Facing an onslaught of impactful economic news, most of it negative, mortgage rates meandered down the line, with the end result a slight decrease overall in rates from this week to last.
Market movement continues to be defined by topical events, such as the Federal Reserve Board’s intent to close out its mortgage-backed securities buyback program, and a key unemployment number that once again went in the wrong direction.
The Federal Reserve did purchase about $17.6 billion in mortgage paper last week, selling $6.6 billion to net out at $11 billion. Economists view the Fed’s timeline to be right on track to stop the buyback program by the end of March — just as Ben Bernanke said it would.
Most economists expect mortgage rates to rise once the Fed is out of the picture, as demand for mortgage-backed securities should decline starting in April, thus causing mortgage interest rates to creep back upward.
On the employment front, jobless claims were up again last week, from 474,000 new unemployment insurance claims to 496,000 new claims from week to week. Worse, the unemployment benefits program approved by Congress last year is officially off the clock — the law that initiated the program expired Feb. 28. Congress is expected to extend the program by at least 30 days, but it hasn’t done so yet. And that’s not just a key economic trend to watch, it’s a potential life or death issue for thousands of unemployed Americans.
Some other key numbers keep rolling in, and they’re not being met with open arms by mortgage lenders — or apparently by potential homebuyers. A new FDIC report shows that mortgage lending fell by 1.7% in the fourth quarter of 2009 — a decline of $128.8 billion. Granted, the lion’s share of that decline was in commercial real estate, which saw quarterly lending fall by $54 billion, according to the FDIC. But it is another frustrating sign that banks continue to tighten lending standards, and to apply a hair trigger, negative response to loan customers with less-than-perfect-credit.
The FDIC also reports that the number of failed banks has risen from 552 at the end of September 2009, to 702 by the end of the year — which further depletes the all-important FDIC bank insurance reserves (which fell by $12.7 billion in 2009, and now is down to $23 billion, the FDCI says.)