Spain's Troubles Show Signs Of Euro Weakness

Large Spanish Bank Fails

The continued financial troubles, in Europe, keep pushing Mortgage-Backed Securities to areas that I couldn’t even have dreamed of, one month ago.  CajaSur, one of Spain’s largest banks, has FAILED and has been taken over by The Bank of Spain, Spain’s Central Bank.

Economic Recovery

The National Association for Business Economics (NABE) has pronounced a few existing figures, to the market, today.  They are claiming that the U.S. Economy will grow at an unanticipated rate of 3.2%, compared to the expected 3.1%.  Some good news on the employment front, was that they expect unemployment to drop to 8.5% by the end of 2011.  These numbers aren’t as hopeful as our government’s numbers, however, they are probably more realistic.  They also pin-pointed the economic recovery date to June of 2009.

US Treasury Auction

Starting tomorrow, the U.S. Treasury will auction off $42 Billion of 2-Year Notes.  Wednesday will see $40 Billion of 5-Year Notes, and Thursday will show another $31 Billion of 7-Year Notes.  These auctions can cause wild market reaction, however, with Europe’s troubles on the wing, who knows what can happen!

It Doesn't Get Much Better Than This!

Locking Advice

With a ton of economic information and the auctions, for this week, I would be comfortable Locking!  With the completely unexpected values of Mortgage-Backed Securities, I would take advantage.

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Political Chess Game Could Damn Financially Troubled Europe

Will ECB Package Rescue?

Is the $1 Trillion European Central Bank (ECB) Rescue Package too little, too late?  The world is trying to figure that out.  It’s election time in Europe, and many feel as though the funds were held up, until after the election in Germany.  So, this political strategy may have damned Greece, and other European Countries, by the stalling too long.  Investors are trying to figure out the consequences of the delay, and how, or even if, the financial band-aid will fix the problem.  As investors ponder, money flows in and out of world economies widely effecting Stocks and Bonds.

$16 Billion 30-Year Note Auction

The uncertainty in Europe may benefit today’s Note Auction.  We’ll have to wait and see.  If the feeling is that the rescue package is too little, too late, than interest rates, in America, will benefit.  So much uncertainty!

Initial Jobless Claims

The number of Americans filing for unemployment benefits moved to 444,000.  Just slightly higher than the 440,000 expected, bringing the total unemployment recipients to 4.63 Million, not taking into consideration the 5.13 Million people receiving Emergency Unemployment Compensation.  I’m sorry folks, but until these numbers start looking better, expect housing to grow at a more modest pace.  Low rates are great, however, jobs will benefit real estate, more than lower rates.

Initial Jobless Claims Higher Than Expected

Locking Advice

We’re back in CAREFUL float mode!  It, again, doesn’t get much better than this, however, we’ll have to watch the Auction Results, closely, and carefully!

Related Must Reads

European Fix
Why Be Leery Of Yesterday’s Auction Success: A Look Into Why 30-Year Notes Are Harder To Auction
Interesting Side Note On Unemployment: How The Numbers Are Squewed

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Rates On The Rise

3-Year Notes Fare So-So

The 3-Year Treasury Note Auction fared only so well, yesterday.  And the market is poised for another adequate auction of the 10-Year Note Auction, scheduled for today.  Remember, the longer the term of that note, the harder to sell it at reasonably low rates.

European News

Spain announced that they have a financial strategy to narrow their budget deficit, and Germany reported a Gross Domestic Product report that was unexpected.  This caused Stocks to rise, all over the world, at the expense of bonds, and therefore, interest rates.

John Paulson Speaks

Hedge Fund Manger, John Paulson, the man who made billions of dollars calling the collapse of the housing market, in 2007, has indicated that he sees housing prices rise 3-5% this year, and 10-12% next year.  This is huge news, as he’s called a lot of other shots, too, and even if he’s fractionally correct, and housing prices only rise 1.5%, if someone buys a home for $100,000 and puts 10% down ($10,000), in one year, they will have gained $1,500 on that $10,000.  A 15% gain on your investment, is pretty darn good these days!

