Mar

21

In This Issue…

Last Week in Review: Our thoughts continue to go out to people suffering in both Japan and the Middle East. Read on to learn how world events impacted the markets.
Forecast for the Week: The volatility is sure to continue, as will the barrage of news, including several reports that will tell us how our economic recovery is faring.
View: Have a home equity line of credit? Know if it is impacting your credit score unfairly? Check out important details below!
Last Week in Review

“It’s a small world after all…” That notion was especially evident last week, with both the news in Japan and the Middle East impacting our markets. Here’s what happened, and what the impact was on home loan rates.
The first thing to understand is the concept of “safe haven trading.” At times of global unrest and uncertainty, like with last week’s nuclear crisis in Japan and the ongoing fighting in Libya, Traders will park their money in “safe” investments like our Bonds. And since Bonds such as Mortgage Backed Securities (MBS) are tied to home loan rates, when Bond pricing improves, our home loan rates can improve… which is what we saw last week.
But it’s also important to understand how incredibly volatile this situation is. A “safe haven trade” is just that… a trade, which is short-term. Should events around the world become more stable, this safe haven trade can unwind very quickly… with Bond prices and home loan rates worsening as a result. This is similar to how the market reacted at the end of last week, when Libya declared a cease fire to fighting after the United Nations declared a no-fly zone.
Another thing to note is that Bonds and home loan rates are facing some additional headwinds that could hamper their improvement. First, if Japan sells some of their Treasury holdings to help finance the recovery and reconstruction, like they did in 1995 after the Kobe earthquake, this could spur a sell-off in Bonds overall, which would cause Bonds and home loan rates to worsen.
Second, we cannot overlook the impact of inflation… which is the arch enemy of Bonds and home loan rates… both here and overseas. Not only is China struggling with inflation even though they have raised rates and tightened lending requirements multiple times over the past few months, but last week both our Producer Price Index (which measures inflation at the wholesale level) and our Consumer Price Index were hotter than expected.
The bottom line: If inflation is allowed to grow, it can be very difficult to rein in and control… and this will hinder improvement in home loan rates. And, if the situations in Japan and the Middle East stabilize or improve, we could see further unwinding of the “safe-haven” buying of US Bonds… which will also hinder improvement in home loan rates.
If you have been thinking about purchasing or refinancing a home, call or email me to learn more about how you can benefit. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.
Forecast for the Week

Continuing developments in world events are sure to impact the markets this week, but there are some important US economic reports to look for, too, including:
• Monday’s Existing Home Sales Report and Wednesday’s New Home Sales Report for February – will they show improvement in the housing market?
• We’ll get a read on the economic recovery with the Durable Goods Report on Thursday, which gives us an update on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time (i.e. televisions, appliances, vehicles, etc). It’s an interesting report, as people tend to hold back on these types of purchases when they are feeling a need to be extra conservative with their finances or feel insecure about their employment.
• We’ll also get a read on the labor market with Thursday’s weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Jobless Claims were reported at 385,000, right smack at expectations, and show that the labor market is continuing to improve.
• Friday will bring two additional reads on our economic recovery: The Consumer Sentiment Index and the Gross Domestic Product Report, which is the broadest measure of economic activity.
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 improved due to the turmoil around the world, but they were unable to improve above a key technical level. I’ll be watching to see which way the markets move this week.

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Chart: Fannie Mae 4.0% Mortgage Bond (Friday Mar 18, 2011)

The Mortgage Market Guide View…

Home Equity Lines of Credit and Your Credit Score
What You Need to Know and Do
Credit reports have always been important, but they’ve grown even more important in recent years. Now more than ever, you need to make sure you understand what’s on your credit report – and you need to know what steps you can take to improve your score.
For example, did you know that a Home Equity Line of Credit (HELOC) can impact your credit score quite dramatically… and sometimes unfairly… depending on how it is reported?
Here’s What You Need to Know… and Do!
First, you need to know that HELOC’s are commonly reported by the three credit bureaus as revolving accounts. In reality however, they do not fall under the typical revolving terms, even though they are set up in the same way as a revolving account. That’s because HELOC’s are secured by an asset.
Here’s the Good News…
The Fair Credit Reporting act requires reporting agencies to report true and accurate information. So when a HELOC is reported as a revolving account, you can actually send a letter to the three credit bureaus asking them to change the type of account from “Revolving” to “Line of Credit” or “Other.”
This way, the account will not be rated by the scoring system using the “Balance to Limit” ratio scenario – which can drop a credit score by as much as 75 points if the HELOC is maxed out to the limit of the available credit line.
A Final Word of Advice
If you do decide to send a letter, you should send it as a Certified Letter, along with a copy of the HELOC agreement. You may have to send the letters more than once, but persistence is the key to accomplishing a positive result with the bureaus.
This article was adapted from information provided by national credit expert Linda Ferrari, author of “THE BIG SCORE: Getting It and Keeping It, Buying Power for Life.” Learn more and check out her credit resources at www.lindaferrari.com

