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A Meeting of the Mindless

Not much gets done by committee. There are a thousand pull quotes I could insert to reinforce:

“A committee is a group of the unprepared, appointed by the unwilling to do the unnecessary,” “A committee is a group that keeps minutes and loses hours.,” Muddle is the extra, unknown personality in any committee.”

But, there is one committee wields considerable influence. The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, and decides on economic policy. At their last meeting, this all-powerful brain trust dropped what amounted to an A-bomb when they intimated that they were going “ease” on the “easing” they previously proclaimed would last for the next couple years. That announcement was akin to fingernails on a chalkboard, making most of the mortgage broker ilk twist in obvious mental discomfort.

The Feds have kept the overnight interest rates at near zero for the better part of the last four years. The changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services. Most directly, they affect mortgage rates.

However, after an initial .5 -.75 increase in price on rates, mortgage rates on 30-year loans fell for the third consecutive week… Whew, that was close.

According to Freddie Mac’s weekly rate survey, for the week ending April 12 lenders on average were offering 30-year conventional FRMs at 3.88% with 0.7 points. A week earlier rates were 10 basis points higher. And a year ago rates were at at 4.91%.

Refinance transactions have dominated the mortgage market since 2008 accounting for 66% of all loans funded, which coincides with the Fed Funds Committee committed to dropping their shorts. So, while “There is no monument dedicated to the memory of a committee,” this group may just get one if mortgagors and brokers have a vote.


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