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Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy "has continued to strengthen" and that the jobs markets "is stabilizing".  It also said that business spending has "has risen significantly".

This is a slight departure from the Fed's January statement in which housing was not mentioned at all, and business spending was said to be "picking up".

The change is notable, even if barely detectable.

Today's statement also marks the 6th straight session after which the Fed described the economy with optimism.  The 2008-2009 recession is over and that growth is returning to Ohio and the U.S., in general.

The economy is not without threats, however, and the Fed identified several:

1. High unemployment threatens consumer spending
2. Housing starts are at a "depressed level"
3. Consumer credit remains tight

The message’s overall tone, however, remained positive and inflation remains within tolerance limits.

Lastly, the Fed confirmed its plan to end its $1.25 trillion mortgage markets commitment in March 31, 2010. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start. Rates should rise once the program expires.

Mortgage market reaction is muted to the Fed's press release. Mortgage rates are unchanged this afternoon.

The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.

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The Federal Open Market Committee meets today and will vote to keep the Fed Funds Rate unchanged. But don't rest on your rate-locking laurels.

Mortgage Rates Are Made On Wall Street

When the Federal Reserve votes to leave the Fed Funds Rate unchanged, it's different from the Fed keeping mortgage rates unchanged.  Actually, the Fed can't leave mortgage rates unchanged because its powers don't extend to the mortgage markets. Mortgage rates are "made" on Wall Street, in open trading.

The Fed Funds Rate is unrelated to mortgage rates.

Looking back 20 years, the difference between the two benchmark rates has been as wide as 5 points and as narrow as 1. And, prior to that, in 1973-74 and again in 1980-81, the spread went negative. 30-year fixed mortgage rates were actually less the Fed Funds Rate.

If the Fed Funds Rate directly related to mortgage rates, the spreads would be linear.

The Fed's Statement Will Make Rates Change

The Fed doesn't set mortgage rates and the markets will make that clear again this afternoon.  Despite the Fed announcing its intent to keep the Fed Funds Rate near zero "for an extended period of time", mortgage rates will dance.

If the Fed's press release carries a positive tone about the economy and economic growth, mortgage rates will rise.  If the tone is negative, rates will fall.

Today is not a good day to float your mortgage.

What To Do If Your Loan Isn't Locked Yet

If you're not locked in, talk to your loan officer in advance of the Fed's 2:15 P.M. ET announcement. Rates are more likely to rise than to fall.

Or, if you don't have a loan officer, with your details. I'm happy to get your rate locked right away -- before potential changes for the worse.

Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may help you.

Conventional, Conforming Mortgage Rates

By way of disclosure, the Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago mortgage rates. Furthermore, unique property types including non-warrantable condos and condotels may be excluded.

for a real-time rate quote.

Breaking Down The Predictions

Here's the group's mortgage rates predictions:

• 43% predict mortgage rates will increase
• 0% predict mortgage rates will decrease
• 57% predict mortgage rates will remain unchanged

I expect mortgage rates to increase.

My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent watching the only working mousetrap ever made than reading my analysis.

Either way, here's what I told Bankrate.com:

"Markets adjust to Life After Fed Intervention."

We can say it a thousand times and it would still be a thousand times too few -- the Federal Reserve is withdrawing its mortgage market support March 31, 2010.  Indeed, the Fed's barely a player even now as its intervention winds down to nothing.

Last week, it bought just $11 billion worth. And here's why it matters.

The Biggest Bond Buyer Is Going Bye-Bye

Since the end of 2008, the Federal Reserve has been the biggest open-market purchaser of mortgage bonds and the net impact of that intervention is lower mortgage rates by 1 percent. In other words, mortgage rates are 5 percent right now. They'd be 6 percent without the Fed.

"Without the Fed" starts in 27 days.

Mortgage rates have been low lately, and falling. It's unexpected.  Also, it's easy to get lulled into thinking that rates are down because markets are shrugging off the Fed's deadline.  Don't make that mistake.

