MMG Weekly: Bonds say to China...Yuan-na Piece of Me?

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Edward F. W. Deanes

Home Mortgage Consultant

Wells Fargo Home Mortgage

Phone: (757) 418-2064

Fax:: (866) 935-0661



edward.deanes@wellsfargo.com<mailto:edward.deanes@wellsfargo.com>

www.deanesgroup.com


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In This Issue [http://www.mmgweekly.com/templates/images/weekly/sym_arrow.gif]














Last Week in Review: Bonds may sink or swim on the value of the Chinese Yuan. Here's why.

Forecast for the Week: Why are the markets watching the Autumnal Equinox?

View: How to handle fundraisers and donation requests as the new school year starts.












Last Week in Review [http://www.mmgweekly.com/templates/images/weekly/sym_arrow.gif]














"NOT ONLY CAN WATER FLOAT A BOAT - IT CAN SINK IT ALSO." Wise words, but you don't need to know that Chinese proverb to know that a knife can cut both ways. The same is true with the strong ties between the Chinese and US economies. For example, news came out last week that Chinese factories stepped up production in August, which helped ease concerns of a double-dip recession in US and, as a result, helped move Stocks higher earlier in the week. But additional news regarding China is also impacting the Bond market - and could impact home loan rates in the future, depending on how the events unfold.

Here's what's happening. There have been numerous accusations that China has kept their currency artificially low, in an effort to fuel their exports. Some American businesses remark that this is an unfair competitive advantage, and call for tariffs to be levied against Chinese goods. It would appear that a stronger Chinese Yuan would help to resolve this problem... but remember there can be some nasty unintended consequences, due to the relationship between Chinese currency and our Bond prices. The way that the Chinese keep their currency weak against the Dollar is by buying massive amounts of our Bonds, including Mortgage Backed Securities. And their heavy buying has helped keep home loan rates low. So strengthening the Yuan would require fewer purchases of our Bonds and Mortgage Backed Securities - and that would be negative for home loan rates.

To paraphrase the Chinese proverb above, the value of the Chinese Yuan may help determine whether Bonds sink or swim in the near future. That makes this a complicated situation... but you can count on me to continue to monitor it closely.

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The Chinese Yuan May Help Bonds Sink or Swim
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Bonds saw a nice rally earlier last week, due to speculation about the Fed making additional purchases of Bonds in the future. Last week, Goldman Sachs said the Fed may announce another $1 Trillion asset purchase at the November meeting. And while this is just speculation, many Bond traders bid prices higher on the chatter. Adding fuel to this story was an article in the Wall Street Journal, suggesting the same thing. On the other side of the debate, however, is Richmond Fed President Jeffrey Lacker, who stated that the US is far from needing more Bond purchasing by the Fed.

In other economic news, the Labor Department reported the inflation measuring Consumer Price Index (CPI) for August at 0.3%. That reading was just slightly above the 0.2% that was expected, but it was still a relatively tame reading. When stripping out volatile food and fuel, Core CPI was flat at 0.0%. This rather benign read on inflation allowed traders to breathe a sigh of relief and push Bonds higher. Prior to receiving the news, many traders were worried the CPI reading would be higher than expected. That's because the Producer Price Index (PPI) was reported the day before and showed wholesale inflation rose by 0.4% in August. That was above the 0.3% expected and the biggest gain in 5 months! Remember, inflation is the archenemy of Bonds and home loan rates, so any indication that inflation is increasing could cause home loan rates to worsen.

IT'S THAT TIME OF YEAR AGAIN! THE START OF THE NEW SCHOOL YEAR MEANS THE BEGINNING OF SCHOOL FUNDRAISERS AND DONATION REQUESTS. ALTHOUGH THE INTENTIONS ARE GOOD, THEY CAN BE TOUGH ON YOUR BUDGET. FOR TIPS ON HOW TO HANDLE ALL THOSE REQUESTS, CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW.












