Mortgage Market Guide Vol. 10 Issue 9

Last Week in Review: The markets were closed Monday but the rest of the week had its share of good and bad news.

Every cloud has a silver lining. That popular idiom is one way to look at the headlines last week, both here in the U.S. and overseas. Read on for the details and what they may mean for home loan rates.

There was good news on Friday as Consumer Sentiment rose to 75.3, which is the best level since February of 2011. However, this news was tempered by the rise in oil prices that we have been seeing. There’s a good side and a bad side to higher oil prices.

On the one hand, high oil prices are very detrimental for the fragile U.S. economy, as consumers have to put more of their discretionary dollars into their gas tanks...meaning they have less to spend elsewhere. High oil prices are also inflationary as the added shipping and material costs apply upward price pressures on Producer or Wholesale goods that either have to be absorbed by the producer, thus hurting profits and the ability to expand or hire. Or the added costs get passed onto to the consumer...a la a rise in consumer inflation.

The silver lining is that high oil prices could actually be good news for home loan rates, as the dampening effect on economic growth produces a sluggish economic environment in which Bonds (including Mortgage Bonds, to which home loan rates are tied) thrive. This is an important topic to continue watching in the weeks and months ahead.

In silver linings overseas, after seemingly endless negotiations, Greece, investors and central bankers came to an agreement to provide Greece with 130 Billion Euros ($172 Billion) in financial aid. This will help the country fund itself through March and into the future... as long as it institutes economic reform, austerity measures and meets deficit targets. Any deal with Greece will be very tough to implement and a default could still occur...which makes this another important topic to keep close watch on.

Between some of this uncertainty from overseas being lifted, a lower unemployment rate, and better than expected economic reports, home loan rates have struggled to improve beyond some of the best levels seen over the past two weeks. But yet another silver lining is that home loan rates remain near historic lows, and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week: A plethora of economic reports will hit the wires, with news on inflation, manufacturing, the state of the economy and more.

 As you can see in the chart below, roller coaster trading in the markets continues. I'll continue to monitor this situation closely.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Feb 24, 2012)

After last week's holiday-shortened week, there will be plenty of economic reports to watch for.

• Pending Home Sales will be released on Monday and could have a relatively modest impact on trading.
• Durable Orders will be delivered on Tuesday. This report gives a look at consumer spending for products that are expected to last at least three years.
• Another important report will be Consumer Confidence on Tuesday, as the American consumer is a very important player in the U.S. economy.
• In the manufacturing sector, the Chicago PMI and the ISM Index will be released on Wednesday and Thursday, respectively.
• The all-important Gross Domestic Product report comes on Wednesday and will give a detailed      view on the overall picture of growth in the U.S.
• Weekly Initial Jobless Claims will be released on Thursday, and last week's claims remained near four-year lows, signaling that the jobs market could be healing.
• Finally, the Core Personal Consumption Expenditure (PCE) report will be released on Thursday. This is the Fed's favorite gauge of 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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving - and when they are moving lower, home loan rates are getting worse.

To go one step further - a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. 

View: “Thank you” may be two small words, but they carry a large significance.

7 Ways to Say Thanks

It's hard to go through the day without hearing the words "thank you" or "thanks." However, much of the time, people say those words quickly and without much meaning. Sure, a quick "thanks" is appropriate when someone holds a door for you or hands you something.

But when it comes to saying thank you to a client, partner, or friend for a more significant gesture, it's important to go the extra mile. This is even more crucial in today's business environment when success is so dependent on personal connections.

So how do demonstrate your appreciation? Here are 7 ways to say thank you…to strengthen your relationships…and to stand out in the mind of the person you're thanking.

1. Classic and Classy. Mailing thank you notes has dwindled in today's email business environment. That means you can really stand out and demonstrate your sincere appreciation by hand writing a brief thank you note and mailing it. Not sure what to write? No problem. Check out this Simple advice for writing a thank you note.

2. A Little Surprise. Little surprises can be a fun way to thank a client, colleague, or friend. You may want to write a thank you note, but then slip it into a file that you hand the person. Or you could consider getting the person's jacket for them when they get ready to leave a meeting…and then slip the note into a pocket just before you hand it to him or her.

3. See You in the Papers. If you have a newsletter, social media page or blog, thank people publicly. A short "shout out" can go a long way.

4. Phone a Friend. There's something about hearing a person's voice…and it's even better when they call just to say thank you rather than to ask for something.

