Monday, September 16, 2013

Mortgage Events

For watchers of the U.S. mortgage market, this week is the most eventful in months.
Along with a bevy of housing and economic data, the Federal Open Market Committee (FOMC) meets for the sixth time this year. The FOMC is the sub-group within the Federal Reserve which votes upon U.S. monetary policy.
The FOMC is expected to vote to keep the Fed Funds Rate in its current range near 0.000% but may elect to begin tapering the Federal Reserve's QE3 program, which started one year ago last week.
Via QE3, the central banker purchases $40 billion of mortgage-backed securities on the open market monthly, creating excess demand which holds bond prices high. The Fed's stimulus is directly responsible for last year's lowest mortgage rates in history.
In May 2013, the Fed said it would begin considering whether to increase or decrease the pace of its purchases based on U.S. economic growth. That statement sparked a massive MBS sell-off which pushed rates from 3.5% to the current range near 4.5%.
However, the economy has shown little spark since that date. Job growth is slower-than-expected nationwide; housing data has somewhat cooled; and, consumer spending has failed to keep up. The economy is expanding, but not by enough to warrant a "full taper", some believe.
How the Federal Reserve handles QE3 will be the big news this week, and make the largest impact on U.S. mortgage rates. The week's complete schedule looks like this :
  • Monday : Empire State Manufacturing Survey
  • Tuesday : Homebuilder Confidence Survey; Consumer Price Index (CPI)
  • Wednesday : FOMC adjourns; Federal Reserve forecasts released; Housing Starts
  • Thursday : Initial Jobless Claims; Existing Home Sales
  • Friday : None
It's also noteworthy that five Federal Reserve members have scheduled speeches between Thursday and Friday. Expect these speeches to affect mortgage rates because each speaker is expected to put their personal spin on "what the Fed should do next".

Will HARP 3 Pass This Week?

U.S. homeowners also wonder if this week is the week Congress passes HARP 3.
Also known as #MyRefi and "A Better Bargain For U.S. Homeowners", HARP 3 would be the third iteration of the popular Home Affordable Refinance Program which was first launched in early-2009. More than 2.7 million U.S. homeowners have used HARP to refinance to lower mortgage rates since the program's inception.
It's unknown what will be different with HARP 3, but there is speculation that any, or all, of the following enhancements could be added when HARP is revamped for the public :
  1. HARP 3 may allow the "Re-HARP" of an existing HARP refinance
  2. HARP 3 may allow non-Fannie Mae and non-Freddie Mac mortgages
  3. HARP 3 may change the program cut-off date to include more homeowners
  4. HARP 3 may allow larger loan sizes of up $729,750
HARP 3.0 is currently in committee in Congress and may pass this week, or next week, or not at all. Millions of homeowners may be instantly refinance-eligible should HARP 3.0 pass.