MMG Weekly: The Fed is Talking, But Will They Act

Phil Jensen Mortgage Director AmeriFirst Financial Phone: 602-692-7445 Fax:: Phil@JensenTeam.com www.JensenTeam.com

In This Issue Last Week in Review: Fed members did a lot of talking...find out what they're saying and what it means for home loan rates. Forecast for the Week: Inflation, housing, and manufacturing reports are ahead. Plus, will the Euro show signs of stabilization? View: Travel safely with these tips from Kiplinger.com on avoiding travel scams. Last Week in Review "ACTIONS SPEAK LOUDER THAN WORDS," or so the popular saying goes. But the words from various Fed members on the actions they feel need to be taken are getting pretty loud. And what could all this potential action mean for home loan rates? Read on to learn more. There has been growing debate among Fed members about when to begin raising the Fed Funds Rate. What is the Fed Funds Rate? It's the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans. A higher Fed Funds Rate tends to slow economic activity, as it means the cost of borrowing to finance a purchase will be higher, while a lower rate helps to stimulate activity, a ripple effect that expands into all sectors of the economy. As you can see in the chart below, the Fed Funds Rate is currently at a range of 0.0-0.25%, and it has been this low for over a year to help stimulate our economy and move us from recession to recovery. ----------------------- Fed Funds Rate If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a "double dip" recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result...and inflation concerns were a big reason for all the Fed chatter last week. Remember, inflation is the arch enemy of Bonds and home loan rates. With mounting debt in the US and concerns that US debt will overtake GDP by 2012 - as well as the problems in Europe - there are many factors the Fed needs to consider before taking action. For instance, last week Fed Chairman Ben Bernanke said that the Unemployment Rate is likely to remain high for a while and he noted that the Fed "can't wait until unemployment is where we'd like it to be" before tightening credit, or inflation could too easily get out of control. That said, recent reports like May's Jobs Report and Retail Sales Report - which showed the first monthly decline since September 2009 - indicate that our economic recovery is still fragile at the moment. This means the Fed won't want to act too quickly, either. The next Fed Meeting is June 22-23rd, and while the Fed will most likely not raise the Fed Funds Rate at this time, more and more Fed members are expressing concerns about the current very accommodative monetary policy in place. Although home loan rates are not tied to the Fed Funds Rate, I'll be watching this situation very carefully as it continues to unfold. In addition, Bonds and home loan rates have benefitted lately from the situation in Europe, as global investors have sought the safe haven of our US Bonds. However, as the Euro's freefall is finally showing some signs of stabilization, traders and investors can be very fickle in unwinding or reversing these trades pretty quickly. This could reverse the improvement we've seen in home loan rates, and we saw a sign of that last week. Bonds and home loan rates ended the week a bit off their best levels of the week...but are still incredibly low overall. If you or anyone you know would like to take advantage of the exceptional opportunity that exists in the home loan marketplace at this point in history, please don't hesitate to call or email. Or forward this newsletter on to anyone you think may benefit as well! PLANNING A VACATION IS AN ACTION MANY OF US TAKE DURING THE SUMMER. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR TIPS FROM KIPLINGER FOR AVOIDING TRAVEL SCAMS. Forecast for the Week There will be plenty of inflation news for the Fed to gather this week, ahead of its meeting later this month. First, there's Wednesday's Producer Price Index, which measures inflation at the wholesale level, which will be followed by Thursday's Consumer Price Index. As mentioned above, inflation is the arch enemy of Bonds and home loan rates, so it will be important to see what these reports reveal. Housing, manufacturing, and job news are also in store this week, with Wednesday's Housing Starts and Building Permits Reports (which give us an update on the health of the new construction sector of the housing market) and Thursday's Philadelphia Fed Report (which gives us an update on the manufacturing sector). We'll also have another weekly Initial Jobless Claims Report. Initial Jobless Claims numbers have remained stubbornly high. The most troubling numbers in last week's report are the additional 5.13M people claiming EUC (Emergency Unemployment Compensation), which are benefits lasting longer than 26 weeks, up to 99 weeks in total. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds and home loan rates have rallied in the last few months, helped by the uncertainties in Europe. But remember, traders are fickle, and stabilization in Europe could bring an end to this rally. I'll be watching closely to see what happens this week. ----------------------- Chart: Fannie Mae 4.0% Mortgage Bond (Friday, June 11, 2010) The Mortgage Market View Six Travel Scams to Avoid All of these deals are too good to be true. By Cameron Huddleston, Kiplinger.com The summer travel season is almost here. If you're looking for deals, make sure you don't become the victim of a scam when trying to score a bargain. I spoke with SmarterTravel.com contributing editor Ed Perkins to find out which scams are most common and what you can do to avoid them. Here's his list: 1. Phony airline tickets How it works: A Web site or travel agency offers a deal better than anyone else's, won't accept credit cards and instead demands direct transfer of funds. What you get is a plane ticket that's worthless. How you can avoid this scam: Don't deal with an outfit you've never heard of. See our list of the 28 best travel sites for legitimate companies. Don't purchase airline tickets or any travel accommodations through a group that won't accept a credit card. If you have a dispute with a merchant -- for example, you were sold a phony plane ticket -- you may have an easier time working out a solution if you paid with a credit card. 2. Pay now for future travel How it works: You're approached to enroll in a club that will enable you to take future vacations for an upfront fee of thousands to tens of thousands of dollars. After enrolling, you try to book a vacation but are told that the location or time period you want is unavailable. Then you might be asked for more money to gain access to more upscale spots that would be available. How to avoid this scam: Unless you know someone who participates in a particular program and is happy with the service, stay away from these clubs. Even if your friend recommends a club, do some research of your own. See Resources to Help You Check Out a Company. 3. Travel like a travel agent How it works: You receive a promotion in the mail or e-mail telling you that you can travel like a travel agent or sell travel from your home. The group purports to be a large travel agency that will provide back-office support while you sell travel packages. For a fee (usually $495 or $4,900), you'll receive training and a travel agent ID card that you can use when making reservations to get a special rate. How to avoid this scam: "There's hardly an airline or hotel that doesn't know about these phony IDs," Perkins says. Even legitimate travel agents have a tough time getting discounts on airfare. Toss the promotion in the trash or hit "delete." 4. No-ticket event packages How it works: A tour operator offers a package for a big event, such as the Super Bow