5. Face-to-Face. Dropping by to say thank you goes a long way to demonstrating your sincerity and to strengthening your relationships.

6. Time Is On Your Side. People seem busier than ever. That's why making time for someone means so much. One way to thank a person is simply to schedule some time for coffee or to chat. Then, turn off your cell phone and give him or her your undivided attention.

7. A Good Cause. Sometimes it's not appropriate to give money or a gift. That's ok. You may find that a unique and sincere gesture is to make a donation to a worthy cause that the person cares about. Then, let the person know about your donation as a way of saying thanks. 

Mortgage Market Guide Vol. 10 Issue 8

Last Week in Review: Good economic news, signs of inflation, and news from Greece all had an impact on Bonds and home loan rates.

A tale of three stories. That's a great way to describe last week's news, as a string of positive economic reports, news out of Greece, and hints that inflation is heating up all worked together to impact Bonds and home loan rates. Here are the details!

A breakfast buffet of better than expected economic data hit the wires last week. In the housing arena, Housing Starts came in better than expected, while both the New York Empire State Index and the Philadelphia Fed Index reported positive manufacturing news. There was also decent labor market news, as Weekly Initial Jobless Claims fell by 13,000 in the latest week to 348,000 - the lowest level since March 2008! Meanwhile, Retail Sales rose in January by 0.4%, the largest gain since October.

Remember, strong economic news often cause money to flow out of Bonds and into Stocks, as investors hope to take advantage of gains. That's partly what caused Bonds (including Mortgage Bonds, to which home loan rates are tied) to worsen late last week.

Also weighing on Bonds and home loan rates was the news that inflation is heating up. Despite the Fed's claim that inflation is moderating, the Core Consumer Price Index (CPI), which strips out volatile food and energy, rose to its highest levels since October 2008. Meanwhile, as you can see in the chart, the wholesale measuring Core Producer Price Index (PPI) rose double the expectations of 0.2%, coming in at 0.4%. Any hints of inflation can serve to spook Bond investors - causing both Bonds and home loan rates to worsen - as inflation can reduce the value of fixed investments like Bonds. This is one story to keep a close eye on in the weeks ahead.

The drama in Greece is another key story to monitor, as it also impacted Bonds and home loan rates last week. Greece sent the markets into the weekend with assuring messages that a deal for them to avoid default is close, and this sense of optimism weighed on Bonds and home loan rates. Our Bonds and home loan rates have benefitted from all the uncertainty in Greece, as investors have seen our Bond Market as a safe haven for their money. Time will tell whether this uncertainty and safe haven trading will continue.

The bottom line is that now is a great time to purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week: A holiday-shortened week is ahead, and the economic calendar will be light.

As you can see in the chart below, good economic news late last week reversed the improving trend Bonds and home loan rates experienced early in the week. I'll continue to monitor this situation closely.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Feb 17, 2012)

 

The capital markets were closed on Monday due to Presidents' Day and the economic calendar is light the rest of the week with just a few reports.

• On Wednesday Existing Home Sales will be released, followed by the New Home Sales report on Friday. The reports come after last week's positive Housing Starts data.
• Thursday brings the weekly Initial Jobless Claims Report, which has steadily declined this year to a more job-friendly level.
• On Friday, the Consumer Sentiment Report will be released.

In addition to those reports, a number of news stories may move the markets, including additional news out of Greece, the Treasury Department's auction of $99 Billion worth of government securities, and movement in the Stock Market. All of those news stories have the potential to negatively impact the Bond Market, depending on how they develop.

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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving - and when they are moving lower, home loan rates are getting worse.

To go one step further - a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. 

View: Drive a car for work? Be sure you’re using the latest mileage rates.

Mileage Rates for 2012

If you drive a car, truck or van for work, you'll want to make sure you know the standard mileage rates that the Internal Revenue Service (IRS) has set for 2012.

These mileage rates are used to calculate deductible costs for driving an automobile for business, charitable, medical and moving purposes. So when it comes to filing your taxes this time next year, you'll need to know these numbers!

New for 2012

As of January 1, 2012, the standard mileage rates are as follows:

• Businesses = 55.5 cents per mile driven
• Medical or moving = 23 cents per mile driven
• Charitable organizations = 14 cents per mile driven

You'll notice that the rate for business miles is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

Make Sure You Qualify

Before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. However, the IRS is accepting public comments on this policy.

