The Federal Reserve board voted Wednesday to keep the target range for its federal funds rate at 0 to 0.25 percent and maintain that level “for an extended period.”

The central bank has said since December 2008 that economic conditions call for the benchmark rate to beheld “exceptionally low,” and its board continues to hold true to that stance despite concerns among some economists and policymakers that if the rate doesn’t rise, the near-zero level will give rise to inflation.

At least one board member agrees. Thomas M. Hoenig, head of the Kansas City Federal Reserve Bank, was the only dissenting vote on the interest rate action. Hoenig said that “continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted” because it could lead to a build-up of future imbalances and increase risks to long-term financial stability, while limiting the Fed’s flexibility to begin raising rates modestly.

Analysts were looking for any kind of semblance of change in the central bank’s wording of its monetary policy statement, but it was déjà vu as the Fed remained guarded in its outlook and careful phrasing. One area, though, that did get a bit of a lift was the jobs market.

At its March meeting, the Federal Reserve board said: “…economic activity has continued to strengthen and…the labor market is stabilizing.”

By Wednesday, that assessment had shifted to: “…economic activity has continued to strengthen and…the labor market is beginning to improve.”

Fed officials cautioned that the pace of economic recovery is “likely to be moderate for a time,” and noted that while bank lending continues to contract, financial market conditions remain supportive of economic growth. They pointed to the same economic stumbling blocks as posing the biggest risks to improving stability – declines in commercial real estate investing, modest income growth, lower housing wealth, and employers’ reluctance to add to payrolls.

In emailed commentary regarding the Fed’s policy meeting, IHS Global Insight pointed out that the central bank’s exit from the mortgage debt markets at the end of March went surprisingly smooth.

“In fact, there was no evidence of any sustained upward pressure on mortgage rate spreads during the transition – on the contrary, risk spreads on average continued to edge downwards,” said Brian Bethune, IHS’ chief U.S. financial economist.

The Fed’s statement, though, made no mention of what it plans to do with the $1.25 trillion in assets it added to its balance sheet from purchases of the GSEs’ mortgage-backed securities (MBS) over the past year.

Some Fed officials in recent months have spoken out in favor of selling off the mortgage bonds into the marketplace a little at a time, up to $25 billion each month.

A panel of financial experts from academia called theShadow Financial Regulatory Committee put forth their own proposal for the Fed’s MBS disposition this week. The group says the central bank should consider transferring the securities back to the GSEs.

Given that Fannie Mae and Freddie Mac have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. government, the Shadow committee says, “The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve.”

The group outlined several benefits to this type of transaction. First, it would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed from financing U.S. housing policy, the members of the Shadow Financial Regulatory Committee said.

“This would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy,” they said in the proposal.

And secondly, “it would free the Fed to device strategies to reduce its balance sheet by engaging in more traditional asset sales in the much deeper Treasury market where the pricing impacts would be smaller and would accommodate a more rapid reduction in excess reserves,” according to the Shadow Financial Regulatory Committee.

