How New Fed Chief Powell Is Changing Things Up

Jerome Powell is the first Federal Reserve chairman in more than a decade to have any background in the private sector. That could explain changes he’s implemented in his first weeks on the job.

Ty Laffoon 

Powell has made it clear within the institution he wants more direct interaction with the Fed’s army of Ph.D. economists, and on a faster and more informal basis than sought by his predecessors, according to two Fed insiders familiar with the moves and who asked not to be identified.

The changes are more evolution than revolution, the people said. They build on other steps taken in recent years to relax a once-rigid system that strictly controlled the flow of information between politically appointed policy makers and the rank-and-file staff. Still, several former senFed officials said, it’s a notable shift in the way it flattens the central bank’s traditional hierarchy and further liberalizes internal communication.

Former Fed Vice Chairman Donald Kohn said he had no direct knowledge of Powell’s changes, but they struck him as positive steps that could help the new chairman as he attempts to shepherd the U.S. economy through an uncertain period of low unemployment, low inflation and still tepid, but quickening economic growth.

‘Loosening it Up’

“I don’t know that this is about getting alternative perspectives as much as it is about opening the funnel a bit,” Kohn said. “Loosening it up and also getting alternative perspectives and having informal conversations, that’s probably a good idea.”

Powell, who was sworn in as chairman on Feb. 5, is by many accounts a voracious reader of economic research. At the same time he lacks the academic grounding of Ph.D economists who have recently led the Fed, such as Ben Bernanke and Janet Yellen. Perhaps in recognition of that potential weakness, he’s keen to engage staff on topics that grab his attention.

Spur-of-the-moment exchanges between the chair and junior staffers would have been largely unthinkable at the Fed a generation ago. Even in recent years, a request for information would often result in a carefully vetted formal presentation that might take weeks to prepare and an hour to deliver.

Ty Laffoon

First published in Mortgage Daily News 

Mortgage rates tumbled in the past two weeks, approaching all-time lows

By Athena Cao, USA TODAY 

Mortgage rates tumbled in the past two weeks, approaching all-time lows as the U.K.’s vote to leave the European Union drove down Treasury yields.

The 30-year fixed-rate mortgage averaged 3.41% this week, down from 3.48% a week ago and 4.04% a year ago, mortgage giant Freddie Mac said Thursday.
Qualify Now!! http://pbsd.primemortgageloans.net 

The 30-year rate has dropped 15 basis points in the past two weeks, leaving it only 10 basis points above the record low of 3.31% set in November of 2012.

The 15-year fixed-rate mortgage averaged 2.74% this week. It stood at 2.78% last week and 3.20% a year ago.

The five-year Treasury-indexed adjustable-rate mortgage edged down to 2.68% from 2.70% last week and 2.93% a year ago.

Qualify Now!! http://pbsd.primemortgageloans.net 

Ty Laffoon

After the United Kingdom's vote to leave the EU, investors fled to the perceived safety of U.S. Treasury bonds, sinking the 30-year yield from 2.55% to 2.14% Wednesday.

Ty Laffoon

Mortgage rates tumbled in the past two weeks, approaching all-time lows

By Athena Cao, USA TODAY 

Mortgage rates tumbled in the past two weeks, approaching all-time lows as the U.K.’s vote to leave the European Union drove down Treasury yields.

The 30-year fixed-rate mortgage averaged 3.41% this week, down from 3.48% a week ago and 4.04% a year ago, mortgage giant Freddie Mac said Thursday.
Qualify Now!! http://pbsd.primemortgageloans.net 

The 30-year rate has dropped 15 basis points in the past two weeks, leaving it only 10 basis points above the record low of 3.31% set in November of 2012.

The 15-year fixed-rate mortgage averaged 2.74% this week. It stood at 2.78% last week and 3.20% a year ago.

The five-year Treasury-indexed adjustable-rate mortgage edged down to 2.68% from 2.70% last week and 2.93% a year ago.

Qualify Now!! http://pbsd.primemortgageloans.net 

Ty Laffoon

After the United Kingdom's vote to leave the EU, investors fled to the perceived safety of U.S. Treasury bonds, sinking the 30-year yield from 2.55% to 2.14% Wednesday.

Ty Laffoon

8 costly mortgage misunderstandings Ty Laffoon

8 costly mortgage misunderstanding

(Photo: iStockphoto)

w.

