You lost your house – but you still have to pay

Vanessa Corey sold this house but still owed some of the mortgage balance. Now the bank is coming after the $65,000 difference.
By Les Christie, staff writerFebruary 3, 2010: 3:21 PM ET

NEW YORK (CNNMoney.com) — As terrible as it is to lose your house to foreclosure, at least it’s a relief to put your biggest financial headache behind you, right?

Wrong.

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Vanessa Corey
Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these “deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

“My understanding was that the deficiency was negotiated away,” she said. “Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it.”

Where the foreclosure plague is spreading
Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called “liar loans” where they didn’t have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances — like unemployment or a job transfer — can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

“After the banks foreclose, it’s very common now to have large deficiencies with houses not worth the balances owed,” said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey’s lender, BB&T did indicate it was pursuing more deficiency judgments.

“They follow the rise and fall of foreclosures,” said the spokeswoman, who would not discuss Corey’s account.

Can they come after you?
Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

“Once they have a judgment, they can pursue you anywhere,” said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. “They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail.”

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are “non-recourse” and don’t allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.

Check the foreclosure rate in your state
Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

“People shouldn’t have a false sense of security that a deficiency judgment may not be later sought,” Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

“The parties who bought those notes wouldn’t have paid money for them unless they had the intention of acting,” Zaretsky said.

Ticking time bomb
What can be scary is that the judgments don’t have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn’t have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn’t until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

“I told them, ‘Hey, you guys released the title,’” he said. “As far as I know, I’m off the hook.”

He wasn’t. Releasing title does not necessarily end the debt. It’s complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

“He had no idea what he was doing,” said Zaretsky. “All the lender had to do was go to court to convert the confession into a deficiency judgment.”

Lenders are also very inconsistent. One of Zaretsky’s short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults
Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

“Banks are pulling credit reports to see if it’s a strategic default,” he said. “If you’re behind on all your other payments, you’re okay. But if you’re not, they’ll come after you.”

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

“We don’t favor any short-sale contracts that leave any deficiency that can be pursued,” he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

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For the week of Feb 08, 2010 — Vol. 8, Issue 6

Last Week in Review

“BOTH OPTIMISTS AND PESSIMISTS CONTRIBUTE TO OUR SOCIETY. THE OPTIMIST INVENTS THE AIRPLANE, AND THE PESSIMIST – THE PARACHUTE.” G.B. Stern. And last week’s Jobs Report had something for both optimists and pessimists, as the numbers were both good and bad…depending on which survey you looked at, and what numbers you focused on.
First, the headline numbers: The Labor Department reported that there were 20,000 jobs lost in January, which was worse than expectations of 15,000 jobs gained. However, the Unemployment Rate came in lower at 9.7%, down from last month’s read of 10.0%. But what do these numbers actually tell us?
Remember that the numbers in the Jobs Report come from two separate surveys: First, the Business Survey – also called the Establishment Survey or Current Employment Statistics Survey – which surveys about 140,000 businesses and government agencies. It uses something called the “birth/death ratio” to provide an estimate of the number of jobs gained or lost each month. This survey is used to report the headline number of jobs gained or lost. Now there is also the Household Survey, also known as the Current Population Survey, which uses actual phone calls to 50 – 60,000 households to gather its data. This survey is used to report the headline Unemployment Rate.
The Business Survey is very susceptible to inaccuracy, particularly during times when the labor market is substantially worsening or improving…and you don’t need to look much further than all the revisions to prior reports to see how inaccurate the report seems to be. December’s report was revised to 150,000 jobs lost, nearly doubling the original report of 85,000 job losses. Although November showed 60,000 additional gains – wait a minute – October’s revisions showed another 100,000 jobs lost. And if that weren’t enough, the Business Survey threw in a “Benchmark Revision”, which indicated that there were an additional 900,000 jobs lost from March 2008 – March 2009 from what was previously reported!
———————–
Chart: Non-farm Payroll Change and Revisions