Posted via email from philipjensen's posterous

USDA has funds! You may start locking your loans.

RE:                 Lender Update 2010-24

Funding for the USDA Guaranteed Rural Housing Program – Reinstatement of Chase Rural Housing’s Standard Interest Rate Lock and Extension Policies

In view of the information we have received today from USDA Rural Development regarding the Agency’s ability to issue loan approvals (Conditional Commitments: RD Form 1980-18) that are subject to Congressional action, Chase Rural Housing’s standard interest rate lock and lock extension policies have been reinstated effective immediately.

 

Download now or preview on posterous

Lender Notice CCs 5-2010.pdf (124 KB)

Posted via email from philipjensen's posterous

Mortgage Update

For the week of May 24, 2010 --- Vol. 8, Issue 21

In This Issue

Last Week in Review: Stock market teeters on the verge of becoming either a correction...or an "official" Bear market. Forecast for the Week: A fully loaded plate of economic news is in store, including reads on housing and consumer attitudes. View: How you can "insure" a smart and safe vacation this summer.

Last Week In Review

IT'S A SHOWDOWN...THE BULLS VS. THE BEARS. But we're not talking about the Chicago Bulls who were recently knocked out of the NBA playoffs. We're talking about the Bull Market that Stocks have enjoyed over the past months...that is now slipping back lower. So why are these animal terms used to describe action in the Stock market anyways? The terms "Bull" and "Bear" are used because of the way those animals attack. Bulls attack using an upward thrusting motion with their horns, and Bears attack by moving their powerful claws in a downward motion. So an upward market is termed a Bull market, while a downward market is called a Bear market. Last week, Stocks saw a sharp thrust downward, with prices down more than 10% from their peak. But that doesn't mean it's a Bear market just yet. Instead, the drop can be seen as a "correction", if prices recover and resume their uptrend. A correction can be quite healthy, and help a Bull market sustain its strength. But here's the trick: if the market drops 20% from its peak, it's officially considered a Bear market. That means every Bear market was once potentially just a correction. And so the debate rages on. Is this a good time to buy - because you believe it's a correction and prices will move much higher? Or is this a time to sell, before the correction turns into a Bear market? The answer should become clearer over the next few days, as the market's direction takes hold. Waiting in the wings are Bond prices and home loan rates... A Bear market could help Bond prices and home loan rates improve a bit more, as some of the money from Stock sales finds its way into the Bond market, including Mortgage Bonds. On the other hand, a correction back to a Bull market will be at the expense of some of the recent improvements that Bonds and home loan rates have enjoyed. The reality is, Mortgage Bonds have looked a lot like a lottery winner recently, since Bond prices really should be much lower, and home loan rates much higher. But Mortgage Bonds are catching every lucky break - from the situation in Greece...to the declining Euro...to the correction in the Stock market. It's all going in the favor of Mortgage Bonds...for now. But the Bond market's good fortune may not last very long - so be sure to give me a call if I can help explain the current rate situation, and how it might benefit you. ----------------------- BULL MARKETS THRUST UPWARD...WHILE BEAR MARKETS SWIPE DOWNWARD Despite the sharp sell-off in Stocks, the markets did receive some good news last week on the inflation front. The Producer Price Index (PPI) was reported lower than expectations for the month of April, and the more closely followed Consumer Price Index (CPI) fell to report the first month-over-month decline since March of 2009. And when volatile food and energy prices were removed from the equation, the annual Core index came in at its lowest level since January 1966. Those numbers appear to show that inflation is subdued - and with oil prices significantly lower from where they were a few weeks ago, there will even be more downward pressure on headline inflation in the next report. But the reality is that inflation will eventually begin to rear its ugly head - and once that happens, inflation can accelerate rather quickly. China recently reported a spike in inflation - and last week, the UK saw surprisingly higher inflation numbers being reported as well. So the Fed - and the markets - will have to continue to keep close tabs on inflation in the US. WHILE YOU CAN'T CONTROL IF THE BULLS OR BEARS WILL WIN THE NEXT ROUND IN THE MARKETS...THERE ARE SOME THINGS YOU CAN CONTROL. FOR EXAMPLE, CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR TIPS ON "INSURING" A SMART AND SAFE VACATION THIS COMING SUMMER.