Treasury Auctions Are Somewhat Disappointing

Locking Advice

We moved to a locking status, as news from Europe continues to be positive, which is taking the sails out of US Treasury Auctions and Bonds offerings.

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More Volatility Coming From Europe

European Fix

The European Central Bank (ECU) and The International Monetary Fund (IMF) announced that they will be lending 750 Billion Euro ($955 Billion) to European Countries to help stabilize the Euro and restore confidence in European countries’ debts.  They have also agreed to start purchasing the debt, as well as government Bonds, of struggling countries like Spain, Portugal, Ireland, and you guessed it…Greece.

Eerily Similar To US

This strategy sounds awfully familiar to the United States Troubled Asset Relief Program (TARP), and $1.25 Trillion Mortgage-Backed Security Purchase Program.  Seems as though these tactics have, so far, worked for the United States, and therefore, Europe is interested in their temporary relief benefits, as well.  What is alarming is that these programs can be quite inflation causing, when the government unloads this massive debt in the future.  That’s all anyone needs, is hyper-inflation, all over the world…

Treasury Auctions

Tomorrow, the Treasury will start it’s auction of $38 Billion in 3-Year Treasury Notes, followed by Wednesday’s $24 Billion in 10-Year Notes, and finally Thursday’s auction of $16 Billion in 30-Year Treasury Notes.

Europe's Influx of Cash

Locking Advice

Careful Floating, as the Stock Market and Bond Market determine what the IMF and ECB’s influx of funds will do to these markets

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What Happened Yesterday?

Too Many Market Orders

Yesterday, the Stock Market had a wild ride.  They’re still determining the reason, however, many attribute it to Market Sell Orders.  Remember, computers are set to sell stocks, when a stock gets to a certain level.  Then, these computers are programmed to sell at the next market level, to “fill” their order requirement.  So, stocks got trapped in a technical nightmare, after losing so much value already, and basically, computers started “selling” at each market level…which kept getting lower…and lower.  The volatility was impressive, to say the least.  For example:   Accenture (NYSE: ACN) went from $40 down to 14 Cents!  If that wasn’t impressive enough, the stock ended the day at $41.09. So, you can imagine the roller-coaster ride that interest took, as well.

Fat Finger Thursday

Another analogy is that there was a Fat Finger involved in yesterday’s debacle.  Again, using computers, a trader could have accidentally touched one too many zero’s, when trying to sell a certain number of Stock, causing panic in the markets.  Regardless, it’s interesting stuff.

Unemployment Figures

Unemployment moved from 9.7%, in March, to 9.9%, in April.  However, the Labor Department reported that 290,000 new jobs were created.  The market expected 187,000 new jobs, so that’s a serious increase.  Coupled with the fact that revisions to February and March’s numbers increased jobs numbers by 121,000.

More Jobs, But Less Employment?

So, how do we move to a higher unemployment rate of 9.9%, yet add 290,000 jobs?  Well, when people are laid off, they probably prefer to collect their unemployment checks for a while.  If you don’t look for a job, for four weeks, than you’re removed from the Unemployment Figures, by the Labor Department.  It’s just the way things are…So, last month, 805,000 people started looking for jobs, again.  So how those numbers can twist and turn, like the roller coaster, above?

It's Safe To Float...

Locking Advice

I’m in favor of locking in, while the gettin’s good!  Germany has decided to help bail Greece out.  So, that could have a negative effect on the flight to quality, or safe-haven of Mortgage Backed Securities.

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Trouble In Greece Is Helping Our MBS

Daily Updates Are Back!

Internet problems have caused the daily updates to be interrupted, however, we have a temporary fix, that should keep us up and running until our new wireless system is installed.

FOMC Meeting

The Federal Open Market Committee finished their meetings, last week, and it was status quo.  The “extended period” verbiage was left alone, with only one continuing dissenter, Thomas Hoenig.  However, it will be interesting to see the minutes, from this meeting, when they’re released, at a later date.

