The FOMC stands for the Federal Open Market Committee, which is a branch of the Federal Reserve Bank. Basically the FOMC is the policy making arm of the Federal Reserve.

Eight times a year the FOMC meets to assess the marketplace and the make decisions based on those assessments. During the meetings of the FOMC 12 reserve banks from around the nation are represented. While the decisions that the FOMC makes only directly impact funds held by the Federal Reserve Bank, they have a ripple effect on the market in general, and the results of FOMC meetings are eagerly awaited by the finance industry.

Of the FOMC 12 members, 7 come from the Federal Reserve Bank Board and are appointed by the President of the U.S. The president of the New York Reserve Bank has a permanent seat on the committee with full voting rights and the remaining four seats are filled on a rotating basis with presidents of the various reserve banks. Each president serves with voting rights for one year before stepping down to allow another president to take his or her place, ensuring even representation.

The goal of the FOMC is to maintain a stable and healthy economy with high employment rates and reasonable rates of credit. If inflation is running rampant, the FOMC may choose to restrict available credit to reduce it, or it may choose to slash interest rates and make more credit available to stimulate a sluggish economy. The voting members carefully weigh the available information and forecasts when they vote behind closed doors, and then the results are released to the public, usually triggering a radical response on the open market.

In addition to eight regularly scheduled meetings, the FOMC can also meet on short notice in a case of national emergency or urgent need. The committee is capable of making rapid decisions to ward off potential economic instability, and the Federal Reserve Bank, along with the nation, relies upon the FOMC to make positive choices for the American economy.

The U.S. housing and mortgage industry has faced many difficulties in the past couple years, with widespread foreclosures occurring, home sales down, and lenders having to be “bailed out” by the government. Voter concern about the economy has become one of the most important issues in this election. So what do the 2008 presidential candidates plan to do about housing? Here are some details about each of the candidates housing plans, at a glance.

Barack Obama: The presidential nominee of the Democratic Party, Senator Barack Obama plans to take various measures aimed at assisting homeowners and regulating the housing industry. He calls for instituting a mortgage tax credit to benefit owners who don’t itemize their deductions, creating a scoring system that makes it less difficult to compare mortgage offerings, and initiating a program to encourage the conversion of present mortgages to fixed-rate thirty year loans. Senator Obama also supports additional efforts to detect and punish those guilty of mortgage fraud.

John McCain: Senator and Republican presidential nominee John McCain also plans to introduce a program that would help subprime loan holders change to fixed rate 30-year mortgages. He calls for some limitations on federal bailouts, but supports aiding banks if it is necessary to avoid “systemic risk”. McCain plans to help housing related non-profits which work to assist homeowners. Part of a speech by Senator McCain in March urged lenders to “do everything possible” to help the economy and prevent people from losing their homes. He opposes mortgages involving little or no downpayment.

Other Candidates: Libertarian presidential candidate and former Congressman Bob Barr has criticized the bailout for Freddie Mac, Fannie Mae, subprime mortgage holders, and others in the housing industry. He accuses Congress, President Bush, former President Clinton, and the Federal Reserve of helping to bring about the subprime crisis. Independent candidate Ralph Nader calls for greater regulation of trading in derivatives (investors have bought derivatives of mortgage revenues from Freddie Mac and others) and he supports the increased building of energy efficient housing and infrastructure.

Basically, the Republican and Democratic presidential candidates housing plans both support the bailout, along with efforts to penalize mortgage fraud and convert subprime mortgages to 30-year fixed rate loans. However, Obama puts somewhat more emphasis on government assistance to homeowners. Each of the candidates plans to support additional regulation and/or government intervention, with the exception of Bob Barr, who opposes govt. involvement in the economy.

Following a seizure by the Federal Office of Thrift Supervision, control of IndyMac was transferred to the FDIC and the California bank has been renamed IndyMac Federal Bank. The confiscation of the bank came on the heels of a two-week period where customers withdrew more than $1.3 billion.

