Bernanke Speaks...Uncle Sam Throws Another Treasury Auction(s)…..

Federal Reserve Chairman Bernanke will have two speaking performances this week starting with his semi-annual monetary policy testimony to the House Financial Services on Wednesday and then he will he will testify in front of the Senate Banking Committee on Thursday. While I don’t think the message from the two testimonies will differ that much, the market will be listening as to whether the Federal Reserve will continue their current position of keeping rates at current levels for an “extended period” of time. If Bernanke reiterates their commitment to keep rates low and the outlook on inflation seems to be in check for at least the next 12 months, look for rates to move marginally to lower levels. After last week’s rise in rates...any relief would be welcomed!!! In other news, Uncle Sam is throwing another HUGE treasury auction this week. Over $132B in bonds and notes will be auctioned this week starting today with $8B in 30 year inflation indexed bonds. $44B in 2 year notes will be auction tomorrow which should be received well. Wednesday Uncle Sam will auction $42B in 5year notes. Again, this auction is expected to be received well however...if this is not the case it will tee the ball up for a bad auction on Thursday for the $32B in 7 year notes which I believe is the “biggie” of this week's auction party. A poor showing at the 7 year auction will move rates notably higher. Keep your eyes on this auction...we need a good showing here to set the tone for rates for the next several weeks.

Market Looks Overseas For Direction

The markets are concerned about Greece and several other European countries as to whether they will default on their debt. The potential economic collapse of several European nations has investors worried that this may spread into a global issue. The good news to this story is that many investors are making the “flight to quality” (investing in US bonds) which has kept our rates at current levels with some bias to lower levels. European finance ministers are meeting today in order to come up with a viable solution for their debt crisis. If a viable solution is reached, look for rates to move higher as the demand for US bonds will move to a more normal trading range. The best thing to watch this week will be the DOW. Higher DOW = Higher Raters...Lower DOW=Lower Rates. Economic Calendar for the Week…. Tomorrow we will get a look at housing statistics, Industrial Production and the minutes from the January Fed meeting. Housing starts are projected to have risen by 4.13% in January however, building permits are expected to have fallen by 5%. Both Industrial production and utilization are expected to have risen slightly in January giving some hopes that we may actually be emerging out of the recession. I still believe we need to see several more months of consistent growth before we can wave the victory flag. The minutes to the January Federal Reserve meeting will be released tomorrow. I don’t expect any surprises here but if their minutes hint that they may feel that the economy is beginning to pick back up….look for rates to move marginally higher. Thursday and Friday will produce the “Biggies” of the week with the release of the Producer Price Index as well as the Consumer Price Index figures for January. The market is looking for a minimal increase of .1% in both the Producer Price Index and the Consumer Price Index. If actual numbers come in at or even below these projections, look for rates to move marginally lower. Overall, I expect rates to continue to move within a very narrow range this week. Homebuyers need to take advantage of these rates and sign contract before the tax credit expires!!!

The “Three CardRule” andRESPAFact or Fiction?

Over the years, I have heard that realtors have to give at least 3 cards out to their buyers since this is a RESPA rule. The article below dispels this myth and even goes on to say that violations can occur as easily with one referral as multiple referrals. The article below is written by Kate Hoskins of O’Kelley and Sorohan. “A number of licensed real estate agents have long held to the common belief that referring less than three mortgage lenders to a purchaser of real property is a per se violation of the Real Estate Settlement Procedures Act (“RESPA”), Section (8)(a). In fact, RESPA contains no such exact prohibition or mandate for what has become the common practice of providing three different lender’s business cards to each buyer. As providers of “settlement services” under Section (8) (a),mortgage bankers and brokers, as well as real estate brokers and affiliated licensees, are prohibited from accepting “…any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” Therefore, it is the agent’s intent in providing a referral to a lender and the lender’s response to that referral and not the number of referrals that determine the parties’ compliance with RESPA. You can view the whole article on our Realtor Corner.

Bernanke Testifies This Week...Uncle Sam To Auction $78B In Notes This Week...