Greece XI

It looks as though the International Monetary Fund (IMF) and the European Union (EU) have agreed to a $159 Billion, three-year rescue package, for Greece.   However, public workers began to strike, in Greece.  They feel as though this, “bailout for austerity” deal, with the IMF and EU will definitely hit their pockets, worse than others, as the cut-backs demanded by the agreement, are for more public-type programs.  The public striking has led to over 40,000 rioters, in the streets of Greece.  To make matters worse, Portugal’s financial problems continue.  Credit Rating, on Portugal’s debt, is being threatened to move lower.  This would cause more investors to move to the safe-haven of U.S. Treasuries, however, we’re hitting the highs of the year.  And, Mortgage-Backed Securities are already showing signs of being over-bought and may be due for a reversal.  So, watching this market closely, will benefit your buyers.

Locking Advice

With the world watching over the problems in Europe, and investors scrambling over the the U.S. Treasury Safe-Haven, it makes sense to float…and, with inflation reports, over this past week, keeping inflation at bay, rates have remained quite comfortably low.  However, we are due for a reversal…so registering loans for a quick change to locking status, would be prudent.

Related Must Reads

Kansas City Fed President Thomas Hoenig’s Comments Started LAST YEAR
Portugal’s Financial Troubles

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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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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!

Continued Volatility Will Push People To Want To Lock

Fighting For Investors

There are no real economic factors to report today, so Bonds will move in the opposite direction of Stocks while each fight for investors’ attention.  I think Stocks will win, however, later in the week, and into May, expect Stocks to lose and Bonds to rise, lowering interest rates…but only expect that if you have any trust in what I have to say…just puttin’ it out there.  I feel Stocks are primmed for a reversal.  As earnings reports continue to roll out, this and next week, I don’t think the Dow can remain over 11,100.

Watching England

The United Kingdom (UK) Reported a Consumer Price Inflation rise of 3.4%, last month.  The government mandates inflation to read at or below the 2.0% level, similarly to the United States.  England is suffering from a horrible recession, and therefore their government is not prepared to raise their interest rates, to combat inflation.  However, eventually, they will be pressured to do so…and the longer they wait…the harder the inflationary pressures and results will be; pushing rates higher…resulting in a competition with the United States…as the United States will have to raise their rates, to be competitive in a world market.

Treasury Auctions

Tomorrow, the United States’ Government will announce the value of the auctions set forth for Monday through Thursday of next week.  The results of that auction might surprise people, as they have TIPS on Monday, and 2, 5, & 7-Year Treasury Note Auctions on each consecutive day.

Can You Stomach The Ride?

Locking Advice

If you can stomach the ride…and try and be patient…I’d float into the next couple of weeks and see if the Stock Market moves lower, benefiting dollars for Mortgage-Backed Securities and lower rates.

Related Must Reads

Why Be Leery…A Look Into Short Term / Long Term Treasuries

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More Volatility Right Around The Corner

Greece VII

The European Union approved a thirty billion Euro ($40 Billion Dollar) bailout for financially stricken Greece, yesterday.  It’s the second such bailout in a couple of months.  Once Greece realized that the first bailout wasn’t going to be enough to really help them, they petitioned for a second bailout.  Where do I get in line for this type of assistance, huh?  Sign me up!

Corporate Earnings Week

The week starts off with Alcoa reporting lower than expected earnings.  This would generally hurt Stocks and boost Bonds, and did so, temporarily this morning.  However, expect extreme volatility since The Fed has exited the buying market.  First thing, this morning, we were up 31 Basis points, however, we just will have a lot of difficulty rising above numerous trend lines of resistance.  So, be prepared for a bumpy ride.

Businesses Pessimistic About Growth

The National Federation of Independent Businesses reported that businesses’ confidence level has dropped to an eight month low.  Seven of the reports ten components were in negative territory.  That’s not the best news for a struggling employment rate.

Numerous Lines Of Resistance Will Be Tough To Break Through

Locking Advice

Since this morning, we have lost 34 Basis Points.  Locking today, would probably, be prudent.

Related Must Reads

Greece’s Financial Woes
Greece’s First Bailout Plan: Trouble From The Beginning

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