So what about the other report, the Household Survey? It gives us the headline Unemployment Rate, which was reported at 9.7%. That’s an improvement over last month’s reading of 10.0%. But this survey has its own job creation or loss number, just like the Business Survey does. The Household Survey showed that 540,000 jobs were created during January, which is really good news, and explains why the Unemployment Rate declined in the face of the Business Survey showing job losses.
There are definitely some glimmers of hope for the job market – but any way you look at it, the bottom line is that continued and significant improvements need to be seen in the labor market before the economy can be considered out of the woods.
Another important note for the week – Pending Home Sales for December were up significantly from November’s reading, and up a healthy 10.9% over December 2008, as homebuyers take advantage of today’s low rates and tax incentives. And speaking of low home loan rates, the Federal Reserve purchased $12 billion in Mortgage Backed Securities last week, bringing the total to $1.173 trillion since the program began in January of 2009…which leaves just $77 billion in purchases to be made over the next eight weeks until the program ends on March 31st. While home loan rates improved very slightly during this volatile week – don’t forget that when the Fed is done buying, home loan rates will be very susceptible to moving higher. Please reach out to me to discuss how you or someone you know might benefit from current low rates, or the Homebuyers Tax Credit. The clock is ticking on both these fronts – so why wait?
THE NEW MILEAGE RATES ARE HERE! THE NEW MILEAGE RATES ARE HERE! OKAY…NEWS FROM THE IRS ISN’T NECESSARILY ALL THAT EXCITING, BUT YOU DON’T WANT TO MISS OUT ON A SINGLE TAX DEDUCTION YOU MIGHT HAVE COMING. CHECK OUT THIS WEEK’S MORTGAGE MARKET GUIDE VIEW FOR THE DETAILS.
Forecast for the Week

We have a quiet week ahead when it comes to economic reports, but whether that’s good or bad news remains to be seen. Be sure to look for Thursday’s Initial Jobless Claims Report, as last week’s numbers came in at 480,000, quite a bit worse than the 455,000 expected and the highest count since mid-December. Last week’s Continuing Claims increased slightly to 4.6 million, and remember this…the Continuing Claims number doesn’t even account for the nearly 6 million people whose Unemployment benefits have expired, and are now receiving Extended Emergency Unemployment benefits.
Also on tap for Thursday is the Retail Sales Report for January. This report is the most-timely indicator of broad consumer spending patterns, and it is important to see in which direction the numbers are moving. And the Treasury will be auctioning $40B in 3-year Notes on Tuesday, $25B in 10-years on Wednesday and $16B in 30-year Bonds on Thursday for a total of $81B. These auctions could move the markets, especially in the face of few scheduled economic reports.
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 in the chart below, Bond prices have been improving of late, but there is tough technical resistance ahead. As always, I’ll be watching closely – so give me a call this week if you’d like an update on the market action!
Chart: Fannie Mae 4.5% Mortgage Bond (Friday Feb 05, 2010)

The Mortgage Market View…

New Mileage Rates for 2010
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 2010. And remember, these mileage rates are not just used to calculate deductible costs for driving an automobile for business, but also for charitable, medical or moving purposes.
New for 2010
As of January 1, 2010, the standard mileage rates are as follows:
• Businesses = 50 cents per mile driven
• Medical or moving = 16.5 cents per mile driven
• Charitable organizations = 14 cents per mile driven
Note: The 2010 rates are slightly lower than last year’s, due to generally lower transportation costs as compared to a year ago.
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 any vehicle used for hire or for more than four vehicles used simultaneously.
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.
Best yet – most people find that they save money on taxes by working with a tax professional. Let me know if you need a referral!
The Week’s Economic Indicator Calendar

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 February 08 – February 12
Date ET Economic Report For Estimate Actual Prior Impact
Wed. February 10 08:30 Balance of Trade Dec -$35.0B -$36.4B Moderate
Thu. February 11 08:30 Jobless Claims (Initial) 2/6 NA 480K Moderate
Thu. February 11 08:30 Retail Sales Jan 0.4% -0.3% HIGH
Thu. February 11 08:30 Retail Sales ex-auto Jan 0.4% -0.2% HIGH
Fri. February 12 10:00 Consumer Sentiment Index (UoM) Feb 74.8 74.4 Moderate

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. 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, we do not make any representations as to its accuracy or completeness and as a result, 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.