Mortgage rates are lower for a few reasons, all of which increase demand for U.S. mortgage bonds.  More demand mean higher bonds prices and, therefore, lower mortgage rates.

1. Greece is having debt issues, pushing investors to buy "safe" securities like bonds
2. Economic growth is steady, but precariously balanced. Without clarity, investors seek safety.
3. Rumors that the Fed (or another agency) will extend the program beyond its original expiration date.

Don't expect these conditions to last.

They've been lucky so far but, pretty soon, mortgage rate shoppers are soon to face the music. You don't want to be on the wrong side of this bet. Rate jumps will be fast and fierce.

Rate Hikes Will Be Fast And Fierce

If you need a rate lock, take your chips off the table and get it done.

That said, locking mortgages is a timing game and you'll still want some help to get it right. On some days, rates will over-react higher, and on other days, they'll retreat.  You're going to want your loan officer to offer some coaching.  Call "your guy" or, if it's easier for you, with your situation.

I handle all of my own mail and I would love to get you a good rate. It's what I do best.

Plus, my bank has good, low mortgage rates. Just ask me about it.

Science experiments can be excellent metaphors at times.

Thursday, shortly after the markets closed, the Federal Reserve announced a 25 basis point increase to the Discount Rate.  The Discount Rate is now 0.750%. Mortgage markets are selling off on the news.

The Era of Low Mortgage Rates may be officially over.

The Psychological Impact Of The Discount Rate

For some context, it's important to understand what the Fed's Discount Rate is and, more specifically, what it isn't.

The Discount Rate is the interest rate that the Federal Reserve charges to banks when banks borrow money from it. Banks typically borrow money from the Fed to beef up their cash reserves because all banks are required to keep as minimum level of cash-on-hand.

The Discount Rate is not the rate at which banks borrow money from each other -- that's the Fed Funds Rate.  Nor is the Discount Rate the benchmark rate at which banks lend money to consumers and businesses -- that's Prime Rate.

Discount Rate is just one of the Fed's many tools to slow or speed the economy and, as of yesterday, it's taking steps to slow growth down.  Or, at least, push some responsibility back to banks.  There's no direct impact on consumers for a move like this, but it's the indirect impact we need to worry about.

In raising the Discount Rate, the Fed implies that the U.S. is strong enough to withstand a shock.  It's the signal for which Wall Street has been waiting.

Mortgage Rates Are Breaking Higher

See, since late-2008, 30-year fixed mortgage rates have moved within a very tight range. With few exceptions, never more than 5.375% and never less than 4.875%.   This was because the bond markets harbored doubt about whether the "green shoots" of the economy were for real. Yesterday, the Fed answered that "Are We?" and "Aren't We?" question.

Clearly, we are.  And that brings us to the science experiment.

Much like a super-saturated solution, the mortgage-backed bond market has been in precarious balance, one crystal away from complete transformation.  Well, Thursday, February 18, 2010, the Fed introduced that crystal.  Loan officers everywhere will forever remember yesterday as the Last Day of Low Mortgage Rates.

What To Expect From Your Loan Officer

The Federal Reserve won't make policy changes over the next few weeks, months, or maybe even quarters, but the damage is done. Bond markets are played 12-18 months into the future and the Fed's move to raise the Discount Rate has traders to change their expectations what's coming down the pipe.

Mortgage rates will rise in response.

If you're in the process of shopping for a mortgage or buying a home, the longer you wait to commit, the higher your mortgage rate will likely be.  Call or and I will send you a rate quote based on what the market is doing today.

Rates are changing very quickly and every day counts.

Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may help you.

The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago.

for a real-time rate quote.

Here's the group's mortgage rates predictions:

• 50% predict mortgage rates will increase
• 29% predict mortgage rates will decrease
• 21% predict mortgage rates will remain unchanged

I expect mortgage rates to increase.