6 Short Sale Myths Rectified in short order

Short sales can be a tall order, but as their numbers increase, better trained professionals working the deal are getting wise to what's needed to make them a success -- in short order.
More competent short sale professionals are also helping bust some of the myths that have surrounded the lesser-used foreclosure alternative, according to Grand Rapids, MI based
Rapid Real Estate Solutions-Manage My Short Sale helps Homeowners, Realtor’s, Lenders, Attorneys and Investors negotiate and close short sale transactions.
If done right, the short sale is a winning proposition for all, including the lender because the costs involved are certainly lower than that of foreclosing.
A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance, typically provided there's a qualified buyer in the wings. Such homes are often held by home owners struggling with "underwater" mortgages -- mortgages with balances larger than the value of the home.
First American Core Logic says more than 11.3 million home owners are underwater on their mortgages.
Mortgage modifications and federally sponsored refinancing programs, to date, have been the go-to tools to help struggling home owners.
All are strategies to avoid foreclosure, but banks have been more likely to refinance, modify or foreclose, rather than taking the short sell route.
That's because short sale bids can come in well below the last appraisal and banks don't want to take a loss. After sellers seal the deal, they can be left with a bill that's the difference between the selling price and the mortgage balance. Real estate agents and buyers fear a six month or longer transaction period that could end in a no-sale scenario that comes with the cost of lost time.
A major reason why a short sale fails is the length of time it takes to get the lender’s approval. Long delays frequently cause the buyer to drop out of escrow and buy another home.  Also it is vital how the purchase offer is submitted; missing documents cause delays as well.
However, as their numbers have grown, more attention is making the deals easier to close.
First American Core Logic's first monthly Distressed Sales Report released in April reveals January's short sales nationwide were 8 percent of all resale home sales, up from 7 percent in December and 5 percent a year ago.  Their numbers are much higher in areas hit hardest like Michigan.
Effective April 5, the Obama Administration rolled out Making Home Affordable Plan  Home Affordable Foreclosure Alternatives (HAFA)streamlined short sale effort to give qualifying home owners up to $3,000 to defray the cost of moving. Servicers can also get $1,500 each for short sale deals that pencil.
With short sales getting more federal support and greater know-how from professionals who work them, myths about short sales are flying out the window, according to Rapid Real Estate Solutions, which is helping to set the record straight on common short sale myths.

Myths Rectified:

1. You must be default on your mortgage to negotiate a short sale. Short sales are not a function of default status on a mortgage. They are the result of the bank mitigating a potential default situation that, in the long run, will cost more money to the investors. Defaulting is not a short sale requirement under the HAFA plan.
2. Short sales are embarrassing. Home owners who "avoid" short sale "embarrassment" could face a foreclosure disaster and much greater heartache. Emoting through tough financial situations won't make the problem go away, says RRES.ManageMyShortSale.com
3. Buyers aren't interested in short sale properties. Perhaps not as many as are interested in foreclosures, but the number of short sales is up, according to First American Core Logic. That's because short sale properties are often available at bargain prices compared to similar homes on the market and given the owner remains until the sale is closed, short sale properties may also be in better shape than abandoned foreclosures.   "Search for a buyer, especially those who have expressed an interest in buying short sale properties. The buyer must be willing to deal with extended deadlines and additional demands made by your lender," said Donna Tashjian a Keller William Realtor and of the new Certified Short-Sale & Foreclosure Professional (SFR) designation.
4. There's not enough time to negotiate a short sale before foreclosure. Federal guidelines come with paid incentives for lenders demand that lenders consider a short sale before moving to foreclosures, especially if a refinance or mortgage modification hasn't worked out. A good negotiator takes into account the timeline affiliated with a foreclosure. There is always a chance that a short sale can be negotiated. However, the only way to know for sure is to try.  An organized and complete short sale proposal minimizes the back-and-forth delays," said Donna Tashjian.
5. The bank would rather foreclose than complete a short sale. The bank would rather have the full mortgage paid on time. If a lender can strike a better deal with a short sale than a foreclosure, they'll go for the short sale when possible. It costs the bank money and liability risk to carry foreclosed homes. The sooner a home is off the books for the most amount of money, the better. Wherever possible, banks are seeking other loss mitigation options before foreclosure.
6. Short sales are impossible and never get approved. Short sales can be complicated, but again, according to First American, short sales are increasing.

"We negotiate short sale approvals every day," reports Rapid Real Estate Solutions-Manage My Short Sale.

Existing Home Sales Jump 6.8% in March

Sales of previously-owned homes rose higher than expected in March, reversing a three-month slide. The National Association of Realtors (NAR) said Thursday that existing-home sales jumped 6.8 percent to a 5.35 million-unit annual sales rate.

Year-over-year, sales are up 16.1 percent. According toNAR, the March numbers are just the beginning of what will be a strong spring season. Lawrence Yun, NAR’s chief economist, called the latest report a sign of “broad home sales recovery in nearly every part of the country.”
The surge last month was largely attributed to buyers racing to make the window for the homebuyer tax credit. Borrowers must be under contract by April 30 to take advantage of the government incentive. First-time buyers, who are eligible for the larger $8,000 tax break, purchased 44 percent of homes in March, according to a separate NAR study.
By Carrie Bay