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“Every day is a new beginning. Treat it that way. Stay away from what might have been, and look at what can be.”
- Marsha Petrie Sue

“You become a champion by fighting one more round. When things are tough, you fight one more round.”
- James Corbett

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Terry Heffner and Amy Johnson
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Phone: (208) 321-0245
Mobile: (208) 599-8500
Fax: (208) 321-0251

For the week of February 1, 2010 – Vol. 8, Issue 5
>> Market Update
INFO THAT HITS US WHERE WE LIVE The week began with December Existing Home Sales dropping 16.7%. Some observers felt this was the result of uncertainty over the homebuyer tax credit, scheduled to expire at the end of November. The tax credit was, as we now know, extended into this year, but it wasn’t announced soon enough to help December sales. Nonetheless, Existing Home Sales are UP 15.0% over a year ago. And the median price of an existing home is now $178,300, UP 1.5% over a year ago and the best year-over-year comp since 2006. Finally, inventories are now down to 3.29 million, their lowest reading since March 2006.

Wednesday, New Home Sales were reported at a 342,000 annual rate, down 7.6% for December. But inventories are now at 231,000, 59.6% below their mid-2006 peak and at their lowest level since 1971, when the population was two thirds its size today. The Case-Shiller index of home prices in the 20 biggest markets went up a seasonally-adjusted 0.2% in November. This was the sixth month in a row the index gained and prices increased in 14 of the 20 markets. The FHFA price index for homes bought with conforming mortgages went up 0.7% in November, its fifth advance in the last seven readings.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, mortgage rates inched down for the fourth week in a row. But prospective homebuyers and owners looking to refinance should note that the Fed reiterated its intention to end mortgage bond purchases on March 31. Experts feel this will make rates head up a bit.
>> Review of Last Week
STILL SLIPPING… There were plenty of good things to consider last week, but investors chose to dwell on the negative tidbits instead. This sent stocks down for the third week in a row, making January the worst month for the markets since February 2009. The week began with Apple reporting its most profitable quarter ever. Microsoft and SanDisk also made the tech sector look good by beating earnings estimates, but Wall Street worried about the companies’ cautious outlooks. Oh well. We even saw Consumer Confidence UP in January for the third month in a row!

At its meeting last week, the Fed left the funds rate at 0% to 0.25% and altered the language of its policy statement to be more bullish on the economy. But there was one dissenting vote against keeping the rate low, which investors fretted over. That evening, President Obama’s State of the Union message didn’t include too many specifics on how he would help boost the economy. Stocks slid Thursday. December durable goods orders were up only 0.3%, but taking out transportation, they were UP 0.9% for the month and UP 11.9% annually for the last six months. History shows that once businesses begin investing more in equipment (“durable goods”), payroll gains soon follow.

Friday we got the terrific news that the U.S. economy grew in Q4 of last year at a 5.7% pace, the fastest GDP growth rate in six years. Pessimistic observers seem scared to admit the economy is in fact improving, commenting that inventories accounted for a large part of Q4 growth. In fact, final sales, which is GDP excluding inventories, are UP at an accelerating pace for three straight quarters! The Chicago PMI, expected to decline, instead increased, showing growing strength in Midwest manufacturing. And the employment index came in at the highest level since 2005, reporting its first positive number since 2007.

But for the week, the Dow dipped 1.0%, to 10067.33; the S&P 500 slipped 1.6%, to 1073.87; while the Nasdaq was down 2.6%, to 2147.35.