John Bovenzi, who was placed in charge of IndyMac said, “Our objective is to preserve the bank’s value and return it to the private sector, which we plan to do in the upcoming months.” Though many IndyMac accounts are guaranteed, stockholders will likely be “wiped out” according to Bovenzi, IndyMac’s new CEO.

The bank has 265,000 customers with insured accounts that will be guaranteed by the Federal Deposit Insurance Corp. and Bovenzi insists their insured money is safe. Those with deposits exceeding the insured limits are covered for those amounts and will have immediate access to 50% of their uninsured balances.

Bovenzi said stockholders will likely be “wiped out” once the bank’s assets are sold. IndyMac shares already were down to 28 cents on Friday, and shareholders won’t receive the proceeds from the bank’s eventual sale, he said.

IndyMac grew rapidly during the recent real estate boom years, specializing in “Alt-A” loans that required little or no evidence of income or assets from borrowers. But it suffered losses when the market for mortgage-backed securities dried up.

PMI, or Private Mortgage Insurance, is often required by banks when borrowers make a relatively small down payment. After a borrower’s home equity reaches a certain level, cancellation of PMI by the borrower or lender becomes possible. But what could this mean for the borrower and the lender, and when does the insurance become eligible for cancellation?

A mortgage borrower can request that PMI be cancelled after surpassing twenty percent equity, according to the Federal Trade Commission. Lenders are generally required by law to cancel the insurance when twenty-two percent equity has been achieved on loans originated after 07/28/99. However, some situations which indicate continued risk to the lender - such as recent late payments - could delay the cancellation of this insurance. It is typically not possible to cancel PMI on federally insured loans or mortgages with LPMI, and there are a couple other exclusions as well.

So what could it mean for the home owner if he or she is eligible for the cancellation of PMI? The most significant change would be that the borrower will make a lower monthly mortgage payment. Rates for insurance on a $100 thousand dollar mortgage generally range from about $25-65 dollars/month, according to sec.state.ma.us, but differ depending upon other characteristics of the loan in question. It could also mean the end of deducting PMI from federal income taxes, if the borrower is eligible for this deduction and has been using it; this will save some time when paying taxes.

Private Mortgage Ins. does not safeguard the borrower from any type of loss, so he or she is not losing protection by requesting its cancellation. As for what cancellation of PMI could mean for the lending institution, it would be susceptible to greater loss if the borrower becomes unable to keep making payments and the home is foreclosed upon. Regarding the insurance company, it stops receiving monthly premiums from the home owner, but no longer has to protect the mortgage lender from loss on the specific loan for which the insurance has been cancelled.

Basically, the cancellation of PMI will mean that the borrower’s monthly expenses are lower, but it is generally not in the interest of the bank or the insurer. It doesn’t mean much else, except that the borrower has a substantial amount of equity and may no longer be able to use a tax deduction for Private Mortgage Insurance.

The current U.S. housing crisis involving subprime mortgages, increased foreclosures, mortgage industry layoffs, and reduced real estate sales started early last year and shows few signs of being over just yet. However, is the worst of the housing crisis over?

Unfortunately, many negative indications for the housing industry continue to appear in the news. On July 11, Bloomberg News reported that oil prices have reached a new record high and the government may need to “rescue” the Freddie Mac and Fannie Mae mortgage corporations. The two companies’ stock rapidly fell during the week over concerns about the implications of this.

High heating and transportation costs are making it more difficult for people to pay their home mortgages. Additional oil facility attacks by Nigerian rebels or a war involving Iran could push these expenses much higher. Elevated unemployment, high inflation, and rising food costs have likely contributed to the high rate of foreclosures and mortgage delinquencies as well.

Meanwhile, reports of continually decreasing home sales persist in newspapers across the country, and foreclosures remain common. A press release issued by RealtyTrac on the 10th indicated that the rate of U.S. foreclosures in June was fifty-three percent higher than it was during the same month last year. California and Nevada remain among the worst affected states.

However, there are some minor positive signs. Foreclosures in June did drop by three percent compared with May 2008, so it can’t be considered the worst month of the housing crisis in this regard. It too early to tell if this is a sign the worst is over, or if it is only temporary. Recent federal tax rebates and increased lender approval of “short sales” may be helping, to at least briefly, decrease the rate of foreclosures.