Forecast for the Week

There's a very full load of economic reports on tap this week, including fresh news on the health of the housing industry. After last week's reports on Housing Starts and Building Permits in April, we'll see reports on Existing Home Sales right away Monday morning and New Home Sales on Wednesday. We'll also discover how consumers feel about the economy with a report on Consumer Confidence on Tuesday, followed by the Consumer Sentiment Index on Friday. Both reports have risen lately, indicating that consumers feel better about the present and future economic conditions. The markets will be watching to see if that trend continues in this week's reports. The manufacturing sector of the economy will also be in the spotlight this week. Wednesday brings the Durable Goods Orders report, which measures new orders placed and is considered a leading indicator of manufacturing activity. That report will be followed by the Chicago PMI on Friday. This report surveys more than 200 Chicago purchasing managers about the manufacturing industry and is a good indicator of overall economic activity. And if that wasn't enough, we'll also see more inflation news this week. First, the Gross Domestic Product (GDP) and GDP Chain Deflator for the first quarter will be released on Thursday. The Chain Deflator is a key inflation measure included in the GDP Report. And since inflation is the archenemy of Bonds and home loan rates, this report could be a market mover. Unlike the Consumer Price Index that was released last week, the Chain Deflator has the advantage of not being a fixed basket of goods and services, so changes in consumption patterns or the introduction of new goods and services will be reflected in the Chain Deflator. Then, one day after the Chain Deflator comes out, we'll see the Personal Consumption Expenditures report on Friday. This report measures price changes in consumer goods and services, and is considered the Fed's favorite gauge on inflation. After last week's better-than-expected inflation news, the markets will definitely be watching these reports. Rounding out the week, we'll also see reports on Personal Income and Personal Spending this Friday. But that's not all...in addition to all those reports, the government will auction off $42 Billion of 2-years on Tuesday, $40 Billion of 5-years on Wednesday, and $31 Billion of 7-years on Thursday. These auctions may move the markets depending on how they are received. Oh, not to mention that the news coming out of Europe may once again add to the market's volatility here at home. That's a very full helping of potentially market moving activity. But you can count on me to be here and watching very closely. And remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Mortgage Bonds have improved over the last few weeks, as Stocks have undergone their move lower. I'll be watching closely to see if Bonds...and home loan rates...can continue to improve in the week ahead. ----------------------- Chart: Fannie Mae 4.5% Mortgage Bond (Friday, May 21, 2010)

