The Fed Speaks

In response to our protracted recession and financial crisis, we have experienced a long period of fiscal stimulus from the Federal Reserve Board. In a typical cycle we focus on the Fed’s actions with regard to rates. However, during this cycle their activity has extended far beyond traditional stimulus. Certainly, keeping short term rates near zero for over a year has been very significant. Remember at the beginning of the crisis we were focusing upon subprime loans and the lurking danger of rate increases because of rising adjustables. However, with most adjustable rate indices at or less than 1.0%, this threat became secondary to many other issues within the housing sector.

The Fed has supplied hundreds of billions of dollars in stimulus to help stabilize the economy. Paramount has been their purchases of Treasuries and mortgage-backed securities (MBS). The Treasury purchase program has winded down and now the Fed says that they are on track to end the MBS purchase program at the end of this quarter. These actions have been significant in their efforts to keep long-term rates low to facilitate the recovery, especially in the housing sector. Now that the economy has stabilized and it looks like the recovery is beginning, the Fed is returning fiscal policies to normal, slowly but surely. Of course, the next action would be an increase in rates and the speculation has started in this regard, despite the fact that the Fed has indicated that rates will remain low for an "extended" period of time. The Fed also has indicated that because the recovery is expected to be fragile, they remain ready to reintroduce the fiscal stimulus if needed. The more immediate question is, how much will home loan rates rise when the Fed stops purchasing securities? This will be a good test to see if the financial markets have indeed begun to return to normal.


Rates were stable in the past week. Freddie Mac announced that for the week ending March 18, 30-year fixed rates averaged 4.96%, up slightly from 4.95% the week before. The average for 15-year fixed also rose slightly to 4.33%. Adjustables were mixed with the average for one-year adjustables falling to 4.12% and five-year adjustables rising to 4.09%. A year ago 30-year fixed rates were at 4.98%. "Rates for fixed-rate home loans were virtually unchanged this week as the effects of the prior storms emerged in recent housing data," said Frank Nothaft, Freddie Mac vice president and chief economist. "New construction slowed by 5.9 percent in February to 575,000 homes. Both the South and Northeast regions had all the declines due to the snow storms. In addition, homebuilder confidence unexpectedly dipped in March. With house prices starting to stabilize and even rise, homeowners on aggregate are slowly building back equity in their homes based on figures from the Federal Reserve Board. After losing almost $7.9 trillion in home equity since the end of 2006, homeowners regained almost $1.1 trillion over the past three quarters ending in 2009."
Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated March 19, 2010

Daily Value

Monthly Value

March 18

February

6-month Treasury Security

0.26%

0.18%

1-year Treasury Security

0.41%

0.35%

3-year Treasury Security

1.52%

1.40%

5-year Treasury Security

2.44%

2.36%

10-year Treasury Security

3.68%

3.69%

12-month LIBOR

0.852% (Feb)

12-month MTA

0.441% (Feb)

11th District Cost of Funds

1.786% (Feb)

Prime Rate

3.25%


Condominium and home owners associations desperate for money are experimenting with a tactic called “reverse foreclosure” to force banks to pay association fees. The process works like this: When a borrower stops paying the loan, banks often delay taking the property into foreclosure. When banks delay, neither the former home owner nor the bank is paying association fees. To remedy this, the association files its own foreclosure notice, taking over the title. The association can’t sell the property because of the bank’s lien on it. So the association goes to court, renounces the property and asks the judge to give the title back to the bank. When the judge does so, the bank has to pay the fees. Experts say this technique is becoming very popular in parts of the country where there are a lot of foreclosed condos.
Source: Miami Herald

Speaking to a crowd of more than 100 at the Federal Reserve Bank of Dallas, keynote speaker Carol Coletta, president and CEO of CEOs for Cities, said there is a shift occurring in the housing demands of young professionals and other city dwellers away from suburban lifestyles and a renewed interest in urban living. She, as part of her firm’s national network of urban leaders specializes in identifying trends and mobilizing activists for metropolitan development, added the cities and communities that adapt to those changing demands will be best positioned to grow and prosper. “We have to give Americans a concrete picture of the future,” she said. ‘And we have to figure out how to deliver it. Coletta said college graduates are a city’s primary economic driver, and younger generations continue to become more mobile and desire to live in urban, inner city communities. This creates communities with a more diverse income spectrum, which boosts poor or disenfranchised individuals’ ability to move up economically, creating neighborhood stability. Source: Housing Wire

Beginning April 5, the Obama administration will encourage delinquent borrowers to avoid foreclosure and instead give up their homes in short sales by streamlining the process. The program will offer a cash payment to the home owner, as well as to the servicer and second-lien holder; and protect borrowers from future lender lawsuits for the unpaid loan balance. To curtail fraud, lenders will have to consult real estate practitioners to assess home value and minimum acceptable offer; they then must accept any offer that is equal to or higher than that.
Source: The New York Times

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Kurt Galitski

The Kurt Real Estate Group

Orange County Distressed Properties

Vice President, Weichman Associates- Realtors

714-957-6677

Ca Broker- 01348644

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Kurt Galitski

Meet Kurt Galitski - The Kurt Real Estate Group, your new best friend. Distinctive Strategies that Deliver Record-Setting Results. When you combine Kurt’s passion and knowledge of the real estate market, you really gain an appreciation for what makes Kurt different. But what truly sets him apart from the crowd are his 5 distinctive strategies and his property management… For Kurt, getting into real estate was not an accident, it was a deliberate and calculated decision to deliver a better experience to home buyers, sellers, and landlords that they have ever received before. Today, you could ask any one of hundreds of clients, read his Yelp reviews, or look at his track record of being featured in Orange Coast Magazine in excess of eight consecu­tive years and you too will say mission accomplished. www.KurtRealEstate.com www.KurtPropertyManagement.com 877-957-6677

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