Tag Archives: Federal Reserve

The Federal Reserve put a conditional timestamp on its interest rate policy Tuesday - a different voice from the ""extended period"" mantra heard from the U.S. central bank for the past two-and-a-half years. The Fed's board again voted to hold the target range for the rate at which banks lend to one another at 0 to 0.25 percent, but this time they included an advisory that the rate would remain at this level for the next two years. Officials cited the ""depressed"" state of the housing market as one of the economy's biggest hindrances.

Economic activity continues to grow but the pace has moderated in many parts of the country, weighed down by a persistent weakness in the residential real estate sector, according to the latest market-gauging Beige Book from the Federal Reserve. Contacts in the Boston district said housing markets ""remain in the doldrums."" A pickup in sales of higher-priced homes was evident in the D.C. area. In the Kansas City region, they're seeing an increase in all-cash purchases of existing homes, while demand in the Dallas district was described as ""choppy.""

The rise in foreclosures in recent years may lead to long-term vacancies, further exacerbating housing prices and the market as a whole, according to Stephan Whitaker, a Cleveland Federal Reserve Bank researcher. In a recent study, Whitaker determined a strong correlation between foreclosures and vacancy rates, suggesting foreclosure may permanently scar some homes. He found that foreclosed homes still have higher vacancy rates than neighboring houses two to five years after a sheriff's sale.

Wells Fargo & Company has reached an agreement with the Federal Reserve that resolves allegations that its former Wells Fargo Financial unit, which was closed in July 2010, did not adequately detect and prevent instances of fraudulent loan applications and that the unit's employees steered prime borrowers into more costly subprime loans. The Fed has assessed an $85 million civil money penalty against Wells Fargo. In addition, the order requires the company to compensate affected borrowers.

One in 10 residential mortgages in New York City is more than 90 days delinquent or in foreclosure, according to an analysis conducted by the Federal Reserve Bank of New York. The study also revealed that the ratio of New York City borrowers at least three months behind on their payments, but not in foreclosure, has improved from 5.4 percent in February 2010 to 3.8 percent as of March 2011. Mortgage performance statistics were also released for Long Island and Hudson Valley.

Housing counseling increases the likelihood that a homeowner will be granted a loan modification by 200 percent, according to a research study from the Federal Reserve. The central bank also found that counseled borrowers received more favorable terms on their loan modifications compared to borrowers who go it alone. The Homeownership Preservation Foundation says these, among other findings, show that mortgage counseling works, but the availability of these services are in jeopardy due to federal budget cuts.

The debate over what constitutes a Qualified Residential Mortgage (QRM) is heating up, with a pivotal argument centered around whether or not the proposed QRM stipulations will actually lower the risk of default. In one corner you have the handful of regulators charged with putting the definition of QRM into the rule book, and in the other corner you have just about everybody else, with consumer advocates joining mortgage bankers in a rare showing, and congressional lawmakers standing firmly alongside them.

Federal Reserve Chairman Ben Bernanke says its all the distress in the housing sector that's pulling home prices and consumer confidence down and keeping buyers away from the market, despite the fact that the Fed's bond-buying program has succeeded in keeping interest rates low and housing affordable. Bernanke says he'd like to see more efforts to modify loans, but when that's not appropriate, the industry needs to speed up the process of foreclosure and disposition to clear the market.

Ongoing deterioration in real estate markets and rising levels of distressed residential and commercial properties are areas of acute concern for officials at the Federal Reserve, as banks' performance and capital continue to be adversely affected. Renewed concerns have surfaced about the health of the mortgage market and home equity loans in particular, while high vacancy rates and declining rents still plague the commercial sector. The Fed says it will take time to make progress on the overhang of distress, and banks should expect continuing losses.

A dozen U.S. senators are pooling their influence to persuade federal regulators to work with state attorneys general and other federal agencies to ""fix the broken foreclosure process,"" as the lawmakers put it. In a letter to the OCC, the senators stressed that the regulators' consent orders do not preclude states' efforts to hold servicers accountable for any wrongful foreclosures. In a separate move, lawmakers have tagged a servicing regulation bill on as an amendment to the larger economic development legislation making its way through Congress.