Mortgage industry layoffs are another area in which the worst of the housing crisis could be over. Although mortgage companies have announced new layoffs during June and July, a press release distributed by MortgageDaily.com on the July 7 indicated that layoffs from April through June were lower than they were in the first quarter of 2008 or the same period during 2007.

Overall, there are a few positive indications that the worst of the housing crisis might be over, but the crisis seems unlikely to end this year. The situation appears worst for people currently trying to sell homes, along with certain housing industry investors.

As part of the government’s efforts to tackle the subprime loan crisis federal prosecutors have charged over 400 people in the U.S. with mortgage fraud.

The effort, known as Operation Malicious Mortgage, was created to send the message that housing crime is a national program according to FBI Director Robert Mueller and Deputy Attorney General Mark Filip. Filip said, “The Department of Justice is determined to detect and to punish mortgage fraud and to help restore the stability and confidence in our housing and credit markets,” in a recent press conference in Washington.

Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University said the increase in subprime lending has created a “fertile environment for all kinds of things, including outright fraud.” Retsinas believes this criminal activity is one more reason for investors and lenders to be concerned about the valuations of investments and loans.

Authorities estimate that more than $1 billion has been lost due to the mortgage frauds. The different schemes include cheating lenders, swindling those facing foreclosure and filing fraudulent bankruptcy claims according to officials. There are real estate agents, lawyers, appraisers and borrowers among the indicted.

This operation focused mainly on individual cases and small crime rings, but officials have reported that they are also looking into 19 companies, including investment banks and hedge funds that are believed to have participated in accounting fraud among other white-collar crimes dealing with mortgage securities.

A home loan known as a mortgage accelerator common in Australia and the U.K. has made it’s way to the U.S. recently. This loan uses a borrower’s paycheck in combination with home-equity borrowing to help lessen the amount of time a mortgage is paid. This can potentially help borrowers save tens of thousands of dollars in interest.

In a traditional 30-year mortgage the principal payment doesn’t equal the interest payments until just after 20 years of paying on the loan. Because many of us only stay in our homes an average of 5 to 7 years we spend most of that time strictly paying the interest on our mortgages. The introduction of the mortgage accelerator helps make a borrower’s money work for him or her instead of the bank or mortgage holder.

The way it works is that a borrower deposits their paychecks into accounts that use all the unspent money against balances on mortgage loans each month. At the beginning of a month you pay an amount toward your mortgage that includes as little interest as possible. Actually an advance line of credit, or HELOC, pays this amount. You’ll also use a credit card for daily expenses and then pay off that balance monthly with the HELOC. Then you deposit your paychecks into the HELOC, paying down the debt in this account. While it may take some financial responsibility to use this method, as many as 25% of Australians use it for paying down their mortgages.

In the United States, the two firms now offering these mortgages are Macquarie Mortgages USA, which calls the program the Macquarie Asset Manager, and CMG Financial Services, whose offering is called the Home Ownership Accelerator.

The Federal Housing Administration held almost 70% of home loans in the 1980s. Due to home prices appreciating faster than the loan limits of the FHA that percentage has drastically decreased over the past decades. To combat this, the 2008 government fiscal stimulus plan provided increases in FHA loans, from $417,00 to $729,750 in geographical areas with larger home prices.
This increase in the FHA loan limit has led to a surge in applications for FHA loans. As a matter of fact, the Mortgage Bankers Association showed a 15% increase in applications in a recent report.

Taking out an FHA loan has a lot of advantages compared to other, more traditional loans. For instance they have lower interest rates, usually around 1% less. The reason for this is that they can be resold to Freddie Mac or Fannie Mae, which implies a financial backing by the government.

You can also have a lot less equity with an FHA loan. Thanks to the recent credit crisis and declining value of houses lenders are lending much lower percentages of a home value to borrowers. This means many borrowers have to pay at least 20% down for home loans these days. FHA loans allow buyers to purchase a home with only 3% down.

