The Federal Reserve will stop buying trillions of dollars worth of mortgage-backed securities at the end of the month. For many, this signals the rising of mortgage rates as well as interest rates. The impact on the economy at large is giving analysts reason for worry.
The Obama Administration’s moves to mend the economy’s wounds have resulted in rigorous, far-reaching measures. These measures have thus far managed to prop up banks deemed ‘Too Big To Fail’, bail out mortgage giants Fannie Mae and Freddie Mac, pump billions of dollars into dubious stimulus packages, and lay out plans for mortgage modifications and refinance options for distressed homeowners.
The outcome of the measures is mixed. While mortgage rate have remained below the 5 percent mark, in the last two weeks, mortgage rates have worsened rising above the benchmark 5 percent point. This was due in part to little movement in the economy, as well as momentum trading and rebalancing of portfolios.
Many analysts expect the rising trend in FHA and conventional mortgage rates to continue especially in the coming weeks. This week more economic data will create more activity in the mortgage market.
On Monday, the Industrial Production and Home Builder Index will come out, followed by a Housing Starts and Builder Permits report Tuesday, as well as a Consumer Confidence report on Wednesday. The weekly Jobless Claims and Producer Price Index comes out on Thursday; finally, Friday will announce the Consumer Price Index and Continuing Jobless Claims numbers.
Monday’s stock market has already taken a tumble as details of a new proposal to reform banking regulations and practices emerge. The legislation was written in an attempt to stop a mortgage and banking crisis like the one that brought down the global banking system in 2008.
The leaked reports outlines Senate Banking Committee chairman Chris Dodd’s plans to give new powers to the Fed to regulate financial institutions, and give investors new influence of corporate boards. The proposed bill is still in its infancy and has many obstacles to face, however, it is one step in prevent further mortgage rate and banking fiascos that have plagued America of late.
Written by Lani Shadduck
HULIQ.com
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