While the economic calendar is filled mostly with “nice to know” economic releases this week, the market will focus its attention on Uncle Sam’s treasury auction, Federal Reserve Chairman Bernanke’s testimony in front of the House Financial Services Committee and January Retail Sales data. Uncle Sam will hold yet another treasury auction to the tune of approximately $78B this week in 3,10 and 30 year notes. Given what is happening in the “world economy” regarding several countries defaulting on their debt, look for this auction to pan out pretty well which should keep rates at current levels. The 3 year notes should do well while there may be some question on the 30 year notes (auctioned on Thursday). The better the participation from foreign countries in these auctions, the better chance we will have to keep rates at current levels. Federal Reserve Chairman Bernanke will testify in front of the House Financial Services Committee on Wednesday. This will include a Q&A session. While I don’t expect anything earth shattering from his testimony, it is certainly something to watch especially the Q&A part of this session. Any comments that he believes the economy is emerging out of the recession now would be a concern for rates. Once again, I don’t believe this will happen but if it did...rates will move marginally higher. On Thursday, we will get a look at January Retail Sales numbers. The market is looking for an increase in sales of approximately .5% excluding auto sales as compared to a –.2% in December. A number above the expect .5% increase will not be good for rates as they will most likely move marginally to notably higher. Even with all of what I have reported that will happen this week, your best bet on which direction rates will head is to watch the DOW….Higher DOW...Higher rates….Lower DOW...Lower rates!

Rates Flat To Slightly Higher As Market Sets Sights On Friday’s Unemployment Figures….

Look for rates this week to take their direction from the DOW...at least up to Friday’s unemployment data. The market is looking for non farm payrolls to have increase by 5000 and the unemployment rate to have remained at 10%. If the actual numbers show any sign that this economy is beginning to emerge from our current recessionary environment, rates will move notably higher. Until then, if the DOW moves higher...look for rates to move higher.

Punxsuntawney Phil Sees Shadow...FNMA Announces Assistance On their Foreclosures...

While we may be heading for 6 more weeks of winter since Punxsutawney Phil saw his shadow this morning, FNMA (Fannie Mae) may have warmed things up with their announcement of providing up to 3.5% in seller contributions on their HomePath Properties. Last Thursday, FNMA announced that people purchasing a FNMA owned HomePath property will receive up to 3.5% of the SALES PRICE to be used towards closing cost or their choice of appliances. This offer is available to any owner-occupant who closes on the purchase no later than May 1, 2010. “Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market to recover. Many families are taking advantage of the federal tax credit to buy a new home so this is a great time for FNMA to offer some additional help” said Terry Edwards, Executive Vice President of Credit Portfolio Management. Properties eligible for this incentive are listed on www.HomePath.com and most listing include detailed property descriptions, photographs, community and school information and more. For further information, go to www.HomePath.com or contact FNMA directly at 1-800-732-6643.

Federal Reserve Begins Pull Back on Mortgage Securities

As reported to you last month, the Federal Reserve will be hitting its cap on purchases of mortgage backed securities sometime in March or early April. This program was created y the Federal Reserve to add liquidity to mortgage market which in turn was intended to lower rates, keep people in homes, slow the pace of foreclosures, increase home sales and ultimately help the economy to recover from the deepest recession we have seen since the Great Depression. The Federal Reserve will cut their purchases of mortgage backed securities by Billions, yes that is Billions with a “B,” each week as they approach their established cap. I have to say with all the “stimulus” programs that are out there through our current administration, this is one of the “packages” that has actually worked!!! Not to mention it has been a tremendous investment for the Feds since they have been purchasing undoubtedly the most pristine mortgages we have seen in probably 30+ years due to the radical changes in guidelines where borrowers actually have to have a job, verify their income, put money into the transaction, and actually have had to pay their bills on time. ...what a novel concept! As rates rise, the value of these securities will rise and the FEDS will actually get a huge return on their/our investment...as opposed to the other things the current administration has done which will ultimately cost us money. So, the only real “stimulus package” that has truly worked and will ultimately not only pay for it self but may actually make the government money is about to come to an end??? Do they really think we are out of the recession??? Where do they think rates will go without liquidity in the mortgage backed securities arena??? The answer is that rates will move higher, foreclosures will begin to rise again, and home prices will fall again driving the economy further into this recession and putting off any potential recovery for our economy for another year or two. Is there hope??? I believe so as we are once again into another election year which tends to be a great motivator for those running for reelection...especially if their constituents are unemployed and facing the loss of their home.