Additional Option

Although the IRS provides the standard mileage rate for ease and convenience, you're not required to use it. If you prefer, you can calculate the actual costs of using your vehicle instead of using the standard mileage rates.

Remember, if you have questions or concerns, talk to a tax consultant or accountant to discuss your options and unique situation. 

Mortgage Market Guide Vol. 10 Issue 7

Last Week in Review: The economic report calendar may have been quiet, but plenty of stories made big headlines.

All's quiet on the economic report front. But that didn't stop last week's news from making headlines. Read on to find out what happened...and how Bonds and home loan rates reacted.

Fed Chairman Ben Bernanke was back on Capitol Hill last week, reaffirming his stance on keeping interest rates low through 2014. Mr. Bernanke said that high unemployment continues to weigh on the housing markets, due to the high number of people who remain out of the labor force or are under-employed. With last week's Initial Jobless Claims coming in at 358,000, lower than the 370,000 expected, there is some good news when it comes to the labor market: It is improving, albeit stubbornly slowly.

Also in the news, an agreement has been finalized with five large banks to settle alleged foreclosure abuses, including the infamous "robosigning." The $25 Billion deal is the largest government versus business settlement since the tobacco lawsuits back in 1998. The deal is expected to include $1.5 Billion in cash payments to borrowers who were foreclosed upon between September 2008 and December 2011, but the larger part of the settlement amount is being directed to potentially help thousands of homeowners who are presently current on their loans but owe more than their homes are worth. It will take some time for the details to be decided and released, and I'll be watching this story closely as more details are forthcoming.

Greece continues to make headlines, as European leaders have now demanded that the austerity measures Greece promises to make be put into law, rather than just be a verbal or virtual handshake. The other valid concern is that there's a big, fat Greek election coming this April. Should new leadership not back these verbal agreements, Germany and the rest of Europe will be throwing good money at a bad and unresolved situation.

While this uncertainty in Europe has led to continued safe haven trading in our Bond Markets, Bonds and home loan rates worsened last week as Stocks are off to their best start to the year since 1987. The Dow Jones Industrial Average is at its highest level since May of 2008. And with the Fed continuing to underwrite the economic recovery, we should expect higher Stock prices still - and this could continue to weigh on Bonds and home loan rates over time.

The bottom line is that home loan rates remain near historic lows and now is a great time to purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week: There’s a full week of economic reports ahead, with news on inflation, manufacturing, housing, and more.

As you can see in the chart below, Bonds and home loan rates have been worsening as investing dollars have been pulled into the Stock Market. I'll be watching closely to see if this continues.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Feb 10, 2012) 

After last week's quiet economic report calendar, this week has several releases ahead.

• Tuesday brings a look at the Retail Sales Report for January.
• We'll get a double dose of manufacturing news with the Empire State Index on Wednesday, followed by the Philadelphia Fed Index on Thursday.
• Also on Wednesday, the FOMC Minutes from the Fed's January meeting will be released.
• We'll also get a double dose of inflation news with the wholesale measuring Producer Price Index on Thursday, followed by the Consumer Price Index on Friday.
• Also on Thursday, another Weekly Initial Jobless Claims Report will be released, plus will get a read on the housing market with Housing Starts and Building Permits.

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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving - and when they are moving lower, home loan rates are getting worse.

To go one step further - a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. 

View: Some popular tax breaks could be going away in 2012. Check out the details below.

9 Popular Tax Breaks You Can No Longer Count on in 2012

Lawmakers may have extended the payroll tax holiday for two months, but they let a number of tax breaks that might be dear to you expire.

By David Muhlbaum, www.kiplinger.com

You'll face a higher tax bill next spring if Congress doesn't act to revive a series of tax breaks that expired Dec. 31, 2011. Among the breaks that Congress didn't extend in all the sturm-und-drang over the payroll tax holiday are:

Alternative minimum tax patch

The AMT is a parallel tax system created more than 40 years ago to prevent excessive use of tax breaks by the very wealthy, ensuring they pay at least some tax. Taxpayers whose income exceeds the AMT exemption - in 2011, $48,450 for individuals and $74,450 for married couples filing jointly - must calculate both regular tax and AMT liability and pay the larger of the two amounts. But exemption levels have, at least tentatively, dropped to $33,750 for individuals and $45,000 for married couples filing jointly in 2012, which will expose 31 million taxpayers to the higher AMT this year, according to Tax Policy Center estimates.

