hello confusion 2010

January 1.  Okay, not January 1 but January 2.  Sorry, but January 4, the first business day of the New Year.  The first day that new RESPA and GFE rules are applied.  Gone are the days with the confusing one-page GFE, now we’re welcomed with a more simplified, confusing three-page GFE.

Lenders haven’t been given any real guidance on how to apply these rules, in fact, there isn’t any assurance on which forms actually need to be used to disclose to borrowers their closing costs.  There’s the Truth in Lending (TIL) form but the GFE doesn’t break down all the charges in 2010 but instead gives “lump sum” fees.  Does that sound better?  It probably does, but after presenting the new GFE to 2010 clients, I”ve heard:

“How much is it for title insurance?”

“Why am I charged for owners title policy when the seller is paying it?”

“I thought I cold roll in my MIP.  This says I’m paying for it.”

Needless, the new GFE will make your eyes glaze over.   I’ve taken three classes on the new forms, one with a group of RE lawyers, and I’m still trying to figure it out.

More later.

fed might extend MBS purchases

Since November of 2008, rates moved from the high six percent range down to the levels we’re seeing today.  We’ve been in the high four to low five percent range (give or take) for over a year now.  One of the main reasons we’ve been in the ultra-low rate environment for such a long time is due to the Federal Reserve Board’s commitment to buy mortgage-backed securities.  These regular purchases keep the demand for mortgage bonds higher than they would normally be, keeping rates in check.

But when the Fed announced they would begin such purchases they at the same time announced when they would stop.  That date is March 30, 2010.  You can expect rates to begin to rise around that time when mortgage bonds have to lower their price to offer an attractive yield.  That = higher mortgage rates.

Recently however, there have been more than rumors that the program would be extended although no one would come out and admit it.  When the Fed released their most recent meeting minutes it showed that more than a few of the Board Members were in favor of extending the purchase program.  On the other hand, there were still a few more that were against it.

Today, Bernanke didn’t rule out extending the program but he didn’t quash the rumor, either.  Instead he simply said that the Fed would wait until the end of the program before deciding to extend it.

My guess is that the Fed won’t make any announcements anytime soon but will make an announcement at say, March 29th that the Fed will extend the program but by only two more quarters.

That’s my bet.  Any takers?