In addition to sliding stocks bringing new money into the bond market, we had month-end buying helping to push prices up. The FNMA 30-year 4.5% bond we watch ended UP 9 basis points for the week, closing at $101.03. Mortgage rates are still historically low, according to the most recent Freddie Mac report.
>> This Week’s Forecast
ANOTHER LOOK AT HOUSING AND JOBS… December Pending Home Sales will grab our attention on Tuesday, then Friday everyone will key on the January Employment Report. The consensus expects no change in the unemployment rate but does think we’ll see some new jobs added. That would be great! The week will also bring us the important ISM read on manufacturing, plus personal income and spending numbers.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of February 1 – February 5
Date Time (ET) Release For Consensus Prior Impact
M
Feb 1 08:30 Personal Income Dec 0.3% 0.4% Moderate
M
Feb 1 08:30 Personal Spending (PCE) Dec 0.3% 0.5% HIGH
M
Feb 1 10:00 ISM Index Jan 55.2 55.9 HIGH
Tu
Feb 2 10:00 Pending Home Sales Dec 1.1% -16.0% Moderate
W
Feb 3 10:00 ISM Services Index Jan 50.9 50.1 Moderate
W
Feb 3 10:30 Crude Inventories 1/29 NA -3.89M Moderate
Th
Feb 4 08:30 Initial Unemployment Claims 1/30 454K 470K Moderate
Th
Feb 4 08:30 Continuing Unemployment Claims 1/30 4.600M 4.602M Moderate
Th
Feb 4 08:30 Productivity-Prelim. Q4 6.0% 8.1% Moderate
F
Feb 5 08:30 Average Workweek Jan 33.2 33.2 HIGH
F
Feb 5 08:30 Hourly Earnings Jan 0.2% 0.2% HIGH
F
Feb 5 08:30 Nonfarm Payrolls Jan 13K -85K HIGH
F
Feb 5 08:30 Unemployment Rate Jan 10.0% 10.0% HIGH

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months Last week the Fed repeated its commitment to keep the Funds Rate at current low levels for “an extended period.” Ben Bernanke was then confirmed by the Senate for a second term as Fed Chairman by a 70-30 vote. Most economists think things will stay as they are. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Mar 16 0%–0.25%
Apr 28 0%–0.25%
Jun 23 0%–0.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Mar 16 <1%
Apr 28 1%
Jun 23 9%

This e-mail is an advertisement for Heffner Group. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Guild Mortgage Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Guild Mortgage Company. This information is subject to change without notice. NMLS Company Identifier #3274; NMLS Branch Identifier #107908; This branch is authorized to do business in Idaho and Hawaii. The material does not represent the opinion of Guild Mortgage Company. Although the material is deemed accurate and reliable, there is no guarantee of its accuracy. © 2010 Media Center, LLC. All rights reserved. Terry Heffer NMLS #95796, Amy Johnson NMLS #97135, We lend in Idaho and Hawaii.

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News Release

January 28, 2010

Fannie Mae Announces 3.5 Percent Seller Assistance on HomePath® Properties

Incentive Part of Ongoing Effort to Stabilize Neighborhoods
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today that people purchasing a Fannie Mae-owned HomePath® property will receive up to 3.5 percent of the final sales price to be used toward closing cost assistance or their choice of appliances. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before 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 recover. Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help,” said Terry Edwards, Executive Vice President of Credit Portfolio Management. “Homebuyers have the option to choose between financial assistance toward closing costs or new appliances for their home.”
Properties eligible for this incentive are listed on HomePath.com and most listings include detailed property descriptions, photographs, community and school information and more. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing which offers homebuyers an opportunity to purchase with as little as 3 percent down.

“Buddha said that it is better to conquer yourself than to win a thousand battles. Make yourself accountable for your life.”
- Myers Barnes

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Heffner Group
Terry Heffner and Amy Johnson
Manager and Loan Officer
991 S Allante Pl
Boise, ID 83709
Phone: (208) 321-0245
Mobile: (208) 599-8500
Fax: (208) 321-0251

For the week of January 25, 2010 – Vol. 8, Issue 4
>> Market Update
INFO THAT HITS US WHERE WE LIVE December housing starts were reported down 4.0% last week. This put them at a 557,000 unit annual rate, a little below expectations. We did have a colder and wetter December than usual, with a good part of the East hit with the biggest snowfall ever recorded for the month. The drop in starts all came from single-family units, but they’re still 27.7% above their January/February 2009 lows. Volatile multi-unit starts were up 12.2% for the month, following their 69.8% November rebound.

Building permits, which are less effected by weather, were UP 10.9% in December, to an annual rate of 653,000 units, well above expectations. There was an 8.3% hike in permits for single-family units, which are up 48.5% over their January 2009 low. Over the past two months, the 18.5% gain in building permits is the largest in 20 years. In line with this, the National Association of Home Builders, which held its annual convention last week, reported that builders expect to start construction on 610,000 homes in 2010. That’s UP 38% over last year!

