Danny Salas

Archive for April, 2010

Chico, CA Interest Rates Market Report – Economic Influences – April 28, 2010

Greece Being Rescued From IMF

Bargain Hunters Abound

After yesterday’s sharp declines, the Stock Market is looking to win back a few investors, coupled with the fact that the International Monetary Fund (IMF) has decided to aid Greece, and Mortgage-Backed Securities (MBS) are taking the blow.  Yesterday’s 50 Basis Point Gain, has lost all but 19 Basis Points.  At one point, we gained 66 Basis Points…And Started Locking, saving our clients ten’s of thousands of dollars!

The ‘Ole Swith-A-Roo

Standard & Poor’s Credit Rating Agency downgraded Greece and Portugal’s debt status to “junk.”  This caused investors to flee to the United States to invest in our Treasuries.  Here’s the “Catch-22″ in all of this.  Greece had to offer higher yields, to attract investors.  So, their 2-Year Treasury Note is offering 18% compared the United States’ 1.0%.  With a “junk” status, it was too risky for investors to throw their pools into Greece’s pot…however, with the IMF offering some stability, it might be worth more risk, so money is now pouring out of the United States’ Treasury Auctions and offerings.  I told you to expect volatility!

Bernanke Speaks

The Federal Open Market Committee (FOMC) will wrap up their two-day meeting today, and announce their decision on Monetary Policy at 11:15 a.m. PST.  Don’t expect any surprise moves, by the Fed.  Also, it will be interesting to see if the “extended period” language will be twisted a bit, or remain in their statement.  Yesterday’s Consumer Confidence levels might put pressure on other Committee members to sway toward Kansas City Fed President Thomas Hoenig’s stance on removing the language to circumvent inflation from rearing its ugly head.

Other FOMC Interests

The Fed has another meeting in June.  With the tax credits ending, more opportunity to take a look at the Labor Market, and see if Consumer Confidence can remain high, I think the Fed will keep their “extended period” language in place, at least for now.  But if I’m wrong…if you didn’t lock yesterday, you’d better talk to your borrowers and let them know it might be prudent.

CAREFUL Floating

Locking Advice

If your clients didn’t lock yesterday, have your lender register them, and lock them, if the Fed’s Statements support doing so.  The 5-Year Treasury Note Auction is today.  That might not fare too well, with Greece being rescued…AGAIN!

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Chico, CA Interest Rates Market Report – Economic Influences – April 27, 2010

Trouble In Greece Is Helping Our MBS

Greece X

The uncertainty, in Greece, has caused investors to park their investment funds in the safe-haven of U.S. Treasuries and Mortgage-Backed Securities.  We’re currently up 34 Basis Points and we’ve broken through the very tough ceiling of resistance, at the 50-Day Moving Average. The biggest concern is, can we remain here?  Will The European Community save the day, again, for Greece?  Will money pour back into the Euro, if a resolution results?  These are questions that continue to go unanswered, however, will have significant implications on interest rates.

Earnings Reports

For the most part, earnings have been stronger than I had anticipated.  We ran into this last year, and my calculations were a few months behind, and that might be what’s happening, currently, as well.  While I am extremely excited for the United States, and the rest of the world, to climb out of this financial nightmare, while trying to remain optimistic, the reality is that until the labor market experiences more significant growth, the economy will continue to drag its ugly tail.

Consumer Confidence

As if to slap me right in the face, for my labor comments above, Consumer Confidence sharply catapulted to 57.9.  This is the highest reading since September of 2008 and significantly higher than last month’s disappointing 52.3 reading.  Consumer Confidence is so important because it measures the willingness of the American People to spend money; boosting the economy.

Fed Meeting Starts Today

The Federal Open Market Committee opens their two day meeting today.  Their Rate Decision and Policy Statement will be released tomorrow, after the meetings, at  11:15 PST.  you can rest assured that the high Consumer Confidence Numbers will be a matter of discussion.

Treasury Auction Starts

Today, $44 Billion worth of 2-Year Treasury Notes will be auctioned off, starting the week off of 2, 5, & 7-Year Treasuries.

Greece's Troubles Are Helping Rates

Locking Advice

Now, is the time to float…however, EXTREMELY carefully!  We’ve managed to climb above some very tough resistance.  And if another resolution to Greece’s troubles is negotiated, money could fly from the U.S, and back to Europe.  However, if not, we could see even better pricing.  Register your loans for locking…but wait until the news changes, before doing so.  It sure is a bumpy ride, however, you knew it was coming.

