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44 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING The laTesT Fed commits to Patience in interest rate Hikes policymakers point to a strengthening economy and robust employment growth as bellwethers for the impending rate increase. c oming out of their first Federal Open Market Committee (FOMC) meeting of 2015, Federal Reserve officials gave no sign of straying from their likely path of slowly bringing interest rates up later this year. In its post-meeting statement, the committee expressed consid- erably more optimism about the direction of the economy than it has in recent years, pointing to the "solid pace" of economic expansion and "strong job gains" reported since December. Also encouraging, the statement says, is the recent rise in house- hold spending as energy prices have declined. Nevertheless, policymakers are apparently in no hurry to start hiking interest rates just yet, bringing back language from the last FOMC statement: "Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy." Projections from economists and Fed leaders largely indicate the central bank will wait until June or later before starting to push rates up. Part of what's slowing the group down is a decline in inflation, though the statement writes it off as a temporary fac- tor brought on by falling energy prices. Also rating a (very) brief men- tion is the ongoing economic crisis in the eurozone, which the Fed says it will take into account in further policy discussions. No voting members dissented to the statement, though that could be due to the fact that the recent dissenters—including Dallas Fed President Richard Fisher, Philadelphia Fed President Charles Plosser, and Minneapolis Fed President Narayana Kocherlakota, all of whom dissented in December—were cycled off the ranks of voting members. HarP activity drops Further as refinances Sink The government program inks its lowest numbers in years as refis fall. m ortgage refinance volumes reversed course in November, turning down as the government's refinance program continued to see its popularity dwindle. Monthly data released by the Federal Housing Finance Agency (FHFA) shows Fannie Mae and Freddie Mac together reported 134,582 refinances in November 2014, down from nearly 139,000 in October. Monthly refinance numbers moved in fits and starts through- out 2014, bouncing between a low of 105,059 in March and October's year-to-date high—though the trend in the year's latter half was largely upward as mortgage rates fell to nearly 4 percent. As overall refinancing fell, so too did the number of mortgages refinanced under the Obama administration's Home Affordable Refinance Program (HARP), which targets borrowers with high loan-to-value (LTV) ratios. For November, the GSEs re- ported a combined 12,429 HARP refinances, putting demand for the program at its lowest point in years. Year-to-date through November, HARP refinances totaled just 201,337, less than a quarter of 2013's full-year number (892,909). While FHFA has focused in the past year on marketing the program through town hall-style events and other borrower out- reach initiatives, analysts say the drop in HARP activity stems not from lack of awareness but from a lack of new and eligible home- owners. "Everybody that has been or could be through that program did it and has moved on," said John Bell, a principal at United Fidelity Funding Corp., a whole- sale mortgage lender. Bell says that at this point, the government would be better served by expanding eligibil- ity requirements, as it already did once in 2012. Though FHFA Director Mel Watt has offered no signal that the agency will create "HARP 3.0" before the program's expiration at the end of this year, it does seem a more likely pos- sibility, given the Obama admin- istration's push to make mortgage credit more affordable. For Bell—who works out of an office in Irvine, California—the first step would be to raise loan limits for certain high-cost areas. The second would be to loosen some federal regulations, such as the qualified mortgage (QM) rule, which he says has hampered some homeowners who would otherwise be eligible for HARP. "We'd be really excited to see [HARP] 3.0 come out with expanded loan limits, maybe lower FICO scores, and possibly reduced QM requirements ... on some loans," he said. "everybody that has been or could be through [hARp] did it and has moved on." — John Bell, United Fidelity Funding Corp.

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