According to Freddie Mac’s weekly Primary Mortgage Market Survey, mortgage rates dipped lower for the third week in a row. Fears of a stock market correction are moving money into mortgage bonds, which should keep interest rates down. But many experts still feel rates will head back up if the Fed sticks to its plan to stop mortgage bond purchases on March 31.
>> Review of Last Week
OOPS!… Last week featured a combination of unexpected developments — Chinese credit tightening, Presidential sword-rattling over bank regulatory reform and doubts about Fed chairman Ben Bernanke’s Senate confirmation. These surprises shook investors, sending all market indexes down for the week. But China was just raising interest rates to cool down an economy now growing at 10%. And the President’s tough talk to bankers, plus Senators cooling on Bernanke, were seen by many as political efforts to appeal to people who don’t like the Wall Street bailouts. Of course, all this happened after Republican Scott Brown took Ted Kennedy’s Massachusetts Senate seat. Talk about surprises!

Economic news included the Producer Price Index (PPI) going up 0.2% in December. This was a bit more than expected and raised inflation concerns at the wholesale level. But the Fed maintains it won’t raise rates to control inflation until the labor market shows more signs of recovery. Last week didn’t provide much encouragement there, with Initial Unemployment Claims up slightly, although Continuing Claims dropped below 4.6 million.

The only encouraging words came from corporate pronouncements on Q4 earnings. Results were better than expected, as 47 of the 60 S&P companies reporting delivered upside results. These included biggies like Google, GE, McDonalds’s and IBM. There were also winners in the financial sector, but investor uncertainty pushed stocks down overall.

For the week, the Dow fell 4.1%, to 10172.98; the S&P 500 dropped 3.9%, to 1091.76; while the Nasdaq was off 3.6%, to 2205.29.

Tanking stocks normally send bond prices skyward, but uncertainty about Bernanke and new bank regulations kept things in check. The FNMA 30-year 4.5% bond we watch did end UP 19 basis points for the week, closing at $100.94. Mortgage rates are staying at their historically low levels and, as noted above, average rates dipped in the most recent Freddie Mac report.
>> This Week’s Forecast
HOUSING, THE FED, GDP, THE PRES… This should be a super interesting week, highlighted by Monday’s Existing Home Sales, Wednesday’s New Home Sales, a meeting of the Fed and Advanced Q4 GDP. Everyone’s looking for another positive GDP number, following the positive GDP we saw for the first time in Q3. Then Wednesday evening, we’ll have the President’s State of the Union message, which will no doubt grab everyone’s economic attention.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of January 25 – January 29
Date Time (ET) Release For Consensus Prior Impact
M
Jan 25 10:00 Existing Home Sales Dec 5.90M 6.54M Moderate
Tu
Jan 26 10:00 Consumer Confidence Jan 53.5 53.3 Moderate
W
Jan 27 10:00 New Home Sales Dec 370K 355K Moderate
W
Jan 27 10:30 Crude Inventories 1/22 NA –0.471M Moderate
W
Jan 27 14:15 FOMC Rate Decision 1/27 0%–0.25% 0%–0.25% HIGH
Th
Jan 28 08:30 Initial Unemployment Claims 1/23 450K 482K Moderate
Th
Jan 28 08:30 Continuing Unemployment Claims 1/16 4.600M 4.599M Moderate
Th
Jan 28 08:30 Durable Goods Orders Dec 2.0% 0.2% Moderate
F
Jan 29 08:30 GDP–Adv. Q4 4.6% 2.2% Moderate
F
Jan 29 08:30 GDP Chain Deflator–Adv. Q4 1.3% 0.4% Moderate
F
Jan 29 08:30 Employment Cost Index Q4 0.4% 0.4% HIGH
F
Jan 29 09:45 Chicago PMI Jan 57.4 58.7 HIGH
F
Jan 29 09:55 Univ. of Michigan Consumer Sentiment Jan 73.0 72.8 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months. Virtually no one expects the Fed Funds Rates to change at this week’s meeting. And an overwhelming majority of economists feel the rate will stay down for the first half of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Jan 27 0%–0.25%
Mar 16 0%–0.25%
Apr 28 0%–0.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Jan 27 <1%
Mar 16 1%
Apr 28 2%

This e-mail is an advertisement for Heffner Group. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Guild Mortgage Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Guild Mortgage Company. This information is subject to change without notice. NMLS Company Identifier #3274; NMLS Branch Identifier #107908; This branch is authorized to do business in Idaho and Hawaii. The material does not represent the opinion of Guild Mortgage Company. Although the material is deemed accurate and reliable, there is no guarantee of its accuracy. © 2010 Media Center, LLC. All rights reserved. Terry Heffer NMLS #95796, Amy Johnson NMLS #97135, We lend in Idaho and Hawaii.