Higher mass transportation benefit

This one's of particular interest to straphangers, van-riders and other users of public transit. A 2009 federal stimulus provision raised the maximum an employee could receive for transit, tax-free, from $120 to $230. That matched the tax-free limit for parking. With the expiration of this break, the maximum for 2012 dropped to $125. Employees who've asked to have an amount higher than that withheld from their paycheck to cover their total commuting costs will see their net pay come down, as the difference is now taxed.

Deduction for direct IRA payouts to charity

Retirees who are 70½ or older could direct up to $100,000 of their IRA distributions directly to charity and exclude the donated amounts from taxable income. Not anymore in 2012, unless Congress reinstates this deduction.

Write-offs for state sales taxes

This particularly significant expired break allowed you to deduct either state income tax or state sales tax from your federal taxable income.

Teacher's supplies deduction

Teachers, even if they didn't itemize, were able to take an additional deduction of up to $250 for classroom supplies they paid for out of their own pockets.

Tuition and fees deduction

Taxpayers (up to certain income limits) who can't claim the more advantageous American Opportunity or Lifetime Learning credits can still reduce taxable income by up to $4,000 for tuition and other qualifying educational expenses -- if, of course, Congress reinstates this break.

Mortgage insurance premium deduction

Homeowners who don't exceed certain income limits had been able to deduct premiums they pay on mortgage insurance policies issued after 2006 on their primary residence.

Personal tax credits applied against the alternative minimum tax

Credits such as the tuition and dependent-care credits were allowed to offset your AMT liability.

Research and Development credit

Like the AMT patch and direct IRA payouts, this credit, which allowed high-tech companies and others to subsidize research in areas that might go unexplored, has broad support. But it still falls to Congress to reauthorize it periodically.

We think Congress will manage to revive these breaks -- eventually -- with the exception of the transit subsidy, whose chances are no better than 50-50 . But you may spend much, if not all, of 2012 in a state of uncertainty. The political atmosphere in Washington is so toxic that it is doubtful the parties will reach agreement before the end of 2012, when Congress will have to take up the question of extending the Bush tax cuts.

If lawmakers wait too long, in 2013, we may have a repeat of the 2006 and 2010 filing seasons, when many taxpayers had to wait for the IRS to reprogram its computers before they could file their tax returns. In both cases, the start of the filing season was delayed for many until early to mid February.

Reprinted with permission. All Contents ©2012 The Kiplinger Washington Editors. www.kiplinger.com 

February Views You Can Use

"We will recover...in time, I know we will recover" - Natasha Bedingfield. The economic recovery has been in the works for a while. It's a slow process, but things are looking a little better each month. Last month was no different. But at the same time, we're not quite where we want to be. The articles below explain where the housing market and economy are now...as well as how long the Fed believes the recovery may take:

 Recovery Continues

The economy and the housing market continue to recover...but that recovery is viewed as a marathon, not a sprint. Last month, the Fed reiterated that sentiment. On the one hand, the Fed's Policy Statement that it released after its regularly scheduled meeting was pretty much the same story, including such statements as stable long-term inflation expectations, a tepid economic recovery, and fragile job market. But there was one big exception to their norm. The Policy Statement said there will be "exceptionally low levels for the Federal Funds Rate at least through late 2014." This is a huge change from the previous statements of "low rates until mid-2013."

On the surface, extending the zero interest policy until 2015 tells us the Fed thinks the economy will just be slogging along, and accommodative monetary policy will be required to keep the economy growing at least at a modest pace. One could argue that recent economic data is better of late and that all this loose monetary policy is unnecessary. But the Fed has spoken, and as the old adage goes: "Don't fight the Fed."


The housing market also received a little good news last month. First, Existing Home Sales increased 5% over the previous reading (read more about that report in the article below). Second, the National Association of Home Builders' Housing Market Index (HMI) rose in January to a reading of 25. That was up 4 points from the previous reading and marks the 4th consecutive month of increases. The last time the HMI had a reading of 25 or more was in June 2007.


The bottom line is that the economy and the markets continue to show some signs of improvement, but there's still a way to go. That said, Bonds and home loan rates remain at historic best levels, which means now is still a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

What To Watch: Existing Home Sales

One way to measure the health of the housing market is to monitor the number of houses being sold. And one of the best ways to do that is by keeping an eye on the Existing Home Sales report that's released by the National Association of Realtors.

