Inflation Pressures Are Easing but Rate Cut Forecast Remains Uncertain

The New Year is beginning where the old one ended -- with uncertainty about when – or whether – the Federal Reserve will begin cutting interest rates.

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Economists who have been speculating nervously about the prospects for a double dip in home prices are becoming even more concerned that the economy as a whole – not just one troubled component of it – may be slipping back into the recessionary bog from which it has not entirely escaped.

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Slamming the door on “liar loans” and other shoddy underwriting practices that contributed to the financial meltdown, the Federal Reserve has proposed new rules requiring mortgage lenders to verify that borrowers have the ability to repay the loans they obtain. The rules implement a provision of the Dodd-Frank financial reform legislation that established the ability-to-repay requirement but left it up to regulators to craft the details.

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Wells Fargo has joined a growing list of financial institutions that are withdrawing from the reverse mortgage arena. Bank officials cited “unpredictable home values” and new restrictions on the loans that make it difficult to assess a borrower’s ability to meet payment obligations” as their primary reasons for shedding this product line.

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State attorneys general are still trying to hammer out an agreement with lenders and loan servicers to resolve complaints about their questionable foreclosure procedures, but rifts among the  AGs and a side-settlement crafted by federal bank regulators appear to be impeding those efforts.