Forecast for the Week [http://www.mmgweekly.com/templates/images/weekly/sym_arrow.gif]














The seasons are changing... but watching the calendar can also help us prepare for changes in the market, especially with Stocks now nearing a very important trading date. September 22 - which is the day of the Autumnal Equinox - has often marked an apex and turning point lower for market prices and events. Keep this in mind as we approach this date this Wednesday, especially with Stocks trading near tough technical resistance. If this trend holds, Stocks may head lower and help Bonds and home loan rates improve. But since traders are aware of this potential problem period for Stocks, an avoidance of the trend would likely have Stocks? players move into the Stock market with more gusto towards the end of next week, prompting a Bond sell off.

The Fed will hold their Federal Open Market Committee (FOMC) meeting next Tuesday - and always, the markets will be listening closely when the Fed's Monetary Policy and Rate Decision are announced.

Also on tap for next week are new reports on the health of the housing industry, beginning with Housing Starts and Building Permits for August on Tuesday. We'll also see reports on Existing Home Sales on Thursday and New Home Sales on Friday.

Thursday brings another round of Initial Jobless Claims. Last week, the Labor Department reported Initial Jobless Claims fell to 450,000, below estimates of 460,000 and the lowest reading in two months. While 450,000 claims are still a pretty high number, it is improved from recent readings.

Finally, we'll get a look at manufacturing on Friday with a new report on Durable Goods Orders for August. Durable Goods Orders are considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator.

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 from the chart below, Mortgage Bonds have started to step down after climbing to a record high at the end of August. Overall, Bonds and home loan rates ended the week worse than where they began.

The good news is home loan rates are still at historically great levels for homebuyers or homeowners looking to refinance... but that situation won't last forever.

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Chart: Fannie Mae 3.5% Mortgage Bond (Friday, September 17, 2010)
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The Mortgage Market Guide View... [http://www.mmgweekly.com/templates/images/weekly/sym_arrow.gif]














When Your Child's School Asks You to Give, Give, Give

Here's how to handle all those requests for classroom supplies, fundraiser contributions and more.

By Cameron Huddleston, Kiplinger.com<http://www.kiplinger.com>

Parents, I know you're feeling the pull on your purse strings from you children's schools. You're being asked to contribute supplies to your children's classrooms (not just pencils and paper, but even cleaning supplies). You're expected to donate money to help with the schools' fundraisers. You're getting notes from teachers each week about this field trip or that art project you have to pay for if your children want to participate.

I know because I'm a parent with one child in a public school and one child in a private preschool. As president of the parent committee at one of my children's schools and vice-president of the parent-teacher organization at the other, I also know how much the schools need financial support from parents. So how do you balance your desire to help with the reality of your own limited funds -- and avoid looking like a cheapskate if you can't open your wallet every time the school asks?

Even though this is your child and his school we're talking about, you have to approach this like you would any other financial situation. You have to...

Set a budget. If this is your child's first year in school, talk to his or teacher, parents with older children or members of the parent organization to get an idea of how much you'll be expected to spend on supplies, field trips, etc. or to contribute to fundraisers throughout the year. If your child is a returning student, you already have a pretty good idea. Once you have a dollar amount, it will be easier to figure out whether you can make room in your budget to help out your child's school. Our budget worksheet<http://www.kiplinger.com/tools/budget/> can help.

Prioritize. Of course the school, its parent committee and your child's teacher would love for you to donate every time they ask, but they also understand that not every parent can. So contribute only when it fits in your budget and when you feel like your contribution will have the most impact. That might mean skipping the chili-supper raffle in order to buy a coffee mug adorned with your child's art so his or her feelings don't get hurt.

Give your time. You might not be able to afford monetary contributions, but you can donate your time. Schools need volunteers to help in the classroom, cafeteria, you name it.

