MReport January 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 56 of 67

TH E M R EP O RT | 55 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Fed's Long-Term Plans Are Uncertain After the Fed's confirmation to increase interest rates for the third time this year, Fed Chair Yellen discussed economic impacts of tax reform. T he Federal Reserve raised its benchmark interest rate for the third time this year in December—an increase in line with the series of gradual rate hikes the Fed has been mak - ing in an effort to normalize its balance sheet. The Fed increased short-term interest rates by a quarter percentage point, from 1.25 percent to 1.5 percent. Fed Presidents Charles Evans of Philadelphia and Neel Kashkari of Minneapolis voted against the interest rate hike. The Federal Open Market Committee also raised its GDP estimate to 2.5 percent, up from 2.1 percent in September 2017. The inflation forecast for 2018 increased from 1.6 percent to 1.7 percent. The unemployment rate is projected to be 3.9 percent in 2018 and 2019, then tick upward to 4.0 percent in 2020. Currently, it lies at 4.1 percent. During a press conference that capped off the Fed's two-day poli - cy meeting, Fed Chair Janet Yellen said that if the Congressional tax plan is passed, the tax changes "will likely provide some lift to economic activity in coming years." However, she cautioned that "the magnitude and timing of the macroeconomic effects of any tax package remain uncertain." On the subject of inflation, Yellen said, "For a number of years now, inflation has been run - ning under 2 percent. I consider it a priority that inflation doesn't undershoot its objective." The increase to the Fed's benchmark interest rate had been widely anticipated in the weeks leading up to the Fed's meeting, and further interest rate hikes are expected in 2018. However, today's increase is somewhat unusual giv - en that inflation is currently low, remaining below the 2 percent rate goal set by the Federal Open Market Committee (FOMC). Alan Levenson, Chief Economist at T. Rowe Price, told Business Insider, "This is the first tightening cycle where they've been concerned about inflation being too low. Yellen previously addressed this concern during her Economic Outlook testimony before the Joint Economic Committee at the end of November 2017. "In my view, the recent lower readings on inflation likely reflect transi - tory factors," Yellen said. "As these transitory factors fade, I anticipate that inflation will stabilize around 2 percent over the medium term." The Fed's long-term plans for interest rates also depend on the tax reform. If the Fed determines that the $1.5 trillion in tax reduc - tions over a decade will be good news for the economy, they will be more likely to plan further interest rate increases. If the Fed is less optimistic about the bill's impact on the economy, they may be more hesitant to implement further interest rate hikes as we move through 2018. Jerome Powell, Yellen's succes - sor, stated during his confirmation hearings that he would likely follow Yellen's path of gradual interest rate increases. Vassili Serebriakov, a foreign exchange strategist at Credit Agricole in New York, told Reuters, "It will probably reinforce the caution of the committee members that are concerned that the Fed is falling short of its infla - tion target. It also supports our view that the Fed will be fairly gradual next year." Compton Confirmed to Serve as HUD General Counsel Paul Compton was officially confirmed by the U.S. Senate. O n December 18, 2017, the United States Sen- ate confirmed J. Paul Compton Jr. to serve as General Counsel of the U.S. Department of Housing and Ur - ban Development (HUD). HUD Secretary Ben Carson said that Compton's confirmation comes at a critical time as the depart - ment continues to deal with the aftermath of Hurricanes Harvey, Irma, and Maria, as well as other natural disasters such as the California wildfires. Secretary Carson said, "Paul's extensive background in real estate and housing finance will be a tremendous asset to this depart - ment as we continue to support our nation's housing markets and our state and local partners recovering from recent disasters. I look forward to adding Paul's ex - pertise to our highly experienced senior team." Paul Compton has extensive le- gal expertise in the areas of multi- family affordable housing finance, tax credit transactions, and resi- dential mortgage Securitization. According to the press statement, Compton is "a former partner of the Birmingham-based law firm of Bradley Arant Boult Cummings, LLP," and "... is listed by Chambers USA as one of America's leading business law - yers on issues related to banking, finance and regulatory matters." Compton served as a legal advi- sor to the Alabama Affordable Housing Association (AAHA), described as "a trade organization for developers, property manag - ers, lenders, investors and service providers for affordable housing."

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport January 2018