As you can see in the chart of the 10 year note, the long term rates have jumped pretty hard starting just before Christmas. Today the Federal Reserve’s meeting notes shows their aggressive approach to normalizing interest rates.
The Fed already announced they will be doubling tapering amounts of their purchases of notes and mortgage backed securities, potentially finalizing their direct purchases in March this year.
The Fed initially indicated that they will complete their Quantitative Easing purchases before increasing the Fed Funds rate (presently at 0-.25%). Now the financial markets are pricing in a potential 4 rate increases by year end.
The meeting notes shows some Fed members are pushing towards a Balance Sheet reduction simultaneous, or prior to Fed Funds increases. Presently the Balance Sheet reflects $9 Trillion in notes and mortgages held by the Fed. Presently $60 Billion in Mortgages are being “repurchased” by the Fed every month, as loans mature or paid off. This will put additional upwards pressure on rates.
On top of the Fed… the Federal Housing Finance Agency (FHFA) announced new upfront fees for high-balance and second home loans sold to Fannie Mae and Freddie Mac.
Beginning April 1, 2022, the new fees will go into effect for deliveries and acquisitions to minimize market and pipeline disruption. April delivery means lenders will have to add the charges a month or two earlier.
The High Balanced Conforming adjustment will have an effect on loans in high-cost areas like Los Angeles. The new High Balanced maximum loan amount for 2022 is $970,800. So expect loans larger than the standard national limit of $647,200 to be higher in rate, tiered to the loan to value.
Loans for second home loans will also be more expensive.
Per the FHFA “To ensure that the Enterprises continue to provide strong support for affordable housing, the existing beneficial pricing treatment of certain programs – such as HomeReady, Home Possible, HFA Preferred, and HFA Advantage – will not be altered by the new fees. In addition, loans to first time homebuyers in high cost areas with incomes at or below 100 percent of area median income will have no specific high balance upfront fees. These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time.”
We’ll have to keep an eye on the financial market, economic numbers and the Fed. The Fed is probably late in making moves, as inflation is much higher than their 2% target, and we’re basically at full employment. If the Fed’s actions slows the economy too much, they’ll probably slow down their moves.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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