1. Ignoring your credit score
Your credit score has a major influence on the interest rate that lenders will offer you. If you don't have a good one, consider spending some time beefing it up before starting to buy a home. You might increase your score by fixing errors in your credit record, by paying bills on time, and by reducing your overall debt load. To understand the kind of difference your credit score makes in the interest rates you're offered, consider sample rates listed at Primemortgageloans.net . When I checked it recently, it showed that if you were borrowing $200,000 via a 30-year fixed-rate mortgage, and you had a top FICO score in the 760 to 850 range, you might get an interest rate of 3.3%, with a monthly payment of $880, and total interest paid over the 30 years of $116,717. If your score was 630, though, your rate would be 4.9%, with a monthly payment of $1,064, and total interest of $183,174. That's $184 more per month — $2,208 per year — and a whopping $66,457 more in interest.

Pre-Qualify  ty@primemortgageloans.net 

2. Thinking it's not worth shopping around for a mortgage
Don't assume that you'll be offered pretty much the same deal wherever you go. Different lenders use different calculations when they assess you and offer you interest rates. Go ahead and check with your own bank(s) first, as they may give you a bit of a discount on the interest rate because you're a customer. But check with other banks, too — and with credit unions, which often sport lower interest rates. You might also consult a mortgage broker. They often offer a wide range of loans, and can be especially helpful if you have an underwhelming credit record. Visit Primemortgageloans.net  too, where you can look up the best rates in your area and beyond.

Pre-Qualify  ty@primemortgageloans.net 

Buying less home than you can afford will give you a margin of safety. (Photo: iStockphoto)

3. Getting a bigger mortgage than you can really afford
When you're house hunting, it will be tempting to look a bit beyond your price range. Don't buy a home that will be expensive enough to have you stretched thin financially. Some suggest spending no more than 25% to 30% of your gross monthly income on housing — including property taxes and insurance — but instead of relying on that broad guideline, take the time to figure out just what you can afford. Take into consideration your regular household expenses, such as food, utilities, transportation, insurance, travel, entertainment, auto maintenance, debt payments, contributions to savings accounts, and so on, and factor in other expenses, too, such as medical or automotive emergencies and the cost of prepping your old home for sale and setting up your new one. Buying less home than you can afford will give you a margin of safety, and help you be able to save.

Pre-Qualify  ty@primemortgageloans.net 

4. Getting pre-qualified, not pre-approved
Once you know what loan you want and from which lender, don't wait until you find the home of your dreams to start the paperwork. Get pre-approved for the loan before you go shopping. This has several advantages. First, through the process of working with a loan officer, you can determine just how much home you can afford to buy. Second, it will make you a more credible buyer, should you end up bidding against any other buyers for a home. Pre-approval means that the lender will have looked at your credit score, your employment, your financial health, and perhaps some tax returns — and found you creditworthy.
Pre-Qualify  ty@primemortgageloans.net 

5. Getting the wrong kind of mortgage
Don't assume that a standard 30-year fixed-rate mortgage will serve you best. It might, but consider alternatives, too. For example, you need to decide between a 15-year or 30-year loan (other time frames are also available), and between a fixed-rate mortgage or adjustable-rate mortgage (ARM). Longer terms will give you lower payments, but you'll pay much more in interest over the life of the loan. If you're not comfortable with a 15-year mortgage's steeper payments, consider getting a 30-year loan that permits prepayments, and then aim to pay significantly more than you need to each month, in order to shorten the life of the loan. If you're not planning to be in the home long, an ARM could serve you best in today's low-interest-rate environment, as it can lock in low rates for a few years. If you think you'll be in the home for decades, though, it can be better to lock in a low rate for the expected long life of the loan — especially because interest rates have started inching up.

Pre-Qualify  ty@primemortgageloans.net 

6. Making a small down payment
Putting less than 20% down on a new home means you'll have to take on an extra loan in the form of private mortgage insurance (PMI), which will increase your monthly payment. A low down payment might also result in a higher interest rate. It's particularly bad if home values drop during your ownership period, leaving you with an "underwater" mortgage, when you owe more than the home is worth. That can make it hard to sell the home. Ty laffoon

Pre-Qualify  ty@primemortgageloans.net 

Paying of your mortgage early is tempting, but it could be a mistake. (Photo: iStockphoto)

7. Paying off your mortgage early
It can be good to pay off your mortgage early, and not have a big loan on your shoulders — especially as you enter retirement. But paying off your mortgage early is not always the best thing to do. If you don't have an emergency fund, for example, you're better off establishing and funding one with that extra money. That money could also go into retirement accounts. You will also give up mortgage interest deductions by paying off the loan early. If you're carrying any high-interest rate debt, such as credit card debt, paying that debt off early should be your priority.

Pre-Qualify  ty@primemortgageloans.net 

8. Thinking it's not worth refinancing
Finally, once you have a mortgage, don't assume that it's not worth refinancing. If the interest rate you might get on a new loan is about a percentage point lower than your current rate, it may well be worth refinancing. Crunch other numbers, though, and consider your big picture. If you don't plan to stay in the home long, refinancing will make less sense.