Reprinted with permission. All Contents c2010 The Kiplinger Washington Editors. www.kiplinger.com.<http://www.kiplinger.com>

--------------------------

Economic Calendar for the Week of September 20-24, 2010

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 September 20 - September 24
Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. September 21

08:30

Housing Starts

Aug

550K



546K

Moderate

Tue. September 21

08:30

Building Permits

Aug

555K



559K

Moderate

Tue. September 21

02:15

FOMC Meeting

9/21

0.25%



0.25%

HIGH

Wed. September 22

10:30

Crude Inventories

9/18

NA



-2.49M

Moderate

Thu. September 23

08:30

Jobless Claims (Initial)

9/18

NA



450K

Moderate

Thu. September 23

10:00

Existing Home Sales

Aug

4.11M



3.83M

Moderate

Thu. September 23

10:00

Index of Leading Econ Ind (LEI)

Aug

0.1%



0.1%

Moderate

Fri. September 24

08:30

Durable Goods Orders

Aug

-2.2%



0.3%

Moderate

Fri. September 24

10:00

New Home Sales

Aug

298K



276K

Moderate
















[mmgwDisclosure]

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. 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, there is no guarantee it is not 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.

Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Market Guide, 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.

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Sept. 16, 2010 edition of Inside Mortgage Finance

According to the Sept. 16, 2010 edition of Inside Mortgage Finance, Wells Fargo was ranked as the top Purchase mortgage originator and the top Refinance Mortgage producer in the second quarter of 2010.

MMG Weekly: Special Holiday Article

 

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Edward F. W. Deanes Home Mortgage Consultant Wells Fargo Home Mortgage Phone: (757) 418-2064 Fax:: (866) 935-0661   edward.deanes@wellsfargo.com www.deanesgroup.com

Labor Day Holiday               I hope you and your family enjoyed the Labor Day holiday. And, I sincerely hope you have been enjoying your complimentary subscription to the MORTGAGE MARKET GUIDE WEEKLY. Due to the holiday weekend, the next full issue will arrive on Monday, September 13. In the meantime, check out the special article below from Kiplinger.com with great money management lessons for kids of all ages. This is a great article that can be shared with your family, friends, and associates as we celebrate this unique holiday, so please feel free to forward this email on to them. I am pleased to provide this timely article to you as well as weekly insights into the mortgage and housing industries through the MORTGAGE MARKET GUIDE WEEKLY. If you feel that any of your clients, friends, family members, or associates would benefit from keeping up to date on market and economic trends in this easy-to-read format, please let me know, and I will be more than happy to add them free of charge. Best wishes to you this holiday weekend. And remember, if you need any assistance at this time, just give me a call.             The Mortgage Market Guide View...               Advice for Parents as Their Kids Head Back to School Now is a great time to teach your children lessons about managing money. Here's how. By Janet Bodnar, Kiplinger.com One positive outcome of the financial turmoil over the past couple of years is that parents and kids are talking more frequently about financial issues. In the T. Rowe Price Parents, Kids & Money survey released earlier this year, nearly half of the parents interviewed said they are having more conversations with their children about money and the basics of saving versus spending. And, yes, Mom and Dad, your children are willing to listen. In fact, 65% of kids said they had approached their parents to talk about money issues. Unfortunately, the lessons don't always stick. For instance, a majority of kids who get an allowance sometimes spend it all at once and many of them come back for more. As students head back to school, parents have a golden opportunity to take advantage of a prime teachable moment for kids of all ages. Elementary and middle-school students: Start an allowance. When children enter first grade, they learn that four quarters equal ten dimes equal one dollar, and they have a more sophisticated understanding of just how far money will go and how to parcel it out. Start with a basic weekly allowance equal to half a child's age. You can adjust that up or down, depending on how much you expect your kids to pay for. Unless you're very well organized, I don't recommend that you tie the basic allowance to household chores. It's tough to keep track of what the kids have done (or not done). And they should be doing some tasks without pay to lend a helping hand. Instead, give the kids financial "chores," such as paying for their own collectibles or refreshments at the movies. Giving youngsters a fixed amount of money - and certain responsibilities to go along with it - teaches them how to make choices, and makes it less likely that they'll spend it all at once and come back for more. To teach kids the value of being paid for their labors, you can pay for extra household tasks on a job-by-job basis. That also makes it easier for you and the kids to keep tabs on what they've done. As children enter middle school, you can expand their allowance - and their responsibilities - to include other expenses, such as mall excursions, after-school snacks with friends and movie tickets. High school students: The average American family will spend more than $600 on clothes, shoes, school supplies and electronics, reports the National Retail Federation, so the back-to-school shopping season is a great time to introduce a clothing allowance. Nothing will focus your teen's attention on wants versus needs more than having to fill out her wardrobe on a fixed income. Mining her closet for things that are still wearable is a good first step. Then she can decide whether she really wants to splurge on a single pair of Juicy Couture denim leggings for $128 or get a couple of pairs from Old Navy for $34.50 each - and still have money for new tops. This is also a good time to help your kids set up a checking account, especially if they have earnings from a summer job. Community banks and credit unions may be more customer-friendly to teens than big banks. If your bank balks, you can always cosign for the account. Another alternative is to give kids access to their savings account with an ATM card so that they can make deposits and withdrawals. The point is to give them more freedom (and responsibility) to manage their account, and avoid overdrafts, before they head off to college. College students: It often comes as a surprise to parents and kids that they don't agree on who's going to pay for which expenses. And it's an even bigger shock when the bills start rolling in a month or two into the semester. So cover all the bases before you drop your kids at the dorm. Let your kids know, for example, that you'll pay for textbooks, but to lower the cost they should look into campus book exchanges, discount Web sites, book rentals and digital books (see How to Cut Textbook Costs in Half - or More). You'll pay for the school meal plan, but beer and pizza on Saturday nights are on their tab. And tell your kids that they'll have to share discretionary expenses, such as Greek fees, so they should think twice before pledging. New laws covering bank overdraft fees and credit cards for young adults hit college students squarely in the wallet. For advice on how to handle those situations, see 5 Financial Lessons for College Students. Reprinted with permission. All Contents c2010 The Kiplinger Washington Editors. www.kiplinger.com. -------------------------- Economic Calendar for the Week of September 6-10, 2010 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 September 06 - September 10 Date ET Economic Report For Estimate Actual Prior Impact Wed. September 08 10:30 Crude Inventories 9/04 NA   3.42M Moderate Wed. September 08 02:00 Beige Book Sept       Moderate Thu. September 09 08:30 Jobless Claims (Initial) 9/04 NA   472K Moderate Thu. September 09 08:30 Balance of Trade Jul -$48.3B   -$49.9B Moderate       [mmgwDisclosure]   The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. 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, there is no guarantee it is not 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.   Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Market Guide, 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.

