Both mortgage rates and home affordability took a turn for the better in Kansas City Wednesday after the Federal Reserve released its December 15-16, 2009 meeting minutes. This came, however, after a late morning fall in bond prices so it just eased the upward pressure interest rates were seeing for the day.

The Fed Minutes is a follow-up piece to the post-FOMC meeting press release. But whereas the press release is succinct and to-the-point, the minutes are lengthy and often meandering.

As a comparison, December’s press release contained 535 words. December’s minutes had 6,260.

But these “extra words” aren’t superfluous. They’re actually very important to homeowners. Because the Federal Reserve’s internal debates help to shape Wall Street expectations, it doesn’t take much for those conversations to have a trickle-down effect on Main Street.

For example, after the December meeting, the Fed said that economic growth is steady, inflation is in check, and an orderly wind-down of mortgage market support was underway. A look at the minutes, though, showed some disconnect.

Some Fed members believe rising commodity prices could lead to stronger-than-expected, and others think that improvement is housing could be “undercut” by a pull-back in government stimulus.

Overall, the Fed appears optimistic about the economy, but not as optimistic as on December 16. Mortgage markets responded favorably to the minutes and mortgage pricing improved.

Although rates remain higher as compared to early-December, pricing has been on a good run this week. If you’re under contract for a home in Missouri or Kansas or just looking to refinance, now may be a good time to lock.

This article is a great read about the general population’s belief of the Finance Industry. 

It goes into details about bailouts, profiteering, and much more.  This excerpt, however, goes to my post yesterday about refinancing (and even purchasing):

For a decade or more, many people resented, or envied, the money winners on Wall Street and in the City of London made. But they weren’t fixated on it. They had complaints, but they had jobs. They had bills, but their houses were worth more every year.

Then came the bursting of the bubble, lower house prices and foreclosures, furloughs and unemployment, and new impediments to borrowing. And the public was told that spending hundreds of billions of dollars of taxpayer money to bail out the banks was the only way to prevent catastrophe. Ben Bernanke, the Fed chairman, tried to explain: I didn’t set out to save Wall Street. I set out to save Main Street. But to save Main Street, I had to save Wall Street.

Read my post from yesterday about refinancing.  Of course, it is only an opinion, but I am in a position to know what’s going on, slightly.  Also click the link below for the entire article from the Wall Street Journal and Yahoo!

the-publics-new-fear-of-finance: Personal Finance News from Yahoo! Finance.

Mortgage Bonds have traded sideways along the 50-day Moving Average for the past seven trading days, but this morning, they seem to have lost their footing on this level and have broken well beneath it.

Stocks were stronger this morning, largely thanks to Microsoft and Amazon, which both posted far better than expected earnings.  Interestingly enough – Microsoft’s revenues and income were both down…but just beating analyst expectations caused their stock price and the Stock market overall to move higher just following the report.  More of the same dynamic we’ve been discussing lately, as “not so bad” news is being taken as good – and much of the reason companies are doing better and beating expectations is due to cost cutting and layoffs, as well as having a very low bar set in the first place in terms of expectations.

This is one of the big disconnects between Wall Street and “Main Street” we are seeing today.  Stocks will improve on better than expected earnings numbers, but those gains were often made by laying off employees…these so-called positive improvements that help Stocks are being gained at the expense of jobs, and not real improvement in the economy.  Realistically – you can only cut so many jobs and so many costs – this can only go so far.  While Wall Street and Stocks appear to be doing well, and want the media and public to feel like things are rosy, we really need to take this with a grain of salt.  You can’t simultaneously grow the ranks of unemployment – and then grow your business, hoping for increased sales to those same people who are without jobs.

Memories are short.  A year ago, with Stock prices plummeting and the safety of Bonds in jeopardy, investors were thrilled to get a return of 1% rather than lose money.  But over the past few months, those same investors are watching Stocks fly high, and are reaching for those higher returns as they feel there are few other attractive options when savings rates are so low.  It will be scary to think about what happens when cost cuts are at the end of their rope, consumers can’t afford to buy, and rates begin to rise, offering a more attractive and safer alternative to Stocks.

Also weighing on Bonds this morning is the massive $123B in Treasury Securities that will be auctioned off next week…the announcement was for even a greater amount than anyone had projected.  The Treasury will offer $7B in TIPS on Monday, $44B in 2-yrs on Tuesday, $41B in 5-yrs on Wednesday and $31B in 7-yrs on Thursday.  And like we mentioned in yesterday’s Update – this whopping $123B will only carry the country for 2 weeks before the next round of Treasury auctions are announced.  And remember, the Fed is buying less than before, as their buying program is slowing and coming to an end.  The New York Federal Reserve purchased $18.1B in Mortgage Backed Securities last week, bringing the year-to-date total to $959B out of the $1.25T allotted.