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Economic Calendar for the Week of March 21-25, 2011
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 March 21 – March 25
Date ET Economic Report For Estimate Actual Prior Impact
Mon. March 21 10:00 Existing Home Sales Feb 5.05M 5.36M Moderate
Wed. March 23 10:00 New Home Sales Feb 288K 284K Moderate
Thu. March 24 08:30 Jobless Claims (Initial) 3/19 384K 385K Moderate
Thu. March 24 08:30 Durable Goods Orders Feb 0.9% 3.2% Moderate
Fri. March 25 08:30 Gross Domestic Product (GDP) Q4 2.9% 2.8% Moderate
Fri. March 25 08:30 GDP Chain Deflator Q4 0.4% 0.4% Moderate
Fri. March 25 10:00 Consumer Sentiment Index (UoM) Mar 68.0 68.2 Moderate

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: curtis@kcmortgageplanner.com

If you prefer to send your removal request by mail the address is:

Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Success Source, LLC does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

Certified Mortgage Planner, Curtis Schartz, Home loan, Interest Rate, Interest Rates, kansas city, lees summit, Mortgage, mortgage backed securities, no cost refinance, overland park, Pulaski Bank, purchase, Rates, Refinance, shawnee

Mar

15

In This Issue…

Last Week in Review: Our hearts and minds – as well as the markets – were moved by the tsunami in Japan and unrest in Saudi Arabia. Read how both impacted Bonds and home loan rates!
Forecast for the Week: Double dose after double dose hits the news wires this week. Find out what to watch and why!
View: Discover the pros, cons, and interesting tidbits about Daylight Saving Time, which begins this week.
Last Week in Review

“And now… the rest of the story” – Paul Harvey. With his famous line, Paul Harvey pointed out for years that there’s more to every story – and often those hidden details influence what happened. With that in mind, let’s look at the “rest of the story” behind last week’s news items, which had alternating impacts on Bond prices and home loan rates.
First, let us start by sending our thoughts and prayers to the families affected by last week’s earthquake and tsunami in Japan. The earthquake was a magnitude of 8.9 – the strongest in 140 years. The earthquake in Japan and its damage created some counterintuitive market reactions.
One would think that US Treasuries and Mortgage Bonds would have traded much higher, as often is the case with devastating natural events that drive money into “safe haven” trades. But that wasn’t the case. Why? The answer is that buying of Treasuries and Mortgage Bonds as a safe haven trade was offset by the Japanese selling some of their own massive holdings of Treasuries and Mortgage Bonds, in order to repatriate money back to their country during the time of emergency. Considering that Japan is the second largest holder of U.S. debt at $877 Billion, selling just a tiny position of their holdings has an impact on Bond prices.
In addition, Bond prices traded in very volatile fashion last week after getting jockeyed around on news out of Saudi Arabia that police had opened fire on protesters with rubber bullets. Let’s look at how this influenced the markets in a different way than one might at first imagine.
Like other recent uprisings in the Middle East, Saudi protesters are looking for more democracy, the right to elect public officials, greater civil rights, freedom of expression, more women’s rights and a higher minimum wage. Interestingly, however, oil fell last week, despite the news. Why? Shouldn’t unrest in Saudi Arabia – the world’s largest oil producer, push prices higher? Yes, but that news was offset by the earthquake in Japan. That’s because Japan is a huge importer of oil… and the market senses that the earthquake and subsequent tsunami may create an economic slowdown and diminish the demand for oil.
Seeing that Mortgage Bonds are lower – even in the face of weak Stocks and enormous uncertain global news – tells us that the gains in Bonds are not coming with a lot of conviction and Traders are selling into this strength. This is because a lot of headwinds remain for Bonds – like inflation abroad, rising government debt and continued QE2 purchases.
This is a good example of why it is important to work with a mortgage professional that understands not only what was reported in the news, but also how the many cross currents may have alternating effects on everything from Bonds, Stocks, Oil to the US Dollar.
Forecast for the Week

“Double dose!” is the phrase of the week, as we’ll see multiple reports this week focusing on the same segments of the economy:
• We’ll start off with some big news Tuesday, when the Federal Reserve holds its FOMC meeting and releases its Policy Statement later that afternoon. As always, what the Fed says about the economy, inflation, and its Quantitative Easing program could have an impact on home loan rates.
• There’s a double dose of real estate news with Wednesday’s release of data on Housing Starts and Building Permits in February. Check back with me on Wednesday to get the breakdown of how the news actually arrived!
• There’s also a double dose of manufacturing news. Tuesday’s Empire State Index looks at New York State’s manufacturing sector and is a good gauge of manufacturing overall, while on Thursday we’ll also see another important manufacturing report in the Philadelphia Fed Index.
• A double dose of inflation news also comes our way this week with Wednesday’s Producer Price Index Report, which highlights inflation at the wholesale level, and Thursday’s Consumer Price Index Report, measuring inflation for consumers like you and me! Remember: The Fed is intent on creating inflation, which is unfriendly to home loan rates, and signs of inflation from these reports could be unfavorable for rates.
• Thursday we’ll get a read on employment with the weekly Initial Jobless Claims Report. Initial Jobless claims rose 26,000 in the latest week to 397,000, which was above expectations but still below that psychological barrier of 400,000.
• Finally, on Thursday we’ll see a double dose of manufacturing data with the release of reports on Capacity Utilization and Industrial Production in February. The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate climbs too high it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and decides how to set interest rates on the basis of whether production constraints are threatening to cause inflation.
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 by the arrows in the chart below, Bond prices experienced some up-and-down volatility last week, but ended the week near where they began – meaning home loan rates are still near historic lows.
So what should you do if you or someone you know is in the market for a new home?
The bottom line is that even if housing were to drop a little further in some areas, the affordability coming from today’s rates serves as a backstop against any moderate price reduction. Remember, housing will likely be in a much better position in the second half of the year and at that time rates could be a bit higher. Now’s the time to take advantage of the combination of low rates and affordable housing. Call or email today to get started.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Mar 11, 2011)