 

Another Business Booster from Edward F. W. Deanes - Meetings that Pack a Punch

 

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Edward F. W. Deanes Home Mortgage Consultant Wells Fargo Home Mortgage Phone: (757) 418-2064 Fax: (866) 935-0661 edward.deanes@wellsfargo.com www.deanesgroup.com

Meetings that Pack a Punch Turn Prospects into Clients with an Effective Presentation! Dynamic business meetings, those that accomplish a set goal, rely on mutual respect. Yes, it sounds cliché, but respect really is a "two-way street." In order to obtain that respect from clients or potential clients, it's crucial to understand the dynamics of business relationships. Everyone wants to feel important, that his or her time is valuable, and the person who set up the meeting has taken this into consideration. For that reason, punctuality matters. Never keep a prospect waiting. And brevity also counts. Move your presentation from point to point in a clear and concise manner, but without appearing rushed. Don't elaborate or belabor a point unless asked for further explanation. And never make your prospects yawn! Kim T. Gordon, president of the National Marketing Federation, Inc. and a noted speaker, elaborated on business meeting etiquette in an article on Entrepreneur.com entitled, "10 Steps for Successful Sales Meetings". "Many entrepreneurs face a common challenge as they launch and grow their companies - their first meetings with prospects." Here are some of Gordon's recommendations: Gather background information. A pre-qualifying telephone call helps determine prospects' needs. Set a realistic goal. Your ultimate goal is to turn the prospect into a client. At the very least, set up the next meeting date, and establish the interim objectives. Prepare quality materials. Make sure your print collateral has eye appeal and holds interest. Rehearse your presentation. Nothing looks more unprofessional than a sales presentation where the speaker fumbles and is all-thumbs with charts or graphs. Observe your prospects carefully. Take clues from body language. Are your prospects sitting forward in their chairs, hanging on your every word and nodding with interest? Or, are they sitting back, nearly reclining, with arms crossed and a look of boredom and disbelief? In the latter case, switch gears before you lose them. As you uncover the needs of the prospect, be ready to provide viable solutions and present case history examples to support your statements. Above all, remember that prospects are people. Be professional, but also be people friendly, and turn each prospect meeting into a home run. Call me to discuss the presentations and seminars I can provide!

