What’s Going on at the Federal Reserve?

Posted on April 27, 2018 in Uncategorized | Add Your Voice
The Collingwood Group, a Situs company, is excited to announce changes to the format of our Voice of Housing newsletter. Keep an eye out for our updated layout next week. We will continue to track hot topics in residential mortgage lending, but will also offer access to additional coverage and commentary on commercial real estate, banking, market movements and risk management.

What’s Going on at the Federal Reserve?

It’s been difficult to keep track of the turnaround at the Federal Reserve lately. The Fed’s Board of Governors is operating with fewer than half of its positions filled. President Donald Trump recently announced two new nominations to the Board, bringing the total number of pending nominations to three, while leaving one vacant seat without a nominee.

Coinciding with the resignations of two Board members in 2017, President Trump nominated Randal Quarles to serve as Vice Chairman for Supervision, a seat created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, but left unfilled for several years. Fellow Trump appointee Jerome Powell was confirmed as Fed Chair in January 2018, leaving his previous seat vacant. Governor Lael Brainard, appointed by President Obama in 2014, could serve through 2028, when her term expires. Bottom line, four of the seven Board seats at the central bank are currently vacant.

Governors traditionally serve 14-year, staggered terms, beginning every two years – a structure designed to distribute appointments across multiple administrations. “The current number of open seats creates a unique opportunity for President Trump to significantly influence monetary policy,” said Tim Rood, Chairman of The Collingwood Group, a Situs company.

The three nominations awaiting Senate confirmation represent a diverse background of experience and relatively moderate views on the Fed’s role in driving monetary policy.

Last week, President Trump tapped conservative economist Richard Clarida to serve as Vice Chairman. Currently an economics professor at Columbia University, Clarida would bring an academic perspective to the Board. President Trump also announced his nomination of Michelle Bowman. As a Governor, Bowman would represent community banks. She is the acting Kansas Bank Commissioner and previously worked at Farmers & Drovers Bank.

Clarida and Bowman now join fellow nominee Marvin Goodfriend in the Senate confirmation queue. Goodfriend, a widely recognized monetary economist, is considered to be a somewhat hawkish candidate, favoring more aggressive actions to control inflation. He is currently a professor at Carnegie Mellon University and previously served as Director of Research at the Federal Reserve Bank of Richmond.

Goodfriend’s nomination was approved by a razor-thin margin by the Senate Banking Committee in February and he awaits confirmation by the full Senate.  Sen. Jon Tester, a Montana Democrat not known for opposing Trump nominees, opposed his nomination based on Goodfriend’s comments at the nomination hearing denouncing the need for the federal government to guarantee 30-year fixed-rate mortgages.

“While it’s important that the Senate conduct a thorough confirmation process, it’s hard to imagine the Federal Reserve Board continuing to make critical monetary decisions with less than half of its positions filled,” said Rood. Even if all three appointments are confirmed, President Trump has yet to offer a nominee for the final vacancy.

U.S. Consumer Confidence Rebounds as Homebuying Plans Hit Record

U.S. consumer confidence unexpectedly rose in April to the second-highest level since 2000 as Americans grew more upbeat about both current conditions and the economic outlook, according to figures Tuesday from the New York-based Conference Board.

A bigger share of respondents expect to purchase big-ticket items including cars and major appliances within six months, while a record 7.8 percent of respondents said they plan to buy a home. That will support both consumer spending, the biggest part of the economy, as well as housing prices that are already handily outpacing wage gains amid tight supplies.

At the same time, the April report from the Conference Board showed the labor differential, which measures the gap between respondents saying jobs are plentiful and those who say they’re hard to get, narrowed to 22.9 percentage points, a three-month low.

Bigger after-tax paychecks and a still-strong job market – with the lowest unemployment rate since 2000 – are helping to sustain sentiment. The latest results contrast with other signs that consumer and business confidence measures, while still fairly high, are coming off the lofty levels seen in the past year.

Read more:  Bloomberg

Tax Changes Mean Mortgage-Interest Deduction Finds Fewer Takers

Meet the new mortgage-interest deduction. It’s smaller and much more concentrated among high-income households.

In 2018, the deduction will save taxpayers $25 billion, down from $60 billion in 2017, according to estimates released on Monday by the Joint Committee on Taxation, the official analysts of tax policy for Congress.

That’s largely because of the way last year’s tax law change altered the standard deduction. The much higher standard deduction means that far fewer taxpayers will itemize their deductions. In most cases, only taxpayers with total deductions exceeding $12,000 for individuals and $24,000 for married couples will itemize. And those deductions can now include only $10,000 in state and local taxes, which means the most likely itemizers are Americans with sizable mortgages or charitable contributions.

The result is that just 18 million households are expected to itemize deductions for 2018, down from 46.5 million in 2017, according to JCT.

Read more:  Wall Street Journal

Mulvaney: CFPB Doesn’t Have to Run a ‘Yelp’ for Bank Customers​​​​​​

Consumer Financial Protection Bureau acting director Mick Mulvaney told a large crowd of bankers gathered in Washington that he doesn’t have to run a “Yelp for financial services, sponsored by the federal government.”

Mulvaney’s remark, delivered to the American Bankers Association, got lots of chuckles and then huge applause when he added that, in particular, he doesn’t see anything in the Dodd-Frank law that created the CFPB that requires “the Bureau,” as he prefers to call the agency, to make a database of complaints against the banks available to the public.

Advocates consider the database an invaluable resource in determining the difficulties consumers face when dealing with banks and other financial service providers. Industry critics say the database is a tabulation of unverified and possibly untrue complaints.

That was just one of several crowd-pleasing remarks by Mulvaney, who does double duty as director of the Office of Management and Budget, a cabinet-level position.

Read more:  MarketWatch​

Sales of New Homes Shoot Up 4% in March; Sales in Western US Jump 28.3%

Sales of new U.S. homes jumped 4% in March, propelled by a surge of buying in the West.

The Commerce Department said Tuesday that sales last month were at a seasonally adjusted annual rate of 694,000. The two prior months had their sales revised upward with the annual rate being 667,000 in February and 644,000 in January. For the first three months of 2018, sales are running 10.3% higher than a year ago.

Homebuyers are snapping up newly built houses as the economic outlook has continued to improve in recent months. Nor have the gains been derailed so far by 30-year mortgage rates climbing to their highest averages since early 2014.

Read more:  USA Today

Homebuyers Stretching Budgets and Mortgage Limits to Win Bidding Wars

At a Sunday open house on a sunny spring day outside Philadelphia, only about a half-dozen families showed up to tour a $600,000 colonial.

The home was in a sought-after suburb with excellent schools and had just gone on the market the previous Thursday. The showing was lean, likely because more than two dozen potential buyers had already seen it immediately, and there were two offers pending.

That scenario is playing out in neighborhoods across the nation, as buyer demand soars and the supply of homes for sale sits at a record low.

“The frustration with the lack of inventory is, so many of the houses are going in bidding wars, and so you know you really have to step up to the plate and you have to do your homework to be a competitive buyer,” said Patrick Clark, the real estate agent with Long and Foster showing the home.

Buyers today not only need to be preapproved for a mortgage, but they must also have a mortgage commitment. Home prices are hitting new highs and the gains are growing, just as mortgage interest rates are turning higher again. All of that has more buyers stretching their budgets, putting less down or using adjustable rate loans, or ARMs, that offer lower rates.

Read more:  CNBC

Please reach out if your company is making news that you would like to see in this space.

Cecilia Panozzo
Chief Marketing Officer
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