Sping Forward Beginning March 13

Daylight Saving Time (DST) begins on Sunday, March 13, 2011. The way we refer to time zones also changes. For example, Eastern Standard Time (EST) becomes Eastern Daylight Time (EDT).
But remember, some areas of the United States don’t use DST, such as Arizona, Puerto Rico, Hawaii, the US Virgin Islands and American Samoa.
Benefits of Daylight Saving Time
Despite some concerns, Americans overwhelmingly like Daylight Saving Time. There is simply more sunlight in the evenings to enjoy the outdoors and get things done. Plus, additional hours of daylight can help save energy on a national scale – as much as 100,000 barrels of oil per day according to some estimates.
And brighter is safer. Studies have shown that the DST shift reduces traffic accidents. Additionally, a study by the US Law Enforcement Admin also determined that crime is consistently lower during DST, with violent crimes down as much as 10% to 13%. For many crimes, like mugging, darkness is a factor–so more light in the evening hours reduces these types of crimes.
Cons of Daylight Saving Time
Not everyone benefits from DST. For example, many farmers say that DST has a negative impact on their livestock’s natural schedules. The airline industry also reports that it costs millions of dollars to adjust time schedules – and even then, airlines report numerous problems with international flight connections during the transition time since DST isn’t followed uniformly around the world.
Interesting DST Facts
• A man was actually able to avoid the draft for the Vietnam War using a Daylight Saving Time loophole. When he was born, it was just after midnight, DST. When he was drafted, he successfully argued that in his home state of Delaware, standard time – not DST – was the official time for recording births. So he was technically born on the previous date – which had a much higher draft lottery number – and he was able to avoid being drafted.
• In September 1999, the West Bank was on Daylight Saving Time, while Israel had switched back to standard time. A group of West Bank terrorists prepared some timed bombs. Unfortunately for them, they misunderstood the time change and the bombs exploded early – killing the terrorists themselves rather than the intended victims, two busloads of innocent citizens.
• In the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul – which are considered one metropolitan area – didn’t agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches seven times in 35 miles!
• To keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks “fall back” in the fall, all trains that are running on time actually stop at 2 am – the official time of DST change – and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time.
Finally, since many electronic devices and computer programs are set to adjust to DST based on the old dates, they may not change automatically on March 13. So, you’ll want to double-check all of your devices and confirm that the time is correct.

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Economic Calendar for the Week of March 14-18, 2011
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 March 14 – March 18
Date ET Economic Report For Estimate Actual Prior Impact
Tue. March 15 08:30 Empire State Index Mar 17.0 15.43 Moderate
Tue. March 15 02:15 FOMC Meeting Mar HIGH
Wed. March 16 08:30 Housing Starts Feb 551K 596K Moderate
Wed. March 16 08:30 Building Permits Feb 570K 562K Moderate
Wed. March 16 08:30 Producer Price Index (PPI) Feb 0.6% 0.8% Moderate
Wed. March 16 08:30 Core Producer Price Index (PPI) Feb 0.2% 0.5% Moderate
Thu. March 17 10:00 Index of Leading Econ Ind (LEI) Feb 0.9% 0.1% Low
Thu. March 17 09:15 Capacity Utilization Feb 76.5% 76.10% Moderate
Thu. March 17 09:15 Industrial Production Feb 0.6% -0.1% Moderate
Thu. March 17 08:30 Core Consumer Price Index (CPI) Feb 0.1% 0.2% HIGH
Thu. March 17 08:30 Consumer Price Index (CPI) Feb 0.4% 0.4% HIGH
Thu. March 17 08:30 Jobless Claims (Initial) 3/12 387K 397K Moderate
Thu. March 17 10:00 Philadelphia Fed Index Mar 28.0 35.9 HIGH

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: curtis@kcmortgageplanner.com

If you prefer to send your removal request by mail the address is:

Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Success Source, LLC does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

Certified Mortgage Planner, Curtis Schartz, home, Home loan, Interest Rates, kansas city, lees summit, overland park, Pulaski Bank, purchase, Refinance, shawnee, No Cost Refinance