It appears that the Fed’s rate cuts may be over for a while.  In fact, it has been rumored that the Fed may raise rates to combat the concern of inflation.  If inflation continues, long term mortgage rates may worsen.

current Fed interest rate policy “well positioned to promote moderate growth and price stability over time.” That language signals the central bank, increasingly worried about inflation, is done cutting rates for now. Bernanke noted that slower U.S. growth, and previous interest rate cuts, have reduced the value of the dollar against other currencies, increasing the potential for inflation.

That equity line of credit you have? You may want to try and lock that rate if you can.  If the Fed raises rates, it will effect the interest rates on shorter term loans, such as credit cards and equity lines.

Bonds and home loan rates ended the week on a sour note, but had spent the early part of the week moving sideways and slightly higher on a blend of mixed economic news and action in the Stock market.

What is happening with home loan rates? What is in store for next week?

Check out all the info at Keri’s Mortgage Newsletter. Signing up for this weekly newsletter is FREE!

The Fed News Is Good News.

However, speaking of inflation, the Fed’s most favored measure of it - the Core Personal Consumption Expenditure Index - arrived on Thursday, showing core inflation at 2.1%, just a whisker above the Fed’s desired range for inflation of 1 to 2%. This read wasn’t great news for inflation-sensitive Bonds…but the resulting market action was nothing, compared to what happened when the Jobs Report arrived on Friday morning.

Talk about a real mover and shaker…the Jobs Report brought word of 20,000 jobs lost in April, which was better than market expectations of 75,000 jobs lost. Initially, Stocks rallied higher and Bonds worsened dramatically, as the headlines were so much better than had been anticipated. But when the details of the report were unpacked, showing prior months worsening revisions - as well as a sobering realization that 20,000 jobs lost is still lousy news - the markets quickly reversed direction, helping Bonds and home loan rates improve once again. Another ultra volatile week - and when the dust settled, home loan rates improved by about .125% overall.

Always an interesting read and you can sign up for the free newsletter by clicking on this link and subscribing in the upper right hand corner.

Looking for assistance with buying a home? 

For a second year in a row, the state is making more federal mortgage tax credits available to people with low or moderate incomes in an effort to reduce the cost of buying a home amid a more restrictive financing market.

The Hawai’i Housing Finance and Development Corp. yesterday said it’s accepting applications for $20 million in credits, a record amount that’s up from $15 million in credits given last year.

The tax credit, called the Mortgage Credit Certificate, was created by Congress in 1984 and has been available and administered here by the state since 1989.

Another option is the Hula Mae Program.

Want to know if you qualify? Just contact me and I can help.

Almost yawning news as it was expected….again.  Read economists Harvey Shapiro’s post on it.  There were a couple of very interesting comments from his post.

1. Because of the weakening dollar, it’s important to realize that Honolulu properties are inexpensive when compared to real estate in parts of the Mainland and in foreign countries, especially in Europe and Japan. This contrasts with the sticker shock that visitors had when comparing O`ahu housing prices to those back home as recently as the mid-90’s. Honolulu prices were the highest in the US and were $100k higher than the second place city, San Francisco. Now, we’re fourth or fifth from the top.

2. There needs to be a discussion of the US dollar in light of the beating its been taking.  Except for some minor fluctuations last week, the dollar has been consistently losing ground to all major currencies over the past few years. This translates into more expensive imports, including oil, and higher cost international travel.  On the other hand, the weakness in the dollar could add demand for exports from the US and, hopefully, will promote more investment from overseas.

By the way…The Fed Cut Rates As Expected

FHA, a formerly obscure federal agency, is now at center of many plans to fix the housing market.  (This was a really good article on what the government is looking to do to help out the struggles of the housing market.)

FHA (Federal Housing Agency) loans in this market will definitely increase. I have already seen several offers from buyers looking to obtain and FHA loan.  So first…what is an FHA Loan?

The FHA is a New Deal-era agency that helped create the modern mortgage market. The FHA program is intended for mortgage borrowers with weak credit or little or no cash, who may not be able to otherwise get an affordable mortgage.

Borrowers get FHA loans from private lenders, just as they would any other mortgage. FHA offers insurance to cover lenders if those borrowers, who pay a small insurance premium to the FHA every month, default on the loan. The FHA uses those premiums to cover the lender in the event of foreclosure. 

Basically, the loans are guaranteed by the Fed government.

About 150,000 borrowers have refinanced under a new program called FHASecure in the past six months. Launched in September, this program is aimed at subprime borrowers facing steep mortgage rate resets that they couldn’t afford. That volume compares to the total of 425,000 loans the FHA backed in its previous fiscal year.

I will have more on FHA loans shortly….

The latest issue of Keri Shepherd’s Mortgage Market News is out. 

A national record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February’s Jobs Report delivered an additional loss of 67,000 jobs - that’s on top of the previously reported loss of 85,000 jobs for that two-month period.

The Federal Reserve may respond to this increasing trend in job losses with additional interest rate cuts when they next meet to determine monetary policy on April 30 and June 25. As we’ve seen in the past though, such rate cuts do not translate into lower long-term rates for mortgages, so there is no better time than right now to refinance an existing mortgage or to structure a new one. Let’s work together to make sure your current financing is a home run!

Keri Shepherd, CMPS
Certified Mortgage Planning Specialist
4211 Waialae Ave. #107
Honolulu, HI 96816
Direct: 808-223-4118
Direct Fax: 866-437-2721
E-Mail: keri.shepherd@imb.com
Website: kshepherd@imbhomelending.com

“NO GREAT DISCOVERY WAS EVER MADE WITHOUT A BOLD GUESS.” Isaac Newton But even the great mind of Isaac Newton might not have guessed that Bonds and home loan rates would continue on such a volatile course. But let’s get bold, and discover what caused the latest rock and roll action in the financial markets, and take a look at what the coming week might have in store.

Here is the gist:

The Federal Reserve is considering doing something it has never done before: use taxpayer money to buy high-risk subprime mortgage-backed securities. Those are at the heart of the housing crisis.  (Fed Weighs Unprecedented Move, then click on the Listen Now icon

Now, let me get this straight.  The Fed wants to use taxpayer money to buy into the same mortgages that have almost taken down Countrywide, Bear Stearns and possibly Lehman Brothers and other major financial players?  How does this make since? and how will that help, except to bail-out those who are responsible?  Private investors won’t touch it, but yet we would essentially throw the taxes we pay away on a proven and guaranteed bad investment?  For what? to bail out the companies that made these investments in the first place.  Let me get into financial trouble and come bail me out instead.

I have been saying this for a while, but this Excellent articlein CNNMoney says it again and very well.  this is definitely worth reading if you are thinking of refinancing or buying a home in the near future.  If economic news is still bad or worsens then mortgage rates could go down.  Here are the best lines from the article.  A definite recommend for reading.

The Fed’s main tool is control over the short-term fed funds rate, which determines what banks charge each other for overnight loans. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.

“There is a long disconnect between the fed funds rate and fixed mortgage rates,” said Keith Gumbinger, vice president of mortgage and consumer loan information publisher HSH.com.

Inflation drives long-term fixed rates.