This increase in FHA loans is great for people that want to purchase homes, but haven’t been able to put away enough money for a down payment. You don’t have to meet minimum requirements to qualify for an FHA home loan, but you will face debt-to-income ratios to prevent you from getting a home that you cannot afford.

The long mortgage industry slump which began early last year was brought about by a combination of factors, including the subprime loan crisis, a weak real estate market, unemployment, and rising inflation. These conditions have diminished people’s ability to make mortgage payments or initiate new mortgages, resulting in continually fewer new applications and more foreclosures (based on recent data from the Mortgage Bankers Association). So how long will this mortgage slump last?

One possibility is that the slump will end after home prices have dropped enough so that more non-homeowners can afford to purchase them. However, owners who previously paid much more for their homes and/or have mortgages for more than the home’s value may remain unwilling to sell at a lower price, and might be unable to buy another home if they do sell. The higher standards banks are applying to borrowers’ credit records (part of the subprime crisis aftermath) also reduce new lending.

Expensive food, heating oil, and gasoline have made keeping up with mortgage payments or buying a home more difficult for many people, which has helped the mortgage industry slump last longer. With an increasing world population and rising demand for fuel in eastern Asia, it appears doubtful that this will change in the near future. However, its impact may reduce as more people adapt to these changes by using public transportation, purchasing smaller vehicles, and growing some of their own food.

It should be kept in mind that the previous “boom” partially consisted of fraudulent loans and risky high-interest lending to people with very poor credit scores, so it may not be realistic to attain this level of mortgage origination again. Federal government agencies have been introducing new regulations for lenders and brokers in recent months; hopefully this will prevent the next slump from lasting as long or having the same severity. Nonetheless, this slump will last at least until incomes increase substantially and/or living expenses decrease.

Basically, the problems which have led to the mortgage slump have a long term impact which is unlikely to be mitigated very easily. Unemployment has just risen again to one of the highest rates in recent years and oil prices are exceeding $130 per barrel, so the present situation seems liable to last for a substantial period of time. However, history shows that previous housing and mortgage downturns have occurred and eventually came to an end as economic conditions changed.

The Federal Housing Administration’s home loan program makes it less difficult to gain approval for a mortgage, while decreasing the upfront expense for home buyers. The program accomplishes this by providing the lender with insurance against the borrower’s potential failure to repay the loan.

Borrowers with problematic credit histories can still qualify for an FHA home loan, according to HUD.gov. The program also only requires a three percent down payment, offers decreased closing costs, and sometimes makes it possible to receive a lower interest rate. The maximum loan amount the administration is willing to insure varies from one locality to another; these are generally higher in regions where real estate is more expensive.

The program includes loans intended for people who are purchasing their first home, buying “fixer-uppers”, making energy efficiency improvements to a house, or taking out a mortgage on a mobile/manufactured home. The housing administration offers a Reverse Mortgage program for home owners older than 61 as well. However, most U.S. citizens are potentially eligible for an FHA loan. A tool on the HUD/FHA web site enables visitors to search for affiliated lending institutions in their area.

The “FHA Resource Center” on HUD.gov includes a useful feature allowing users to ask questions and receive answers about the loan program. It indicates that in some states homes HUD has foreclosed upon can be purchased with only a one-hundred dollar down payment if the new mortgage is also insured by the housing administration. Also, some military veterans are not required to make as large a down payment on loans which are insured by the FHA.

Another program the government offers insures mortgages (including repair costs) on buildings in “older, declining” parts of cities. According to FHA.gov, this option is limited to costs of $18-21 thousand dollars, depending upon property values in the area. A wide variety of other FHA subprograms exist, including options for people purchasing property on Native American reservations, and teachers moving to localities designated as “revitalization areas.”

Overall, the FHA home loan program makes it possible for people who (due to lack of available funds and/or low credit scores) otherwise wouldn’t be able to purchase a home, or would have to accept a less desirable mortgage. Borrowers can contact one of the FHA affiliated lenders to help determine if they are eligible for this program.