Federal Reserve

When Not to Pay Down a Mortgage

By RON LIEBER

This week, the Federal Reserve reaffirmed its intention to stop buying mortgage-backed securities, signaling the likelihood that the mortgage rates you can get today are as good as they’re going to be for a long while. Once the Fed stops buying, after all, rates are likely to go up.

And current rates are quite good. At about 5 percent, in fact, they’re so good that they’ve helped change the age-old debate over whether homeowners should make extra mortgage payments to pay off their debt well before their loan periods are up.

Back when rates ran at 7 or 8 percent, making extra payments offered what amounted to a guaranteed return on your money. When you’re ridding yourself of debt that costs you much less, however, it’s easier to imagine a future when you could more easily earn a higher return by investing those potential extra mortgage payments someplace else.

Meanwhile, at a time when just about everyone knows someone who is unemployed or who owes more on a home loan than the house is worth, keeping extra cash someplace more liquid than a mortgage seems like a safer approach.

So is the case against extra payments closed for good, given that so many people have locked in rock-bottom mortgage rates for the long haul?

The answer depends on two things: how likely you are to leave the extra money in savings and how good it would feel to wipe your debt out years earlier than your mortgage requires.

Full Article

Time Coming For Commercial Mortgage Market To Stand On Its Own

NEW YORK -(Dow Jones)- The Federal Reserve on Friday will conduct the last round of purchases of existing commercial mortgages, marking the end of a government program designed to buoy markets and boost investor confidence in securities that have been battered since the financial crisis in 2008.

The end of this part of the Term Asset-Backed Securities Loan Facility, or TALF, leaves a corner of the commercial mortgage market on its own, and investors won’t see new deals until later in the year, when regulators are expected to provide more clarity on securitization.

While the Fed’s role has been small relative to other programs–the central bank has granted only $11 billion in loan requests since last June–the impact has been much larger in a sector still in the throes of a painful correction.

“TALF provided psychological support for the market,” said Darrell Wheeler, head of commercial mortgages at Amherst Securities. “It served its purpose at the time it was needed.”

Continue Full Article Here

By Prabha Natarajan Dow Jones Newswires

The Going Gets Tougher – Fannie & Freddie Requirements

THOUGH the economy appears to be stabilizing, the market for financing remains tight.

THE MORTGAGE WARS Dr. Stephen Krieger and Dr. Nada Gligorov prevailed over a lender who didn’t like the size of their prospective building’s reserve fund.

By ELIZABETH A. HARRIS

Some people are able to get mortgages without much trouble, but others find the process arduous, mystifying and prolonged. Then there are the buyers who think their financing is secure, only to see it evaporate sometime between the signing of the contract and the closing table.

“Is it a problem? Yes, it’s a problem,” said Dottie Herman, the president of Prudential Douglas Elliman. “When these things fall through, it’s not because people are destitute — they have good incomes. It’s because banks are very, very tough now.”

Banks can be such sticklers that missing just one payment on a bill can result in a thumbs down. Change jobs and expect the microscope. To complicate matters, sometimes it is the buildings themselves, not the buyers, that fail to qualify, thanks to new or newly relevant Fannie Mae and Freddie Mac lending guidelines.

Continue to Full Article at NYTs