The Mortgage Market View

"Insuring" a Smart and Safe Vacation Summer is right around the corner, and that means many people are starting to plan some kind of summer getaway. When planning your fun-filled itinerary, the last thing you want to do is worry about any financial loss that might occur as a result of a missed flight, an injury or illness, lost baggage, or any other unforeseen incident. To ensure your peace of mind while away from home, many companies provide several different types of traveler's protection plans to help ease the burden. Without insurance, a traveler can lose nonrefundable deposits and prepayments that can add up to hundreds, or even thousands, of dollars. A good, comprehensive travel insurance plan will often reimburse a traveler for all pre-paid, nonrefundable expenses for a covered loss. Here are some general types of coverage you may want to consider before heading out for this summer's vacation: Travel Arrangement Protection - This covers you in case of trip cancellation, interruption, or travel delays (these can include inclement weather, lost or stolen passports, quarantine, hijacking or natural disaster). Medical Protection - Just because you have health insurance at home, the moment you set foot on foreign soil or even set sail on a cruise, many health plans are considered null and void, so be sure you get travel medical protection to cover emergency medical expenses, such as illness and accident expenses, and emergency medical transportation to the nearest medical facility. Baggage Protection - Not only do you want coverage for lost, stolen or damaged baggage, but many plans offer reimbursement for the purchase of essential items if baggage is delayed. Worldwide Emergency Assistance - If traveling outside of the country, make sure you purchase a policy that covers international emergencies. This can include emergency cash transfer assistance, legal assistance, and lost travel documents assistance. The cost of travel insurance is based, in most cases, on the value of the trip and the age of the traveler. Typically, the cost is 5-7 percent of the trip cost. Like most every other type of insurance, be it automobile, medical, or homeowner's, you hope you never need to use it. But it can be a relief to have it when you do need it. The bottom line is: Before embarking on your next trip, do your homework! Talk to your insurance agent - or call me for a recommendation - and learn more about all the different insurance options available to you, so you can make the best choice for your peace of mind!

Posted via email from philipjensen's posterous

USDA funds

At this time the USDA is out of money and they will not be issuing subject to funds conditional commitments.  Please share this information with all your colleagues and borrowers.  Please share your concerns with your senators and congressman as well.  There is currently three pieces of legislation that we are waiting to pass in order to have more funds.

Kyl, Jon - (R - AZ)	Class I
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4521
Web Form: kyl.senate.gov/contact.cfm
McCain, John - (R - AZ)	Class III
241 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-2235
Web Form: mccain.senate.gov/public/index.cfm?FuseAction=Contact.Con...

Posted via email from philipjensen's posterous

It's Baaaaaack...... 95% LTV in Arizona!

And we thought it wouldn’t happen again!!!

See and download the full gallery on posterous

Posted via email from philipjensen's posterous

Weekly Mortgage Update

Phil Jensen Mortgage Director AmeriFirst Financial Phone: 602-692-7445 Fax:: Phil@JensenTeam.com www.JensenTeam.com