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Email: anthonyf@guildmortgage.net
website: www.guildmortgage.net

Monday, January 25, 2010
Equity markets doing better this morning after the strong selling last week that took the DJIA down 437 points; the bond and mortgage markets were supported last week on the fall. This morning the 10 yr started weaker; at 9:00 -8/32 at 3.63%, mortgages at 9:00 -5/32 (.15 bp) and the DJIA futures +46. Technically, both the 10 yr treasury and mortgages are finding resistance at key levels; the 30 yr FNMA 4.5 coupon at its 40 day moving average (100 26/32 (100.81 bp), the 10 yr note at 3.60% both levels that will keep rates in check early this week. At 9:30 the DJIA opened +65, the 10 yr note -7/32 and mortgage prices -.15 bp frm Friday’s close.

This week there is a lot to think about; Treasury will sell $118B of notes, the FOMC meeting that will conclude on Wednesday at 2:00 with the usual short statement, and the confirmation of Ben Bernanke for his second term. The Bernanke confirmation really heated up after the Democrats lost elections in three key states; politicians are running around like penguins on an ice sheet trying to posture and pander to their constituents, scrambling to placate voters that are fed up with what is going on in Washington. Bernanke will be re-appointed this week after all the TV face time from politicians running in Nov have their hand-wringing episodes run the gamut. Not appointing Bernanke would break the equity markets, hammer the dollar and eventually spark a run up in interest rates. We do agree with many that the Fed in the past 7 yrs has made a huge mistake by artificially keeping interest rates so low that it allowed excessive leveraging by banks and investors that was a major factor in bringing the financial system to its knees, but we disagree that removing Bernanke will have any positive impact—-quite the contrary, it would roil global markets, send rates higher and equity markets lower on the uncertainty and politicizing the Fed.

The only economic release hit at 10:00; Dec existing home sales expected to be down 9.8%, were down 16.7% to 5.45 mil annualized, the largest monthly decline ever; inventories fell 6.6% and the median sales price at $178.300. Yr/yr sales increased 4.9% in 2009 frm 2008; the yr/yr price decline at 12.4% was also the largest decline in prices ever recorded. Treasuries caught a little bounce, the stock market didn’t react negatively to the decline in sales.

This Week’s Economic and Events Calendar:
Tuesday;
9:00 Nov Case/Shiller 20 city price home price index (-5.0%)
10:00 Jan consumer confidence frm the Conference Board (53.5 frm 53.3 in Dec)
FHFA Home Price Index (+0.1%)
1:00 $44B 2 yr note auction
Wednesday;
7:00 weekly MBA mortgage applications
10:00 Dec new home sales (+3.9%)
1:00 $42B 5 yr note auction
2:15 FOMC policy statement
Thursday;
8:30 weekly jobless claims (-28K to 450K, continuing claims +1K to 4.60 mil)
Dec Durable Goods orders (+2.0%)
1:00 $32B 7 yr note auction
Friday;
8:30 Q4 advance GDP report (+4.6% frm +2.2% in Q3)
Q4 employment cost index (+0.4% unch frm Q3)
9:45 Jan Chicago purchasing mgrs index (57.4 frm 58.7 in Dec)
9:55 U. of Michigan consumer sentiment index (73.0 frm 72.8)

On the FOMC policy statement on Wed; markets are not expecting anything significantly new from the short statement. Economic improvement slow, no inflation fears, the Fed will keep rates low until employment shows some improvement.

On Bernanke’s re-appointment, markets are expecting him to be confirmed after all the chatter last week. Politicians are panicked over the recent election results and what is developing as a voter revolt over all that is going on in Washington. Obama scrambling to help middle class families, again frantically trying to re-gain some high ground.

