That’s a vote of confidence in the nation’s economic strength but bad news for mortgage professional
s, who are certain to see interest rates rise on news of the taper.
“The more accelerated the timeline (of the taper), the greater the sell-off and the higher the rates will be,” said Bryan McNee, vice president and senior bond analyst for MBSAuthority.com.
Mere speculation that the Fed would taper in September led rates to rise by more than a full percentage point over the summer, choking the refi boom and leading to thousands of layoffs in the mortgage units of big banks. Marc Savitt, president of the National Association of Independent Housing Professionals, worries that today's taper news will have similar consequences.
"I think this is not the time to do it, because it’s going to raise interest rates, and if you couple that with the announcement by the (Federal Housing Finance Agency) about loan level adjustments, you’re eroding the market for consumers at the worst possible time," Savitt said. "We don’t want to do anything to jeopardize a full recovery.
"We all know that eventually they were going to have to start tapering," Savitt said. "This can’t go on forever, but it’s the timing. We want to make sure we’re back in a normal housing market. Now, a lot of the signs are good for the housing market, but we’re not there yet. We want to make sure the housing market is stable again before we start to peel away some of the band-aids that were put on during the crisis."
Savitt said that tapering just ahead of January, when several new mortgage industry regulations will take effect, is going to harm both borrowers and originators.
"Any time rates go up, we have more people who fall out of qualifying for a mortgage," he said. "We need to get adjusted to all these rules and regulations before interest rates go up."
The long, strange trip on the Fed’s easy-money train is over – or at least winding down. The Federal Reserve today announced that it would begin to taper its $85bn-per-month bond-buying program, known as quantitative easing. Starting in January, the Fed will lower its bond buys by $10bn per month -- reducing its purchases of mortgage-backed securities and Treasury bonds by $5bn each.