Policy changes ahead: Here's how they could impact your pipeline

According to the Fed’s June 17 – 18 meeting, most officials anticipate the need to lower the federal funds target rate at some point this year.

However, the committee is divided on when and how many cuts will be needed. Some support a reduction as soon as the next meeting in July, while others are looking toward September or December.

The Fed also revised its economic outlook downward, including a reduction in projected GDP growth to 1.4% (from 1.7%) and a rise in unemployment to 4.5%.

The full release can be found here.

The Federal Housing Finance Agency (FHFA) announced that VantageScore 4.0 can be used by mortgage lenders for conforming loans sold to Fannie Mae and Freddie Mac.

This change is effective immediately and gives an option beyond FICO^{registered trademark®} Scores.

It increases competition and boosts lending – especially to renters, rural residents, and veterans. VantageScore 4.0 uses alternative data like rent and utility payments to make more inclusive credit scoring possible.

Fed Chair Jerome Powell hasn’t had the most relaxing tenure leading the central bank for the world’s largest economy.
Originally nominated by President Trump, Powell was criticized by some for being “a Wall Street guy.”

From 2018 – 2020 the Fed started bringing rates down in response to the trade war escalating between President Trump and Chinese President Xi Jinping. This was right after former Fed Chair Janet Yellen and team finally started to raise rates following the ZIRP (zero interest rate policy) era.    

Then came COVID, a pandemic with a lockdown response economists had never seen. Powell acted swiftly and instilled confidence that the Fed would do whatever was necessary to keep the U.S. – and global – economy moving.

Powell and his team then navigated a political shift in which a democratic-led Congress ushered in massive government spending – even as inflation started to rear its head.

Even when Powell was chastised for calling inflation “transitory,” he stuck to the dual mandate of the Fed: maximizing employment and maintaining price stability. He deferred questions on fiscal policy to Congress as he undertook one of the fastest rate hikes in U.S. history – a tough pill for the market to swallow.

After hearing about impending recessions every year for the last 5 years, Powell and his team landed the economy in a decent spot.

However, global trade tensions have resurfaced, and the president who appointed Powell clearly favors lower interest rates during his time in office.

There’s a reason the United States Federal Reserve is independent when it comes to setting interest rates – just imagine the consequences if it hadn’t raised rates when consumer inflation soared to 9% in 2022.

With inflation data scheduled for release on July 15 and 16, expect Trump and his allies to ramp up pressure on the Fed to cut interest rates.

Just like the Fed, we’ll have to wait and see.

Purchase season is here. Stay prepared by engaging with industry leaders and discovering what’s next. We’ll be at these top events – let’s connect.

·      July 17: Arizona Mortgage Expo – Chandler, AZ (Free registration with code RocketFree)

·      August 7: California Mortgage Expo – San Diego, CA (Free registration with code RocketFree)

·      August 14 – 17:Originator Connect – Las Vegas, NV (Free registration with code RocketFree)