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Tapering does not mean tightening

Bernake got it right. Just this past week, the Fed Chairman announced that the Fed would begin the process of tapering by lowering the purchase rate of US Bonds from $40 Billion to $35 Billion.This $5 Billion purchasing difference is a significant message that tells you and everybody else that the US Economy is well on the way to recovery; and here are my three reasons why…



The Reaction

Despite the tapering news on Wednesday, December 18, 2013,the stock market soared over 280 points. This reaction tells me that most of Wall Street had already seen and heard enough of the “tapering effect” and the abundance of free-flowing cash had enough time on the sidelines and was waiting for the excuse to re-invest.

This is a “Bull Market” and I don’t see it easing up. There is no opportunity between now and the end of the year for any negative news that would cause any counter attack to the stock market’s buying frenzy right now. Even Twitter stock is heading to $50 share…

Gold; which is often seen as the benchmark for the pessimistic, secure investor; was sold off in record numbers this week based on the tapering news. The bond market and overall mortgage interest rates reacted with little fan fare as the average 30-year fixed interest rate settled between a 4.5% and 4.625% average based on the tapering news. I foresee mortgage rates in 2014 remaining low, between 5- 5 ½%


Unemployment and Loans

As the Fed Meetings ended, Mr. Bernake made the comment that the Fed would be in no rush in the tapering effect, which he was further quoted as saying that even if the unemployment figures hit the magic number of 6.5%; don’t expect the Fed’s to be in any rush to decrease their purchasing of US Bonds.

Although new construction is growing across America as well as new home starts; new loan applications for the month of November were down. Take in account for the 30-40% drop in refinance; the mortgage industry is still looking at growth in home loan purchase applications for 2014.

My tip for all homeowners who bought REO’s over he past 3 years; look into the FHA 203K Loan, which is the “Equity Line Loan, for Properties with little Equity”. This loan can give you up to $35K cash-out or up to 105% LTV of your Appraised Value for “Home Improvements” on your property…


Dodd Frank Changes

As the mortgage industry faces another round of the Dodd Frank Regulations, don’t be surprised that there may be a delay or extension to this rule enacting. Too much is at risk here and too many banks who have spent the past 5 years cleaning up their book of business to allow another law hamper growth and stability. As much as the new laws are meant to protect the banking industry and ultimately the consumer; it is my opinion that they are only causing more chaos and interrupting the free markets from causing more growth, jobs and prosperity in the US Economy.


In summary,

it won’t take long for the history books to mark this date in time as a benchmark for recognizing the great mind and leadership of Fed Chairman, Ben Bernake. Despite the US Banking Industry, European collapse and the assortment of political and domestic distractions; Ben Bernake will be remembered as a leader who understood how to change his decisions and advert the US economy and the banking system from collapse.

Thank you Ben.

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