Atlanta Mortgage News Update for Sept 16, 2013

Special thanks to James Williamson and Robbie Crozier of Shelter Mortgage for this Atlanta mortgage news update for Sept 16, 2013:

1. For the last two months, the key sentiment of the financial markets has been when the Fed will “taper” it’s bond purchase program. Most likely, we will find this out at Wednesday’s Federal Reserve Meeting. Expect a Fed announcement and potential tremendous rate volatility after 2pm on Wednesday.

2. Last week’s Retail Sales report was essentially the last data which could significantly influence the Fed’s decision this week. Despite the modest pace of economic growth, investors anticipate that the Fed will begin to taper its bond purchases, but only by a relatively small amount. The consensus is that the Fed will scale back from its current pace of $85 B. per month of combined Treasury and mortgage-backed securities purchases to $70-75 B. per month. Some investors expect the Fed to reduce only Treasury purchases, while others think it will be split. Investors also will be interested in hearing how the Fed will determine future changes in the bond purchase program.

3. Whether the Fed tapers this week or not, it will announce on Wednesday that it is keeping interest rates at current exceptionally low levels. The Fed has already announced that it will keep the Fed Funds rate at 0-.25% until the Unemployment Rate drops to 6.5% (most recent level was 7.3%).

4. Key changes are coming to the mortgage industry effective Jan 10, 2014 thanks to the Dodd-Frank Wall Street Reform & Consumer Protection Act. Some of the changes are non-events because the industry has already adjusted and mostly eliminated these programs already, but officially say good-bye to the interest-only feature and amortization terms over 30 years.

5. Other more impactful changes increase the qualification rate on an ARM loan and limit the points and fees a lender can collect to 3%. Neither of these are consumer friendly and both will take good loan program options away from buyers.

6. The biggest change of all though is a 43% cap being placed on the “debt-to-income” ratio. Fortunately, this rule will NOT apply at this time to any Fannie Mae, Freddie Mac, FHA, or VA loan that gets an automated approval.

Rate Update
With all eyes on Wednesday’s Fed meeting, there was little significant economic news last week. The US plans for Syria will take some time to decide, so it had little influence on mortgage rates. The majority of the economic data released last week fell short of expectations, which helped mortgage rates fall slightly over the last week. The benchmark Conforming 30 year fixed-rate is now 4.5%.

This Week
The long awaited, highly anticipated Fed statement will come out on Wednesday around 2pm. A press conference with Fed Chief Bernanke will follow at 2:30. There almost certainly will be a large reaction in the mortgage market to this statement. Other economic events this week will struggle to compete for attention. Industrial Production will be released on Monday, Consumer Price Index (CPI) on Tuesday, Housing Starts on Wednesday, and Existing Home Sales on Thursday. Philly Fed and Empire State will round out the Economic Calendar. Should be a week with very high volatility, especially from Wednesday through Friday…