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.
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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.
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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 Bowl, but doesn’t actually have tickets to the event.
How to avoid this scam: Ask the tour operator if it has event tickets in hand. Of course, the representative could lie. So it’s best to buy through an organization you know.
5. Phony insurance
How it works: A travel agent sells you a “protection plan” that’s supposed to reimburse you if you have to cancel your trip. The policy, however, is unlicensed and you won’t get your money back.
How to avoid this scam: Make sure the product you’re being sold really is a licensed insurance policy. You can see a list of licensed travel insurance companies at the U.S. Travel Insurance Association site. See The Case for Travel Insurance to learn more about what travel insurance covers. You can compare policies at InsureMyTrip.com.
6. “We will sell your timeshare”
How it works: Groups charge an upfront fee to sell your unwanted timeshare. “The bottom line is they don’t,” Perkins says.
How to avoid this scam: Avoid any group that promises to sell your timeshare for a fee (other than cheap listing fee). If you have a timeshare you just can’t unload, consider posting on Craigslist with an offer to give away your timeshare for free to anyone who will take over the commitment.
Reprinted with permission. All Contents © 2010 The Kiplinger Washington Editors. www.kiplinger.com.
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Economic Calendar for the Week of June 14 – June 18
Date ET Economic Report For Estimate Actual Prior Impact
Tue. June 15 08:30 Empire State Index Jun 20.0 19.11 Moderate
Wed. June 16 10:30 Crude Inventories 6/12 NA -1.83M Moderate
Wed. June 16 09:15 Industrial Production May 0.7% 0.8% Moderate
Wed. June 16 09:15 Capacity Utilization May 74.2% 73.7% Moderate
Wed. June 16 08:30 Producer Price Index (PPI) May -0.4% -0.1% Moderate
Wed. June 16 08:30 Core Producer Price Index (PPI) May 0.1% 0.2% Moderate
Wed. June 16 08:30 Building Permits May 655K 610K Moderate
Wed. June 16 08:00 Housing Starts May 655K 672K Moderate
Thu. June 17 08:30 Jobless Claims (Initial) 6/12 NA 431K Moderate
Thu. June 17 08:30 Consumer Price Index (CPI) May -0.1% -0.1% HIGH
Thu. June 17 08:30 Core Consumer Price Index (CPI) May 0.1% 0.0% HIGH
Thu. June 17 10:00 Index of Leading Econ Ind (LEI) May 0.4% -0.1% Low
Thu. June 17 10:00 Philadelphia Fed Index Jun 17.0 21.4 HIGH

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Curtis Schartz, Certified Mortgage Planner, Pulaski Bank Home Lending, Overland Park, Kansas City, Lee’s Summit, Olathe, Leawood, Lenexa, Independence, Liberty, Parkville, Gladstone, Shawnee.