Licensed Loan Officer - Licensed Real Estate Agent - This information is accurate as of the date posted and is subject to change without notice. All of the views and comments are mine and do not represent Wells Fargo.

© Copyright 2010. All About News, Inc.

FHA changes you need to know about!

FHA Implements Minimum Credit Scores

On September 3, 2010 Mortgagee Letter 10-29 was released. This mortgagee letter establishes minimum credit scoring requirements for all standard FHA programs* and is effective for case numbers assigned on or after October 4th, 2010.

Here are the 4 things you need to know about these changes:

1.       Borrowers with a minimum credit score at or above 580 ARE eligible for maximum financing.

2.       Borrowers with a minimum credit score between 500 and 579 ARE limited to a 90% LTV.

3.       Borrowers with a minimum credit score of less than 500 are NOT eligible for FHA-insured mortgage financing.

4.       Borrowers with a non-traditional credit history or insufficient credit are eligible for maximum financing BUT must meet the underwriting guidance in HUD 4155.1 4.C.3. 

*Please note that these new requirements DO NOT apply to:Title I, Home Equity Conversion Mortgages; HOPE for Homeowners; Section 247; Section 248; Section 223(e), Section 238.

FHA MIP Changes Now Official

With the passing of H.R. 5981 and the resulting Public Law 111-229, FHA was given authority to change the amount charged to borrowers for both the Up Front and the Annual premiums. These changes as outlined in Mortgagee Letter 2010-28, are effective for all case numbers assigned on or after October 4th, 2010.

Here are the 6 things you need to know about these changes:

1.       The Up Front premium is now 1.0 % for all standard FHA programs (purchase money mortgages, full credit-qualifying refinances, streamline refinances)
|

2.       The Annual premium is now .90% for LTVs GREATER than 95% on 30 year loans

3.       The Annual premium is now .85% for LTVs EQUAL to or LESS than 95% on 30 year loans

4.       The Annual premium is now .25% for LTVs GREATER than 90% on 15 year loans

5.       The Annual premium is now .00% for LTVs EQUAL to or LESS than 90% on 15 year loans

6.       These premiums apply to purchases, regular refinances and streamlines

Please note that this new law also gives FHA the authority to raise the Annual premium at will up to 1.5% for LTVs at or below 95% and 1.55% for LTVs more than 95%.

Click here to read Mortgagee Letter 2010-28 in its entirety.

FHA Eliminates Unlimited CLTVs for Refinance Transactions

This update from Mortgagee Letter 2010-24 contains changes to the new maximum CLTV limits for refinance transactions, which will be effective for case numbers assigned on or after September 7, 2010.

The combined amount of the FHA-insured first mortgage and any subordinate lien may not exceed the applicable FHA LTV AND the geographical maximum mortgage amount (does not apply to streamline refinance transactions).

Here are the 4 Maximum CLTVs for Refinance Transactions that you need to know about:

1.       Rate and Term (or No Cash Out) Refinances = 97.75%

2.       Refinances for Borrowers in Negative Equity Positions* = 115%

3.       FHA-to-FHA Streamline Refinances With or Without Appraisals = 125%

4.       Cash-out Refinances = 85%

* This refinance option is only available through December 31, 2012. Read Mortgagee Letter 2010-23 for more information.

For more information, read Mortgagee Letter 2010-24 in its entirety.

 

 

 

Thank you,

 

Edward Deanes

 

 

This information is accurate as of the date posted and is subject to change without notice. All of the views and comments are mine and do not represent Wells Fargo.