On this week’s Treasury borrowing; although foreign demand has been very strong for the past six to eight months, traders are always nervous that one day foreign demand will decline. Supply will keep the rate markets in check early this week.

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Forwarded exclusively by:

Tony Fernandez
Guild Mortgage
Office: 425-985-2223
Email: anthonyf@guildmortgage.net
website: www.guildmortgage.net

Thursday, January 21, 2010
Treasuries and mortgages opened weaker this morning but found some support at 8:30 when weekly jobless claims were released. Claims were widely expected to have declined a little but were up 36K to 482K frm a revised 446K filings in the previous week. Continuing claims were better however, from 4.617 mil the previous week to 4.599 mil. Prior to the release the 10 was off 10/32 and mortgages started down 5/32 (.15 bp); by 9:00 the 10 clawed back to -4/32 and mortgages were unchanged from yesterday’s close, at 9:00 the stock indexes were trading lower with the DJIA -24. At 9:30 the DJIA opened +6 but went slightly negative quickly; the 10 yr at 9:30 -6/32 (.18 bp) and mortgage prices -1/32 (.03 bp).

At 10:00 the Philadelphia Fed released its business index for Jan, a measure of economic activity in the Philly Fed region; the overall index was expected to decline from 20.4 to 18.8, the index fell to 15.2; new orders component at 3.2 frm 8.3, prices pd at 32.2 frm 36.6 and employment component at 6.1 frm 4.5. Any read over zero is expansion.

Also at 10:00 Dec leading economic indicators, a data series that includes many other individual series and is seen as an indication of economic growth over the next six months. LEI was expected to increase 0.7%, it jumped to +1.1%.

The two 10:00 reports have added a little more support to treasuries and mortgages; along with weekly claims earlier the bond market has been supported, but with next week’s Treasury auctions not much of a bounce.

Later this morning (11:00) Treasury will announce the auctions for next week. 2 yr notes on Tuesday, 5 yr notes next Wednesday, and 7 yr notes on Thursday next week. Last month and the month before the total for the three auctions was $118B, likely to be the same this go-round. Each round of Treasury borrowing (every other week) is met with trepidation about the demand from foreign investors; China’s economy is exploding leading Chinese officials to talk about restraining banks’ lending to cool thing down somewhat. With increasing evidence of global recovery the fear that demand for US debt will slacken keeps traders edgy. So far however, the demand has been strong, next week is another tester.

Banks’ proprietary trading, and curbing it to keep them from going over the cliff as they did in 2007 and prior, are focused this morning. Pres Obama will take to the air waves at 11:40 this morning to propose new rules to limit banks from over-trading their own portfolios and limit risks. Given their recent performances new rules seem appropriate since banks appear unable to control themselves. Banks do conduct proprietary trading for their own benefit, not for that of their clients. Obama is renewing his focus on economic issues, tapping into voter anger about the struggling economy, taxpayer bailouts and growing bank profits at a time of 10% unemployment (actually 17% when discouraged workers are counted) and a federal deficit that rose to $1.4T last year. Last June Obama stepped up pressure to regulate banks’ trading to reduce the risks that among other events almost sunk the financial system. Former Fed chief Paul Volker a year ago issued a report from the Group of Thirty, a panel of former central bankers that was created to study bank actions, failures and issue recommendations to correct them, calling for separation between commercial banks and businesses that engage in speculative risk-taking such as hedge funds and proprietary trading. Banks however are crying wolf, that limiting these activities would slow economic recovery—-that is simply BS!

Yesterday’s loss of a Senate seat in Mass. to Republicans has re-energized the administration on looking more definitively toward the building anger among independents and all voters over what is increasingly perceived as an explosion in government, high unemployment, and the health care issues. 65% of all Americans are against the present health care legislation. Part of it is that no one really understands it and refuting the administration’s comments that the bill will reduce the budget deficit. The health care bill that was being debated by the Senate is dead in the water as it was constituted; its back to the drawing board to make changes that make more sense and has a possibility to pass. There is a way however to get the House Bill passed as is, without the reality of a Senate filibuster by Republicans; if the Senate acquiesces to the House bill as it is, the House and Senate could get it passed. That however would bring down the wrath of voters even more, so health care is likely dead until next year and if passed it will be more palatable than the 1200 pages of crap no one fully understands.

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