Also – some encouraging news on the housing front.  Existing Home Sales came in better than expected, at 5.57M vs. the expectation of 5.35M.  The very important levels of inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 in April.  The National Association of Realtors also reported that last month’s sales were made up of 45% First Time Homebuyers, as they rushed in to take advantage of the $8000 tax credit.  We still predict that the credit will be extended…and word has it that Congress is trying to stuff an extension of unemployment benefits onto this same bill.  Can’t Congress address one issue at a time?   This also confirms to us that the recent drop in Continuing Jobless Claims is indeed from people’s benefits expiring, and not from new hiring taking place.

Today’s Rates are still at historic levels

30 Year @ 4.75%

15 Year @ 4.25%

5/1 ARM @ 3.75%

7/1 ARM @ 4.375%

10/1 ARM @ 4.75%

Lock in your rate today, these historic rates are not going to last forever!

Barney Frank: Let’s spend TARP profits before taxpayers can get them

When President Obama announced on June 9 that some financial institutions would be allowed to repay Troubled Asset Relief Program dollars, he said the massively expensive TARP bailout had made money for the federal government. “It is worth noting that in the first round of repayments from these [TARP recipients], the government has actually turned a profit,” the president said. Indeed, TARP supporters have long held out the hope that the program might be profitable.

But now Rep. Barney Frank, the chairman of the House Financial Services Committee, has come up with a proposal to spend any TARP profits before they can be returned to the taxpayers. Last Friday, Frank introduced the “TARP for Main Street Act of 2009,” a bill that would take profits from the program and immediately redirect them toward housing proposals favored by Frank and some fellow Democrats.

In exchange for receiving TARP money, financial institutions were required to hand over shares of preferred stock that paid a dividend for the government. In theory, if a financial institution paid the dividend faithfully, and then repaid the TARP money, then the government would turn a profit. Last month, the General Accountability Office (GAO) reported that, through June 12, 2009, the government had received $6.2 billion in dividend payments. The original TARP legislation required that money made from the program “shall be paid into the general fund of the Treasury for reduction of the public debt.”

Frank, however, wants to spend the money before it can be used to pay down anything. First, the “TARP for Main Street” proposal would take $1 billion “from dividends paid by financial institutions that have received financial assistance provided under…the Emergency Economic Stabilization Act” and apply it to a trust fund that Frank has long wanted to create for low-income rental housing. (The measure, unfunded, was part of last year’s bailout of Fannie Mae and Freddie Mac.) Next, Frank would take $1.5 billion from TARP dividends for a so-called “neighborhood stabilization” fund. Republican critics have charged that both measures might allow federal dollars to be distributed to activist groups like the Association of Community Organizers for Reform Now, or ACORN.

The “TARP for Main Street” bill would also spend $2 billion, apparently from remaining TARP funds, to subsidize people who are delinquent on their mortgages, and another $2 billion to “stabilize multifamily properties that are in default or foreclosure.”

Congress’s Travel Tab Swells

Spending by lawmakers on taxpayer-financed trips abroad has risen sharply in recent years, a Wall Street Journal analysis of travel records shows, involving everything from war-zone visits to trips to exotic spots such as the Galápagos Islands.

The spending on overseas travel is up almost tenfold since 1995, and has nearly tripled since 2001, according to the Journal analysis of 60,000 travel records. Hundreds of lawmakers traveled overseas in 2008 at a cost of about $13 million. That’s a 50% jump since Democrats took control of Congress two years ago.

The cost of so-called congressional delegations, known among lawmakers as “codels,” has risen nearly 70% since 2005, when an influence-peddling scandal led to a ban on travel funded by lobbyists, according to the data.

Mortgage-Rescue Plan to Cover More Borrowers

The Obama administration is expanding the number of borrowers who can refinance home loans under its housing-rescue program, an acknowledgment that more needs to be done to help people who are upside down on their mortgages.

The administration said Wednesday that borrowers with mortgages worth up to 125% of their home’s value will now be eligible to refinance under its program, up from a 105% limit.

To be eligible, borrowers must be current on their mortgages and have loans owned or backed by government-controlled mortgage companies Fannie Mae and Freddie Mac.

/had enough Hope and Change yet?