Why Is It Important? The Existing Home Sales report measures how well pre-owned single-family homes are selling. That data is important because sales of existing (or pre-owned) houses account for roughly 84% of all houses sold. As a result, this report sometimes moves markets and is considered a good gauge of near-term spending for housing-related items.


What's the Trend? The most recent report on Existing Home Sales indicated sales in December 2011 increased 5% over the previous reading. That was the third consecutive month of increases and the second highest reading of 2011. The December level was also 3.6% above December 2010 and, as a whole, Existing Home Sales were up 1.7% from 2010. Total housing inventory dropped 9.2% for December, representing a 6.2-month supply, down from a 7.2-month supply in November.


Where Does the Data Come From? The information is collected by the National Association of Realtors from 650 realtor associations.


When Is It Released? The Existing Home Sales report is scheduled for release on the 25th day of every month (or on the first business day thereafter) by the National Association of Realtors.


I'll be watching this release to see if the trend from the latest report continues...and to see how it impacts the markets. If you have any questions about economic reports and how they impact home loan rates, please call or email me. I'm always happy to explain what's going on and how it impacts the rate you can get based on your unique situation.

Fee Increase To Impact Home Loans

In December 2011, Congress reached a last-minute deal to fund the payroll tax cut extension. The payroll tax extension will provide a 2% tax reduction for individuals making up to $106,800 - so the tax extension will be very helpful for many Americans who are struggling during these tough economic times. But like so many things in our tangled economy, there's a flip side. In this case, the tax cut deal has a rippling effect that will impact the mortgage world.


Here's what's happening and what it means to home loan rates:
What is happening and why? To put it bluntly, the passage of the payroll tax cut extension is being funded via a mandate to Fannie Mae and Freddie Mac (the nation's largest providers of mortgage money) to increase their guarantee fees or "g-fee's" by at least 10 basis points on the rate. So rather than giving a par rate of 4.00%, for example, the par rate is now increased by at least 10 basis points, or approximately 4.10%. But home loan rates are priced and offered in .125% increments, so this will most likely impact consumers by .125% in rate. Whether you agree or not on the politics behind this cost being passed along to folks who are taking out mortgages, the Congressional Budget Office recently estimated that the increase will ultimately pay for about $35.7 Billion of the cost of the payroll tax extension.


What exactly is this "g-fee"? The guarantee fee or "g-fee" is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk...which means home loans can be offered at terrific interest rates to borrowers that have good - but not perfect - credit.


What exactly is the impact of the rate increase? For example, for a $200,000 home loan, the increased g-fee (assuming a .125% increase in rate) would equate to $250 more per year in interest, or $7,500 more over 30 years. Someone buying or refinancing a home can certainly choose to buy down the cost with cash up front - but most people probably won't do this.


Who will this impact? The change will impact all new borrowers of Fannie Mae and Freddie Mac loans. The bill will also impact Federal Housing Administration (FHA) loans by increasing the annual mortgage insurance premium that borrowers pay by one-tenth of a percent.


When will it start? Officially, the increase to guarantee fees will begin on April 1, 2012. However, the increase is already starting to be seen in rate sheets right now, since home loans being originated now will likely not be closed, pooled and securitized until April...and therefore will need the increased g-fee priced in earlier.


How long will this be in effect? The increase will be effective through October 1, 2021.
The bottom line is that the g-fees will be going up...and this will impact homebuyers looking to obtain a home loan through Fannie Mae, Freddie Mac and FHA.


The good news is that home loan rates are still at historic lows right now, and it's a great time to purchase a new home or refinance. If you or anyone you know has any questions, please call or email!

Q & A: Home Protection?

QUESTION: How can you protect a home from theft?


ANSWER: Recent studies have found that alarm systems are the single most effective way to reduce the risk of burglary. However, studies have also noted that houses near wooded areas or in areas with easy access to highways tend to get targeted more often. If you already live in a house or want to purchase a house that fits that description, don't fear. You'll just want to take extra precautions, such as clearing the bushes and branches away from windows and entrances, as well as installing fake or real security cameras in prominent places so potential thieves will see them. You may even want to start up a neighborhood watch program - it's a great way to get to know your neighbors and to help your entire neighborhood feel safer.


If you have any questions that I can help with at this time, please call or email today. It will only take a few moments to discuss what's going in the markets and how it impacts your unique goals and situation.

Mortgage Market Guide Vol. 10 Issue 6

Last Week in Review: The Jobs Report for January is in - and the news was good!

