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THE LATEST SERVICING FOMC Moves Modestly to Boost Economy The federal funds rate remains unchanged, as the committee inches toward initiating new housing-focused initiatives. W voted no change in the target federal funds rate but agreed to expand its program to stimulate the economy by purchasing Treasury securities. While voting no change in the ith a lone dissent, the Federal Open Market Committee has with more members of the com- mittee seeing higher rates in 2014 than in the prior forecast. On its assessment of the target Fed funds rate, the FOMC said it would "purchase Treasury securities with remaining ma- turities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remain- ing maturities of approximately three years or less [to] put downward pressure on longer- term interest rates and help to make broader financial condi- tions more accommodative." The action is expected to keep mortgage rates at record lows. After the meeting, the FOMC released its quarterly forecast of the economy and interest rates, ment at the conclusion of the April meeting when the com- mittee said that "labor market conditions have improved." The FOMC also acknowledged "household spending appears to be rising at a somewhat slower pace than earlier in the year" and repeated its view that "despite some signs of improvement, the housing sector remains de- pressed." The committee dialed back its outlook saying in its statement it "expects economic growth to remain moderate over coming quarters and then to pick up economy after a two-day meet- ing, the FOMC said that "growth in employment has slowed in recent months and the unem- ployment rate has declined but remains elevated." That contrasted with the state- ticipants lowered their outlook for GDP growth this year to a range of 1.9 to 2.4 percent from 2.4 to 2.9 percent in April. The FHA Backtracks on Homebuyer Credit Dispute Requirements Choosing to rescind a recently established policy related to homeowners' repayment plans, HUD opts out of enforcing the new rule. H UD has rescinded guidance that would have obligated homeowners to resolve debts out- standing of $1,000 or more or enter into a repay- ment plan by closing time for a mortgage backed by the Federal Housing Administration (FHA). Guidance from February required that lenders with homeowners in dispute of credit accounts or collections in that amount resolve or pay down the debt in order to meet eligibility criteria for an FHA-insured loan. That policy would have gone into effect by July 1. Brian Sullivan, a spokesman with HUD, told us that rescinding the guidance translated into a "distinction" from earlier. ing in which newly confirmed members Jerome H. Powell and Jeremy C. Stein were able to cast a vote; they both voted with the majority. As he had in March and April, Richmond Fed President Jeffrey Lacker cast the only vote against the policy decision. In their forecasts, FOMC par- outlook for inflation and said it anticipates that inflation over the medium term will run at or be- low the rate that it judges most consistent with its dual man- date." In April the committee correctly forecast, "The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily." This was the first meet- very gradually" adding the adjec- tive "very" to the long-term view. The FOMC revised the outlook for GDP growth in 2013 and 2014 was also reduced. The forecasts for the unem- ployment rate were also less optimistic: a range of 8 to 8.2 percent this year compared with the April forecast of 7.8 percent to 8.2 percent. Unemployment rate forecasts for 2013 and 2014 were also higher than they were in April. Inflation forecasts for all three years in the forecast horizon were also lower than they had been in April. As it had in April, the FOMC said it decided "to keep the target range for the federal funds rate at 0 to one-quarter percent and currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014." The committee said it would maintain "its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage- backed securities in agency mortgage-backed securities" but dropped from its statement the commitment to roll over maturing Treasury securities at auction in favor of purchasing new Treasury securities. Borrowers with disputed debt involving $1,000 or more "won't have to work on a debt repayment plan," he said. An earlier policy written by the federal agency still calls on lenders to forward the ap- plications of homeowners with ongoing disputes to manual underwriters. Sullivan said that policy remains in effect. "If the credit report reveals that the bor- rower's disputing any credit account or public records, the mortgage application must be referred to a [manual underwriter] for review . . . to get a human to eyeball the application and more fully understand what's going on," he said. He added that the FHA intends "to revisit this issue very soon." The agency means to "balance our need to manage risk while still pre- serving financing options to otherwise qualified borrowers," he said. 52 | THE M REPORT SECONDARY MARKET ANALYTICS SERVICING ORIGINATION