Yellen: Housing recovery still too slow

by Ryan Smith15 Jul 2014
The head of the Federal Reserve says the housing recovery isn’t moving fast enough – due in part to last year’s mortgage-rate spike.

“The housing sector … has shown little recent progress,” Fed Chair Janet Yellen said today in prepared remarks for the Senate Banking Committee. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates – and readings this year have, overall, continued to be disappointing.”

The rate spike to which Yellen referred happened in large part because of her own organization. Rates, which had been at near-historic lows, rose more than a full percentage point last year when the Fed began considering an end to its bond-buying stimulus program.

But rising rates don’t tell the whole story, according to the Fed’s Monetary Policy Report, released today.

“Historical correlations between mortgage rates and residential investment suggest that the effects of last year’s run-up should have begun to fade by now, but housing activity has yet to pick up,” the report said.

The report said that the continuing increase in house prices and the persistent lag in new-home construction are also choking the market.


  • by Charles Stidham | 7/15/2014 11:04:04 AM

    Ms. Yellen should look no further than the current scare tactics that the entire wholesale lending community is perpetrating upon folks such as Franklin American and Caliber pertinent to the false notion of the God almighty "BUYBACK".

    Current mortgage lending has almost nothing to do with a fear of foreclosure because all TPO mortgage mortgages are so stringently underwritten that the foreclosure rates are at uncommon historic lows. Yet when the reps for the wholesale lenders come by my office all they do is talk and cry about "BUYBACk's'.

    When I ask them exactly what their BUYBACK ratio is, none of them can tell me. Basically this whole thing has turned into one big game to see which lender can tighten the screws a little bit more. I consistently send mortgages for underwriting that are $400,000 mortgage amounts, 80% or less LTV and excellent reserves yet the files get kicked in the head with brain damage conditions. It's a joke.

    I have been originating for 20 years and the current environment hiding behind the BUYBACK wall is very strange and not seen before. Underwriters are consistently making $65,000 to $100,000 while working out of their homes as DE Underwriters and they won't make a common sense decision for fear of the BUYBACK. That's what I see as an impediment to the housing recovery. There is no mutual and/or causal relationship between a foreclosure and a buyback because the mortgages are solid when placed into the market for sale. Asking for one more bank statement in a BUYBACK scenario or one more signature in a BUYBACK scenario has nothing to do with a borrower making his mortgage payment. Foreclosures and BUYBACK's are mutually exclusive. Yet the entire change environment over the past 5 years was exclusively geared to preventing foreclosures. BUYBACKS are a new phenomena and threat on a large scale and that is creating the impediment to more mortgages being closed and funded.

  • by Debbi Kearl | 7/17/2014 12:05:58 PM

    I really believe the new QM rules are a significant reason for the decline in housing. It has become harder for the first time home buyer to qualify with the combination of lower DTI and higher student mortgages. Without the first buyer in the market, there is no move up buyer.


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