It's been said that no news is good news. But last week, the Jobs Report brought some good news for the labor market. Read on for the details...and what they mean for home loan rates.

The headline Jobs Report showed 243,000 jobs created, which was much better than expected. Meanwhile, a whopping 257,000 private jobs were created, also much higher than expected. Upward revisions to November and December added another 60,000 jobs to what was previously reported for those months. And adding to the euphoria was a 0.2% decline in the Unemployment Rate, bringing it to 8.3%...the lowest since February 2009.

Despite all this good news, the report did show a pretty sharp decline in the labor participation rate from 64% to 63.7%. We really need to have more people "participating," or working to help pay down our debt. Understandably, the demographics of baby boomers retiring does account for some of the decline. But is it the entire 0.3%? And the U-6 Unemployment Rate (which counts all persons marginally attached to the labor force, including those who are employed part-time but would prefer full-time) remains at a lofty 15.1%, with that figure dropping just 0.1% for the month.

And there was other good news to note last week as well: The Commerce Department reported that Personal Incomes rose in December by 0.5%, above expectations and well above the 0.1% reported in November. This marked the largest increase in nine months!

So what does all of this mean for the housing market and home loan rates?

While Bonds and home loan rates did worsen on the good Jobs Report news (remember good economic news often causes money to flow out of Bonds and into Stocks, as investor try to take advantage of gains), home loan rates remain near historic best levels. In addition, the problems in Europe remain…and as uncertainty reemerges, US Bonds (including Mortgage Bonds, to which home loan rates are tied) will benefit.

The takeaway from all of last week's news is that the pace of improvement in the labor market is choppy and muddled at best. But the trend is improving over time, and this is welcome news for the struggling housing market because as people feel more secure in their jobs, they are more willing to consider making major purchases like a home.

The bottom line is that now is a great time to purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week: Stocks and Bonds will be battling over investing dollars as only two economic reports are scheduled.

As you can see in the chart below, Bonds and home loan rates worsened after the Jobs Report was delivered on Friday. I'll be watching closely to see what happens this week.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Feb 03, 2012)

There are just two economic reports due for release this week and with earnings season winding down, the Stock and Bond markets will be battling over investing dollars.

• Thursday brings the weekly Initial Jobless Claims Report. Last week people filing for first-time claims fell by 12,000 to 367,000, an encouraging sign now that claims have fallen below that dangerously high level of 400,000.
• On Friday, we'll see the first reading on Consumer Sentiment for February.

In addition, the Treasury will sell a total of $72 Billion in Notes and Bonds this week.

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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving - and when they are moving lower, home loan rates are getting worse.

To go one step further - a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. 

View: President Obama has proposed a new plan to help homeowners refinance. Check out the details below.

New Proposal to Help Homeowners Refinance...

But Will It Ever Get Off the Ground?

The Obama administration has proposed a national refinance plan in an effort to stimulate the housing market by helping those homeowners who are underwater on their mortgages, or owe more on their loan than what the home is currently worth. Based on the proposal, the program would be available to responsible mortgage borrowers...and could save them up to $3,000 a year if they were to partake in the program.

However - and this is very important - the plan is currently just a proposal and would have to be passed through both the Senate and the House of Representatives.

President Obama first introduced the plan at his State of the Union Address on January 24th and stated just recently that this is a "make-or-break" moment for the middle class. The President said the program will cut through the red tape with no hidden fees.

There are, however, certain stipulations within the President's proposal. The candidates would have to be current on their mortgages for the past six months and could only have one missed payment in the six months prior to that. The candidate would have to have a credit score of at least 580. The loans would be backed into Federal Housing Authority (FHA) loans and would come from loans that are privately held, and would expand on the Home Affordable Refinance Program (HARP) that is currently open to loans that are backed by Fannie Mae and Freddie Mac. In addition, the loans would have to be 30-year conforming loans or loans that fall between $271,050 to $729,250, and the residence must be owner occupied.

The White House would also want lenders to take a "haircut" for those homeowners who are deep underwater. Homeowners that are deep underwater could be more susceptible to foreclosure or to just "walk away" from their commitment to repay the debt.

Here's an example of what the plan might mean to a homeowner, if the proposed plan were to be approved. On a $200,000 loan that is currently at 6%, the borrower would receive an interest rate of about 4.25%, which could amount to a savings of $216 a month on a 30-year mortgage. There would also be an option to move into a 20-year mortgage and - although the payments would not be lowered - it would provide an incentive to build equity and to pay off the loan in a shorter amount of time.