Related Must Reads

Related Must Reads From Greece
Earnings Surprise: A Look Back At October of 2009
Why Be Leery: A Look At Short Term Treasuries Desirability Compared To Long Term Treasuries

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Chico, CA Interest Rates Market Report – Economic Influences – April 23, 2010

Greece Is Being Rescued...AGAIN

Greece IX

Things are looking better for Greece, and therefore the safe-haven for US Treasuries and Mortgage-Backed Securities has been abandoned, causing rates to increase.  Here is where we must be patient.  Most of our pipeline is locked, however, with some of the new applications taken, we’re risking not locking in order to see if Stocks have, indeed, moved to an level below their April 16th low of 10,973.  If they ignore this level, and are able to remain above the high’s of 11,154, than I will have been wrong, and interest rates will struggle with moving below their current levels.

Greece IX 1/2

Greek Prime Minister George Papandreou has asked the European Union (EU) and International Monetary Fund (IMF) for their $45 Billion Bailout funds.  Yesterday, I reported on Greece’s financial status, according to Eurostat.  This $45 Billion is a bandaid for their incredible deficit and watch this closely, as Greece will have to plan and cut to get out of their financial struggles.  Sound familiar?

First Time Tax Credit Boosts Home Sales

Home Sales were up 27% from the last month’s record lows.  The First Time Home Buyer’s Tax Credit had a lot to do with it, however, good weather played into the numbers, as well.  Remember, that if you’ve owned a home, five of the last eight years, you would also qualify for $6,250 for just buying a new primary residence.  So, this benefit, also helped increase sales.  411,000 new homes sold, compared to last months 324,000.  The rate in which homes sell, also accelerated to a 6.7 month holding period, as opposed to the 9.2 month reading that we saw in February.  It will be interesting to see how these numbers fare when the stimulus packages expire.

Durable Goods Orders

Durable Good Orders fell by 1.3%, however, when stripping out volatile transportation statistics, it actually gained a promising 2.8%, dominating the expected 0.7% increase, set by the market.

With Lock Barrel's Cocked...We're Still Floating

Locking Advice

At this point, I think we better continue to float, and watch what the Stock Market will do.  We lost some value, and Greece has been rescued, just in time to possibly have a negative effect on the Treasury Auctions this coming week, however, the Stock Market will play a larger roll, in where rates go.  Our loans are registered for locking…with an itchy finger on the lock button, and I warned of this volatility…expect more.

Related Must Reads

Greece’s Problems: What Eurostat Reported
Tax Credit Extension: Do YOU Qualify?

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Processing the 4506-T: The NEW Delay In Lending

IRS Form 4506-T: More Potential Delays

What’s IRS Form 4506-T

Now that April 15th has come and gone, lenders are struggling with a new potential delay.  The 4506-T form.

The 4506-T allows the lender to verify, line by line, the actual filings of a client’s 1040 Federal Tax Returns.  If one line is off by $1.00, than your loan may not fund…period!  Lenders are processing these forms on each and every file…or they cannot sell the loan in the secondary market.

What’s The Problem?

Since you need two year’s tax returns on every file, many times clients need 2009 tax returns to qualify for their loan, because 2007’s income may have been too low, or maybe their business didn’t exist until 2008.  Particularly with self-employed borrowers, as lenders will use the “net” income to qualify a borrower for their loan.  When the 4506-T is processed, you must use the two years’ tax returns compared with two years’ line by line result, from the Internal Revenue Service.  However, can take up to ten (10) weeks for the process to transpire.  If you have a client that is unable to provide 2007 tax returns that support income for qualifying, and you have to wait for the 4506-T results, it can get frustrating.

So, What’s The Answer?

There are a couple of things you can do.  One is to take your returns down to your local IRS office and submit them, ask for a copy, ask them to stamp the returns, IRS Received, and provide that to your lender.  NOT ALL LENDERS will accept this, however, we know who does…of course!  The concern, here, however, is that if you have mailed your returns in, and you hand deliver them…you will be assessed a late fee, because the IRS won’t have record that they were actually mailed.  Frustrating!

Another Route

Have your borrower contact the IRS at 800-829-8374 and ask for the assignment of a tax advocate. You may need to assist them in the preparation of documentation, which should also include a Letter of explanation explaining that the borrower will suffer financial hardship, if the processing of the return and availability of the transcript is not expedited. I received a processed 4506-T, directly from the IRS, in two weeks by employing the same method.

If either of these two processes are not viable options…you may be stuck…waiting!