Short Sales Provide Foreclosure Alternative; Many Await Fed Net Policy Announcement
December 14, 2009 - Mortgage rates drifted upward last week in continued response to the previous week's employment report. Rates do however remain close to their all-time lows. While truly good economic news is still fairly sparse, there is sufficient evidence to warrant some additional optimism regarding the overall economy. Last week ended with another small surprise in the form of a 1.3% increase in retail sales during the month of November. Consumers spent $352.1 billion in November showing a sign that consumer spending is accelerating into the new year.
Short sales have become the newest addition to the Obama administration's foreclosure-deterrence agenda. The addition of the program will hopefully make it easier for more financially stressed borrowers to sell their homes. The short sale program will allow borrowers to receive an incentive of $1500 while mortgage-servicing companies will receive $1000 for each successful completion of a short sale. These incentive payments are available to borrowers who meet the minimum eligibility for the MHA modification but were either unable to qualify or were delinquent in their trial period payments.
For the week ahead, the probability of mortgage rates setting another all-time record low will depend on what the Federal Reserve will say in their net policy announcement. While the Fed has repeatedly indicated that it will keep rates low for an "extended period," these latest hints of economic recovery have some analysts wondering how the Fed will respond. If the Fed drops any bit of the language regarding the "extended period," or if they provide any insight into how they might begin unwinding their positions in the financial markets, we will see rates moving upward. However, if the statement remains mostly unchanged, we could see rates flatten out during the week.