But before you get too excited or start making any plans, we have to remember that this is just a proposed idea at this time.

As with every new bill introduced to Congress, there could be pushback for the plan, which is expected to cost as much as $5 Billion to $10 Billion. The President said that the new plan would not add to the deficit; instead, the funds would come from a fee placed on large financial institutions. This has already gotten negative comments from Republicans in Congress. The White House said that other options to pay for the program would be considered.

This isn't the first time that Capitol Hill has tried to combat the problems of underwater mortgages in the past few years and they have not been too successful. One big question is will the banks and servicers go along with the plan if it were to get through Congress.

In addition, the loans will be backed into FHA loans. But, FHA is on very shaky ground right now and is in no better shape financially than Fannie Mae and Freddie Mac. Some experts even think that FHA may need a bailout in the near future.

The last thing this Congress wants to do right now is to pass yet another stimulus bill, so many pundits see the proposal as "Dead on Arrival."

In conclusion, an assortment of programs have been introduced to help struggling homeowners, and they have only had limited success. In order for this plan to get off the ground, it will need to be a joint effort by the White House, the lender, the servicer and the consumer... a feat that is always difficult to achieve when there are many moving targets and several different agencies involved. 

National Refinance Plan?

New Proposal to Help Homeowners Refinance...

But Will It Ever Get Off the Ground?

The Obama administration has proposed a national refinance plan in an effort to stimulate the housing market by helping those homeowners who are underwater on their mortgages, or owe more on their loan than what the home is currently worth. Based on the proposal, the program would be available to responsible mortgage borrowers...and could save them up to $3,000 a year if they were to partake in the program.

However - and this is very important - the plan is currently just a proposal and would have to be passed through both the Senate and the House of Representatives.

President Obama first introduced the plan at his State of the Union Address on January 24th and stated just recently that this is a "make-or-break" moment for the middle class. The President said the program will cut through the red tape with no hidden fees.

There are, however, certain stipulations within the President's proposal. The candidates would have to be current on their mortgages for the past six months and could only have one missed payment in the six months prior to that. The candidate would have to have a credit score of at least 580. The loans would be backed into Federal Housing Authority (FHA) loans and would come from loans that are privately held, and would expand on the Home Affordable Refinance Program (HARP) that is currently open to loans that are backed by Fannie Mae and Freddie Mac. In addition, the loans would have to be 30-year conforming loans or loans that fall between $271,050 to $729,250, and the residence must be owner occupied.

The White House would also want lenders to take a "haircut" for those homeowners who are deep underwater. Homeowners that are deep underwater could be more susceptible to foreclosure or to just "walk away" from their commitment to repay the debt.

Here's an example of what the plan might mean to a homeowner, if the proposed plan were to be approved. On a $200,000 loan that is currently at 6%, the borrower would receive an interest rate of about 4.25%, which could amount to a savings of $216 a month on a 30-year mortgage. There would also be an option to move into a 20-year mortgage and - although the payments would not be lowered - it would provide an incentive to build equity and to pay off the loan in a shorter amount of time.

But before you get too excited or start making any plans, we have to remember that this is just a proposed idea at this time.

As with every new bill introduced to Congress, there could be pushback for the plan, which is expected to cost as much as $5 Billion to $10 Billion. The President said that the new plan would not add to the deficit; instead, the funds would come from a fee placed on large financial institutions. This has already gotten negative comments from Republicans in Congress. The White House said that other options to pay for the program would be considered.

This isn't the first time that Capitol Hill has tried to combat the problems of underwater mortgages in the past few years and they have not been too successful. One big question is will the banks and servicers go along with the plan if it were to get through Congress.

In addition, the loans will be backed into FHA loans. But, FHA is on very shaky ground right now and is in no better shape financially than Fannie Mae and Freddie Mac. Some experts even think that FHA may need a bailout in the near future.

The last thing this Congress wants to do right now is to pass yet another stimulus bill, so many pundits see the proposal as "Dead on Arrival."

In conclusion, an assortment of programs have been introduced to help struggling homeowners, and they have only had limited success. In order for this plan to get off the ground, it will need to be a joint effort by the White House, the lender, the servicer and the consumer... a feat that is always difficult to achieve when there are many moving targets and several different agencies involved.