Fed Plans to Buy Up Long-Term U.
Watch out as Rates are about to drop!!!! Turntimes continue to stink at the large lenders though. Chase Subordinations are at an 8 week turnaround time. The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months…
Watch out as Rates are about to drop!!!!
Turntimes continue to stink at the large lenders though.
Chase Subordinations are at an 8 week turnaround time.
The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.
CNBC.com
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In a statement at the end of a two-day meeting, the central bank’s policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range —the level reached in December.
It said rates would stay low for “an extended period,” a more explicit vow to stay on hold for a prolonged time.
“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability,” the Fed said.
Prices for U.S. government bonds shot higher and U.S. stocks jumped on the move, with the blue chip Dow Jones industrial average moving into positive territory. The dollar fell sharply.
“This is a pretty dramatic move … They are trying to bring down all consumer rates,” said James Caron, head of global rates research at Morgan Stanley in New York.
In addition to the purchases of U.S. Treasury debt, the Fed said it would expand an already existing program to buy debt and securities issued by the government-backed mortgage finance agencies.
It said it would expand those purchases by a combined $850 billion to a total of $1.45 trillion this year.
The program has already been effective in lowering U.S. mortgage rates.
“Bottom line is the Fed is adding a trillion dollars to their balance sheet and that’s a lot of taxpayer money,” said Greg Salvaggio, vice president for trading at Tempus Consulting in Washington.
With benchmark rates virtually at zero, the Fed has turned its focus to pumping money into stressed credit markets in the hope of restarting lending and restoring growth — a policy Fed chief Ben Bernanke has dubbed “credit easing.”
Bernanke on Sunday said repairing the tattered financial system was necessary to secure a recovery for the U.S. economy, which has been stuck in recession for more than a year.
The Fed this week began taking bids for a program designed to spur student, auto, credit card and small business lending, and it said Wednesday it would consider expanding that program to cover a wider array of assets.
The consumer and small business credit program will initially aim to inject $200 billion into the market for securities backed by these loans, but the Fed has already said that program could be ramped up to $1 trillion.
Wow, this is crazy but really gives us some convenient breathing room on finding a low-priced place. Until, of course, the US defaults under its ever-increasing staggering load of debt. This is madness. But nice for us personally in the short run.
Thanks for posting, Adam.
Thanks Adam, helpful as usual…
Yes, you can refi just the first and SUBORDINATE the 2nd loan. Thye usually charge a small fee depending on the holder of the 2nd lien aprox $250 upfront. Turn tiems are very slow to do this so I’ve been advising clients that are subordinating to float their locks.
If you have a CHASE 2nd they are at 8 week turntime to get to your file. THATS RIGHT 8 WEEKS!!!
I have a few files with them that are taking forever. We are all done just sitting watching the rates while Chase takes their sweet time. They are working on files that they received Jan 9th. Do you believe that?
Starting April 1st CLTV restrictions will be lifted under the REFI PLUS program or as I call it the OBAMA REFI. It will allow you to refi up to 105% on the first lien. Not sure how the 2nd lien holders are going to handle this yet as it could put them into 120% positions, making them worthless.
We get new information everyday, they keep chnaging the game and we are in a “wait and see” mode right now.
I’ll do my best to update the community when I hear more.
Adam Dahill
Adam,
wondering if a Home Equity Loan counts toward the LTV ratio? I have a 30 year fixed that I want to refi, but I also have a fixed home equity loan. Combined they are probably 85% LTV. Seperate the 30 year is probably 80%. Do you think is possible to refi the 30 year fixed?
Thanks!
I locked numerous loans today. Rates are the lowest I have seen since the 2 hour window of opportunity that we had in Dec.
4.5% is possible today for the highest ficos and LTV below 60% on a 1 unit property with a loan amount over 300k by buying down the rate a tad.
4.625%-4.75% no points for 1 unit rate and term on SFR over 300k with a 780 score on LOW LTVs
Remember 2-4 units are penalized 1pt to the price of the loan so those rates are around 5% with no points.
Adam Dahill
adahill@approvedfunding.com
We are at 4 day turntime for loan approvals from submission. If you are not doing a CEMA or Subordination loans are closing in 2.5 – 3 weeks.
How low do you think rates could go, Adam?
Do you think 4.5% is at all in the realm of possibility for someone with a 30 year fixed (not jumbo) with over 800 Fico?
Thank you slopenick! What a clear and gentle answer. I really appreciate it (and feel smarter already). 🙂
amyb, its simple supply and demand: “The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.”
The govt. is buying Treasury bonds, which are held by banks and other investors, with cash. So, as the bonds are sold/bought, the banks have more cash on hand (and fewer interest earning assets). Cash on hand doesn’t earn any return until it is lent out, so this will encourage the banks to lend. As you increase incentives for lending, you will also increase competition among lenders, and that typically serves to drive down lending rates. The government wants lower lending rates to stimulate home buying and encourage/enable lenders to make loans and borrowers to take/afford them. The reason they are taking this step is that their benchmark lending rate – the rate at which banks lend to each other – has already been cut close to 0%, so there is no room to stimulate lending by cutting it (i.e. managing the money supply such that its target rate is achieved) any further.
Could someone more knowledgable than me explain how this will make the rates drop (and which rates)? I don’t mean that sarcastically, I’d really like to understand. Thanks!