My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent learning how to suck at Facebook than reading my analysis.

Either way, here's what I told Bankrate.com:

"The reality of the Fed's mortgage market withdrawal sets in this week."

This is going to read like a recap from last week, but let's review the highlights.

When the economy hit the skids in September 2008, the government made a massive intervention.  In addition to formal stimulus from Congress, the Federal Reserve did what it could to loosen up the credit markets.

One of the Fed's most well-known programs was its commitment to buy $1.25 trillion in mortgage-backed bonds in the open market. Internal studies from the Fed say the program lowered rates by 1 percent last year.

The program ends March 31, 2010.

Now, logic dictates that if the Fed's presence had rates down 1.000 percent in 2009 -- all things equal -- the Fed's absence will have rates up by the same 1.000 percent in 2010. The question remains, "how soon until it happens?"

The Fed has been weaning markets off the program, dropping purchases to just one-third of its March 2009 peak purchase levels. And while it's been doing that, there's been fewer originations to create new supply.

For this reason, some analysts think fears of a Fed pullout are overblown; that rates won't rise by a full percent. And that viewpoint may ultimately be proved correct.

For now, though, the prudent thing to do is to treat the situation like NFL referees treat an instant replay request -- stick with the original call until you've got sufficient evidence to overturn it. Right now, that evidence doesn't exist. It won't exist until April.

Naturally, you don't have until April.  You need to know what to do right now so here it is.

Get locked.

Mortgage rates have receded from December's highs and have been sitting in a pocket for about a week. At some point, Wall Street will start pricing bond for the Fed's MBS exit and you don't want to be on the wrong side of that window.

Locking mortgages is a game of timing and, for that, you may need some help.

If you don't have a loan officer you can call up for advice, know that you can always call me. Or, , whichever is easier. I handle all of my own email and I would happy to get your mortgage rate lock ready for you. The key is to be ready before the market changes and that's what I do best.

Also, my bank has good, low rates. Just ask me about it.

Recapping the FOMC statement from January 27, 2010 and what it means for mortgage rates.

Mortgage rates are notoriously volatile when the Federal Open Market Committee meets and today is such a day.  Today's meeting is one of  this year.

The Federal Open Market Committee is a rotating, 12-member sub-group within the Federal Reserve that debates about financial and economic conditions around the county, and votes on new policies meant to spur, steady, or slow economic growth.

The FOMC's economic toolbox is big, filled with programs and policies that most laypersons have never heard of, or even thought of.  The group's most well-known tool, though, also happens to be its most wielded -- the Federal Funds Rate.

The Fed Funds Rate is the rate at which banks borrow from each other overnight.  The lower the rate, the less banks pay in interest costs, and the more money is available for lending. 

It's in this way that the Fed Funds Rate impacts the economy.  When it's down, banks tend to lend more money, giving the economy room to grow.  And, conversely, when it's up, banks tend to lend less, constricting economic expansion.  This is one reason why FOMC meetings are such big news -- the Federal Reserve has a direct impact on the future of the U.S. economy.

The FOMC is expected with 100% certainty to vote the Fed Funds Rate unchanged from its current 0.000-0.250% target range at today's meeting.  Therefore, it won't be what the FOMC does that matters to mortgage rates. It will be what the FOMC says.

With the economy flopping between growth and recession, and with the Fed pledging to keep the Fed Funds Rate low for as long as necessary, markets will break down the FOMC press release for clues about what's in store economically for late-2009 and 2010.  As one example, if inflation is singled out as a threat, mortgage rates should rise because inflation erodes the value of mortgage bond repayments.

Given the current environment of low mortgage rates -- whether you live in Hyde Park, Cincinnati or Hyde Park, Chicago -- there's definitely more chance of mortgage rates rising this afternoon than falling.  There's only so much lower rates can go, you have to believe.

The Fed's press release hits the wires at 2:15 PM ET today.  If you're the cautious type, consider locking your rate prior to the release.