Here Comes the Fed

Via Origination Pro:

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-One CEO: No Real Estate Double Dip

It used to be that a meeting of the Federal Reserve Board was accompanied by great anticipation and trepidation. This is no longer the case. As a matter of fact, there have been no previous time periods in the past forty years when the Fed has been so inactive when it comes to changing short-term rates. It has been just about two years since the last significant adjustment. Not that the Fed has been idle. They have been very busy purchasing bonds and mortgage securities. And more of these activities may follow, though the recent reports on retail sales and employment, while not strong, may keep the Fed inactive in this regard for right now. Even the members of the Fed don't seem to agree on the correct course of action. From a recent blurb in The Wall Street Journal: Federal Reserve officials differ on the question of how weak the economic outlook should get before they move to take major steps to boost growth.
Don't get us wrong, the markets will still be anticipating the Fed meeting this week. However, the focus is more likely to be on the wording of the announcement at the conclusion of the meeting. The Fed has nowhere to go with regard to rates. The markets would love to see some statement that is positive. More than likely, the Fed will play down the chances of a double dip while acknowledging that the present state of the economy, especially real estate, is slower than anticipated. This is old news. So the question is, will the wording contain some sort of surprise in this regard? Any surprises could definitely increase volatility in the markets.

Rates were stable at historic lows again in the past week. Freddie Mac announced that for the week ending September 16, 30-year fixed rates averaged 4.37%, up slightly from 4.35% the previous week. The average for 15-year fixed fell slightly to 3.82%. Adjustables were also down slightly with the average for one-year adjustables easing to 3.40% and five-year adjustables falling slightly to 3.55%. A year ago 30-year fixed rates were at 5.04%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac, "Rates on 30-year fixed loans have remained below 5 percent for the last 19 weeks giving people ample opportunity to refi their existing loans. As a result, homeowners reduced their financial obligations relative to disposable personal income during the second quarter of 2010 to the lowest share in almost eight years, according to the Federal Reserve. Currently, four out of five applications for home loans are for refinancing existing loans, based on figures released by the Mortgage Bankers Association of America." 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 September 17, 2010

Index	September 16	August
6-month Treasury Security	0.20%	0.19%
1-year Treasury Security	0.25%	0.26%
3-year Treasury Security	0.77%	0.78%
5-year Treasury Security	1.48%	1.47%
10-year Treasury Security	2.77%	2.70%
12-month LIBOR		0.949% Aug
12-month MTA		0.353% Aug
11th District Cost of Funds		1.753% July
Prime Rate		3.250%