March 2016 - RIP Dodd Frank

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | TH E M R EP O RT FEATURE Braced for Impact The industry was primed and ready for the Fed's rate hike, but how has it fared since the increase went into effect? By The Hon. Joseph Murin I n December, the Federal Reserve raised its key interest rate, the federal funds rate, from a range of 0 percent to 0.25 percent to a range of 0.25 percent to 0.5 percent. It was the first announcement of a rate hike since 2006. For some of the younger professionals in the mortgage industry, it's likely the first time they've ever seen such an occurrence. In the past few years, an interest rate hike has been the boogeyman of the mortgage market. After enjoying artificially low rates for the better part of 10 years and two historical refinance spikes as a result, some investors simply couldn't fathom the possibility of higher rates. However, most of us can agree that, inevitably, the action had to be taken based on current economic conditions and the demands of the market. We can also probably assume that any talk of a market panic in the wake of the increase was premature, and the short-term consequences have come and gone. This will be the first year in quite some time that we may experience some kind of increase to average mortgage interest rates. The Anticipated Increase Occurred, Now What? F irst and foremost, the mortgage and real estate industry, including its associated secondary market, is a different place than it was in 2006, even if we set aside the impact of ubiquitous regulatory changes. So too is the 10-year Treasury note, long a reliable indicator of mortgage rates. While there was a time when a Fed hike almost automatically resulted in a subsequent rise in the 10-year T-note that has since changed. One important reason for this is a dramatic increase in the activ- ity of global market participants. An increasing international ap- petite for U.S. debt has brought into play a host of complex and interrelated factors having some effect on the 10-year T-note, making it much more difficult to predict exactly how mortgage rates will be affected by the interest rate increase. The cor- relation between these indicators is no longer a linear one. The first quarter of 2016 has

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