisal management companies will continue. In addition, much of the current risk management for collateral assessment is going to remain in place. Appraisals are going to continue to receive periodic review and extensive scrutiny.
It is beginning to look more and more like any major shifts in business investment and hiring is going to be waiting until after the November elections. U.S. businesses currently have some $3 trillion in cash reserves waiting on the sideline. It’s those funds that can help to invest in real estate or other assets and hire new workers. It would be great if those funds came back into the market sooner, but it does not appear that will happen.
The markets were relatively quiet and stable last week. Rates fell slightly last week settling at a new “record” low. That said, there continues to be pressure on rates. Don’t wait on rates to go lower as they probably won’t be!