In This Issue           Last Week in Review: Little change came from the Fed's latest meeting. Find out what that means for home loan rates, and also why Greece is still the word! Forecast for the Week: Two juicy economic reports bookend the week, bringing highly anticipated news on inflation and the labor market.           Last Week In Review           They say "the only constant is change...", yet last week's meeting of the Federal Open Market Committee ended without any major changes...no change to the Fed Funds Rate, and no change to the now-famous verbiage in their Policy Statement, stating that rates will remain low for an "extended period" of time. While the Fed does not control home loan rates, what does all this mean for those seeking home financing in the months ahead? Read on for details. There are two important things to note about last week's Fed meeting. First, despite strong earnings, a stronger Stock market, and better consumer confidence and housing numbers, St. Louis Fed President Thomas Hoenig remains the lone dissenter to the verbiage in the Policy Statement on keeping rates low for an "extended period." He feels that there is a strong risk of inflation ahead...and that the Fed needs to prepare the markets for the eventual hikes that will be coming to the Fed Funds Rate. When the Fed does indeed change this language, it will signal that the Fed has a consensus on inflation being a threat...and since inflation is the arch-enemy of home loan rates, the change in verbiage will cause rates to move higher. In addition, the Fed made no mention in their Policy Statement about selling any of their Mortgage Backed Security (MBS) holdings - and the added supply coming into the market will also cause home loan rates to rise. That said, the Fed may have discussed the topic during the meeting, and it could come up when the Meeting Minutes are released. There is growing concern that if the Fed doesn't begin selling some of these MBS holdings by 2011 that additional asset bubbles may arise. It's likely that the Fed will look to sell a meaningful chunk by year end, and this will be yet another headwind for home loan rates during the coming year. If you want to see if you can benefit from the current low-rate environment before these items adversely impact home loan rates, please give me a call or send me an email...and as always, please feel free to pass along this newsletter to a friend, coworker or family member that might benefit. In other news, Consumer Confidence rose sharply in April, to its highest reading since September 2008. This number is important because the more confident that consumers feel...the more likely it is that they will help fuel the economy. Also, the Commerce Department's Gross Domestic Product Report indicated that the economy grew for the third straight quarter, despite the report coming in slightly below estimates. Inflation readings within the report remained tame, giving the Fed cover to keep interest rates low, with inflation appearing to be subdued. But inflation concerns can arise quickly, and although the Fed is not acting just now...we can be sure they are watching very carefully. Greece was still the word last week, as Standard & Poor's Bond rating agency downgraded the debt of Greece to "junk" status. The lack of confidence in Greece's ability to repay their debt has pushed yields on their 2-Year Notes up to a whopping 18% to try and incent investors - and by way of comparison, our own US 2-Year Notes are yielding just over 1%! This is why credit downgrades are such a concern, and why the warnings from Moody's about the US overspending must be taken very seriously. There has been much greater volatility in the Bond market lately, with large price swings in both directions. It's no coincidence that the volatility increased just after the Fed exited their buying program. While concerns about Greece have caused some investors to lose some confidence in European debt instruments, and move their holdings over to US securities, which are viewed as a safer bet, the situation is fluid and there's no telling how much and for how long Bonds and home loan rates will benefit from the situation. Overall - the mix of news and market activity benefitted Bonds and home loan rates last week, improving to better levels over the week prior.           Forecast for the Week           Two important reports bookend the week ahead, and hopefully both will show changes in a good economic direction. Monday's Personal Income and Personal Spending Reports will give us a look at the Core Personal Consumption Expenditure (PCE), which is the Fed's favorite gauge of inflation. Rest assured the Fed will be watching this report very closely, as it could impact their decisions on rates and Policy Statement verbiage, as we discussed. Thursday will bring another Initial Jobless Claims Report. At this stage in the economic recovery, the weekly Initial Jobless Claims readings we are seeing are still pretty high, which suggests that businesses are both reluctant to hire and are looking to trim overhead. And the big enchilada of employment news wraps up the week, as April's Jobs Report is due for delivery on Friday morning. Last month's report showed that 162,000 jobs were created in March, making it the biggest one-month increase in three years. Additionally, there were upward revisions to January and February, which brought the last two months' net job losses to near zero. But it's not time to break out the party hats just yet...last month's report also showed that the official Unemployment Rate remained steady at 9.7%, and when factoring in the "underemployed", including people who accepted part-time work because full-time work is simply not available, the rate of unemployment overall rose from 16.8% to 16.9%. This report will be very important to watch, as the labor market is key to our economic recovery. Remember this rule of thumb: Weak or negative economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong or positive economic news normally has the opposite result. As you can see in the chart below, the instability in Greece and the Fed's decision to keep rates low for an extended period of time gave Bonds a boost above a key technical level. But remember, volatility is the name of the game at the moment, and things can change quickly. I'll be watching closely to see in which direction Bonds and home loan rates move this week - and always welcome a call or email from you if I can help answer any questions! ----------------------- Chart: Fannie Mae 4.5% Mortgage Bond (Friday, April 30, 2010)           The Mortgage Market View           Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of May 03 - May 07 Date ET Economic Report For Estimate Actual Prior Impact Mon. May 03 08:30 Personal Income Mar 0.3%   0.0% Moderate Mon. May 03 08:30 Personal Spending Mar 0.6%   0.3% Moderate Mon. May 03 08:30 Personal Consumption Expenditures and Core PCE Mar NA   0.0% HIGH Mon. May 03 08:30 Personal Consumption Expenditures and Core PCE YOY NA   1.3% HIGH Mon. May 03 10:00 ISM Index Apr 60.0   59.6 HIGH Wed. May 05 08:15 ADP National Employment Report Apr 30K   -23K Moderate Wed. May 05 10:00 ISM Services Index Apr 56.1   55.4 Moderate Thu. May 06 08:30 Jobless Claims (Initial) 5/01 440K   448K Moderate Thu. May 06 08:30 Productivity Q1 2.4%   6.9% Moderate Fri. May 07 08:30 Average Work Week Apr 34.0   34.0 HIGH Fri. May 07 08:30 Hourly Earnings Apr 0.1%   -0.1% HIGH Fri. May 07 08:30 Non-farm Payrolls Apr 187K   162K HIGH Fri. May 07 08:30 Unemployment Rate Apr 9.7%   9.7% HIGH   p

Posted via email from philipjensen's posterous

USDA UPDATE

I wanted to give you more news, supplement bill HR 5017 Rural Housing Preservation and Stabilization Act of 2010 has passed the House!  The majority of the House (85%), voted in favor of HR 5017.  Once the bill passes the Senate and is signed into law by the president, we will have an additional 30 billion in funding.

 

As always thank you for your support in this much needed affordable housing program.

 

 

Thanks,

 

Phil

Posted via web from philipjensen's posterous