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Posted over 9 years ago

Market Update November 2014

There is plenty of positive economic news this month. Because of the strength of our economy, the Federal Reserve made the formal announcement that it is ending QE3, the bond buying program that has helped keep interest rates low and stimulate the economy. The program ended at the end of October. This is a little misleading because they are not taking money out of the economy; they are just stopping the program that is pumping money into it. All proceeds from the government’s current holdings will be reinvested into purchasing more government debt, keeping the market liquid. Next will be an increase in the Federal Funds rate, which should not happen until sometime in 2015.

I found it interesting that many banks, credit unions and other lenders are making fewer loans now because of concerns with regulation. Although regulators claim they are trying to make it easier to do business, the fear of violating regulations continue to grow according to a recent survey. While this regulation makes it harder for lenders to make credit available, we have both the FHFA Director, the agency that oversees Fannie Mae and Freddie Mac, and the HUD Secretary pleading with lenders to loosen credit requirements. Both FHA and Fannie Mae have loosened guidelines, but lenders are not as quick to adopt those changes. Probably because they are too busy trying to make sure they are compliant with what they are currently doing. My guess is that credit will continue to loosen, which will help offset some of the interest rate hikes that are coming, and keep our housing market stable.

Now that the Republicans have control over the House and Senate, we should not see much or any changes to Fannie Mae and Freddie Mac in the next few years. The only exception to this that I can see is them possibly combining, but even that will not impact the lending process in this country. 



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