Talking about the Federal Reserve FOMC meeting, construction spending increases, DMarco says no to mortgage principal cuts and much more!
Federal Reserve FOMC Meeting & It’s Effect on You
Well, the much anticipated FOMC meeting was yesterday and they voted to leave the Fed Funds Rate unchanged and leaving Operation Twist in place. The Fed said they planned on keeping rates low until 2014. But no Quantative Easing might have meant even lower mortgage rates. What else did the Fed say?
- Economic activity decelerated somewhat over the first half of this year
- Growth in employment has been slow in recent months
- Unemployment rate remains elevated
- Housing remains depressed
So what is the Fed going to do? Not much and more of the same. But they are keeping an eye on things and might maybe possibly do something when they meet again in September. Because things are so supper peachy keen terrific right now that they have in their infinite wisdom decided to kick the can down the road…
US Construction Spending Increased June 2012
Good news from the US Census Bureau that overall construction spending increased in June 2012. Private residential construction spending increased for the third consecutive month. Construction spending on new single-family homes jumped 3% on a month-to-month basis and is almost a 19% higher than one year ago. Good news for both the economy and real estate.
FHFA Rejects Mortgage Principal Cuts
FHFA Acting Director Ed Demarco pissed off plenty of people when he said that that Fannie Mae and Freddie Mac would not cut mortgage principal for struggling homeowners. DeMarco said it is too risky. Which it may be risky for FHFA but it also may be risky for DeMarco because this may be painting a big target on his back.
There have been grumblings for him to be fired. Whether or not he can be fired by Obama is uncertain from a legal standpoint. But in an election year, do not think for a moment that those seeking re-election won’t try everything they can to appear to be the good guy in this battle. In the past, DeMarco has said that if Congress wants principal reduction on GSE loans, they just need to vote on it.
The FHFA is supposed to “implement a plan that seeks to maximize assistance for homeowners.” I am not sure the FHFA has done everything they could to help struggling home owners. And this could be used as a reason to fire him. US Treasury Secretary Timothy Geithner said
I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac to use targeted principal reduction in their loan modification programs.
In view of the clear benefits that the use of principal reduction by [Fannie and Freddie] would have for homeowners, the housing market and taxpayers, I urge you to reconsider this decision
Hey this is a tough decision. Is it the right one? DeMarco says that using money from the Troubled Asset Relief Program would not the best way to reduce foreclosures in a cost-effective way for taxpayers.The FHFA did research and came to the conclusion that mortgage principal cuts would cost more than they would help. Like I said, the American taxpayer would be footing the bill for this.
How effective would cutting mortgage principals be in helping real estate? DeMarco says that only about 74,000 to 248,000 home owners would be eligible for the principal reductions from FHFA. Since there are about 11 million underwater mortgages this would not help the majority of struggling home owners.
Also, there is a fear that implementing this type of program would encourage people who are not behind on their payments or struggling to use this program. And why would banks ever want to make another mortgage when they may get screwed? Is a contract no longer a contract? Would this lead to higher mortgage rates and even stricter lending requirements as some critics have said?
Plenty of questions but no easy answers. I want struggling and deserving home owners to be given all the help possible. But are mortgage principal cuts going to be the best option for America and real estate in the long run? What do you think?
More Real Estate News
If you or I did this, we would be facing fines or jail time or both. But banks? Well banks can do any freaking thing they want to when it comes to foreclosures. Please read Bank “Walkaways” are a Growing & Troubling Trend
Something to consider: If you can afford to invest in it now, it’s time to buy real estate
Sad that for some, buying a home must be delayed: The kids are not looking for more debt – 40 percent have delayed making a major purchase in a home or car because of student debt Remember that fewer first time home buyers means recovery in real estate will take much much longer.
Those who forget the past are doomed to repeat it: You have this huge, huge class of people who are impoverished. If we keep doing what we’re doing, we will build a class of poor people that will take over this country, and the country will not look like what it does today