November 5th, 2010 11:00 AM by Preston Ware
The Federal Reserve is once again taking an aggressive stance in an effort to maintain low interest rates to help stimulate a sluggish economy.
November 2010: The Federal Reserve announced another debt purchase program in an effort to push borrowing interest rates for consumers and businesses lower to help fuel spending and economic growth. The $600 billion campaign can be considered fairly sizable, but it will be spread over several months and will extend until the middle of 2011. In addition, the Fed will be reinvesting proceeds from current investments back into Treasuries, which is expected to total another $250 - $300 billion. This move by the Federal Reserve does not come as a surprise to the markets as there were many hints and speculative comments made over the past couple of months that suggested a move like this may be in order.The bad news is that mortgage related bonds are not being specifically targeted in this particular purchasing program. Many investors had hoped to see mortgage rates targeted by any move of the Fed. Still, the program’s goal is maintain generally low rates which will aide in the recovery of our economy. If the plan works as the Fed expects it to, we should see mortgage rates remain low for an extended period of time.
Mortgage rates in general remain wonderfully low. As I have said before, every person with an FHA loan should be looking at a streamline refinance without appraisal. This program allows for someone who is 100% upside down on their home to still go out and refinance and lower there payment. Also known as a government sponsored rate reduction this program is not a mortgage modification it is a mortgage refinance.
FHA interest rates still are lower than conventional interest rates offered by Fannie Mae and Freddie Mac but those programs do not mandate lender required mortgage insurance. Premiums for FHA have recently been adjusted to include less up front financed charges but more monthly recurring charges. Regardless, in a sluggish economy, borrowers with limited savings can still go take advantage of 96.5% financing and find a deal in addition to the streamline program.