Spend a little time learning more about mortgages, and you might be able to save hundreds, if not thousands, of dollars.

Pre-Qualify  ty@primemortgageloans.net 

Ty Laffoon

Buy your 1st home with very little down

So you've found your perfect home and you're ready to move in and make it yours. But there's one giant hurdle that stands between you and your new sanctuary – the down payment.

If you're not paying in cash, you'll probably need to take a mortgage out on your future home and with that comes a large upfront deposit--usually 10 to 25% of the total price. The bigger the down payment you're able to pay, the lower your mortgage will be. Ideally you'll want to put at least 20% down, otherwise you'll need to pay mortgage insurance which typically costs around 0.3% to 1.5% of the original loan amount per year.

Ty Laffoon

So if you haven't started saving, now is the time. Open a dedicated account for your down payment, evaluate your current spending habits and cut unnecessary costs. You might also want to have a certain percentage of your paycheck go directly into the savings account so that you're not tempted to spend it.

If you're having trouble finding any extra money to save, you still have options. If you've owned a Roth IRA for more than five years and you're a first-time homebuyer you can withdraw up to $10,000 tax-free.  But remember--you'll be cutting into your retirement savings.

You can also borrow against your 401(k).You are allowed to take a one-time loan of up to $50,000 or half the value of the account, whichever is less. There's no tax penalty and you keep your 401(k) in tact but you'll still have to make monthly payments with interest.

If you still need some extra cash there are nearly 2,300 down payment help programs throughout the U.S. that aide low to middle income, first-time homebuyers. In fact, most people who are eligible for these programs receive at least $10,000 in assistance through grants or low-interest loans. Go to down payment resource.com to see if you're eligible.

Saving for a down payment is tough work--but all of the scrimping and saving will pay off in the end when you're living in your dream house.

Forward from Ty Laffoon

CA gas prices expected to jump 30 cents by weekend

CA gas prices expected to jump 30 cents by weekend

Fill those tanks

The economy wasn't as feeble as believed late last year

The economy wasn't as feeble as believed late last year as businesses throttled back stockpiling less than initially estimated.

The nation’s gross domestic product  --  a measure of all the goods and services produced in the economy -- expanded at a seasonally adjusted annual rate of 1% in the fourth quarter, above the 0.7% initially estimated, the Commerce Department said Friday.

Economists surveyed by Bloomberg expected a downward revision to 0.3% growth.

Growth was still weak in the quarter and well below the roughly 2.3% pace that has marked the nearly 7-year-old recovery. For all of 2015, the economy grew 2.4%, an estimate that was unchanged after Friday's revisions.

Manufacturing and business investment have been crimped by a weak global economy and strong dollar that have dampened exports, as well as a sharp downturn in drilling activity amid the plunge in oil prices. Consumer spending supported the economy through much of 2015, but even that slowed more than first estimated in the final three months of the year.

Job growth, by contrast, averaged a robust 279,000 a month in the quarter, and many economists believe it provides a more accurate picture of the economy than GDP, which can be difficult to measure and is subject to multiple revisions.

Businesses slowed their stockpiling last quarter but that subtracted just 0.14% from growth, less than the nearly half a percentage point first estimated. That, however, could mean that companies will have to do more to shrink bloated inventories in the current quarter, possibly curtailing growth.

"Unfortunately, the cause of the upward revision bodes ill for the first quarter," Chris Williamson, chief economist of Markit, wrote in a note to clients.

Imports, meanwhile, fell 0.6% instead of rising slightly as the government previously believed, narrowing the U.S. trade gap. A stronger dollar generally has made U.S. products more expensive overseas and imports cheaper for American consumers.

And business outlays on equipment, a measure of capital spending,fell 1.8%, less than the 2.5% first estimated.

On the other side of the ledger, consumer spending grew 2%, down from the 2.2% first estimated. Consumption has been lifted by cheap gasoline, strong job growth and lower household debt but wage gains have yet to pick up in earnest.

And government expenditures were virtually flat, instead of the modest increase previously estimated, as state and local outlays fell 1.4%.

All told, the economy's fundamentals were a bit less solid than first thought last quarter despite the upward revision. Final sales, a measure of domestic demand that strips out volatile inventories and trade, rose 1.4%, down from the 1.6% first estimated.

Still, many economists believe GDP growth will rebound to more than a 2% pace in the current quarter, with consumers again poised to drive the economy forward.

The report was the government's second estimate of fourth-quarter GDP. A third and final estimate will be published in March.

Via USA TODAY

 

Ty Laffoon