In This Issue

Last Week in Review: Don't be fooled by today's low rates...

Forecast for the Week: More housing news - plus, why the Fed's upcoming meeting is so important.

Weekly View: Kids and credit cards - what do you need to know?

Last Week in Review

"NOBODY CAN GO BACK AND START A NEW BEGINNING...BUT ANYONE CAN START TODAY AND MAKE A NEW ENDING." Those words by the poet Maria Robinson should hold a special meaning - and warning - for anyone thinking about buying a home or refinancing, especially in light of the article by Former Fed Chairman Alan Greenspan which hit the wires last week.

In his Wall Street Journal op-ed piece, Mr. Greenspan stated: "Don't be fooled by today's low rates. The government could very quickly discover the limits of its borrowing capacity." He also added that the present low inflation and low long-term rate environment has fostered a "sense of complacency (within the government) that can have dire consequences."

What Mr. Greenspan is saying is that the government, rather than cutting budget deficits and showing fiscal restraint is taking advantage of this low rate and low inflation environment to accumulate more debt - and the consequences can be very bad...just look at Greece.

Mr. Greenspan also said Treasury yields could spike, and in a hurry...

Greenspan said, "Long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points."

Mr. Greenspan's sobering comments should not be taken lightly. The fact is, there are no fundamental reasons why rates - including home loan rates - should be as low as they presently are. The confluence of factors all coming together at the same time have made for an incredible low rate opportunity, but it won't last long and can change very quickly.

And, like Maria Robinson's words of wisdom, once rates begin to change, there's no way to go back to take advantage of them. The time for that is today! Contact me today to discuss your unique situation.

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Former Fed Chairman Greenspan Warns "Don't Be Fooled by Today's Low Rates"

In one of the bright spots of news last week, the Senate approved an extension of the Homebuyer Tax Credit's closing deadline...but it's not law just yet. The original deadline to take advantage of the Tax Credit called for buyers to be under contract by April 30th and to close by June 30th. If voted into law, the extension would give those buyers until September 30th to close. However, this Tax Credit provision is part of a jobs and tax package that both chambers must still vote on before it becomes law. And remember, the extension would only apply to buyers who were under contract by April 30th.

Even if you don't qualify for the Tax Credit, there are still some great opportunities available today, since rates are still at unbelievable lows right now. But heed Greenspan's words...these opportunities may not last long, so contact me today to see how you can benefit from them before it's too late.

SPEAKING OF GREENSPAN'S COMMENT ABOUT THE GOVERNMENT ACCUMULATING DEBT, THEY AREN'T THE ONLY ONE IN THAT POSITION. ACCORDING TO A RECENT STUDY, THE AVERAGE BALANCE OF COLLEGE STUDENT CREDIT CARDS CLIMBED TO $3,173. FOR INFORMATION ABOUT KIDS AND CREDIT CARDS, CHECK OUT THE SPECIAL MORTGAGE MARKET GUIDE VIDEO VIEW BELOW.

Forecast for the Week

This week, we'll see a bit lighter load of economic reports, but with some heavy news items coming down the wire. We'll start off with a dose of housing news, with reports on Existing Home Sales on Tuesday and New Home Sales on Wednesday. These reports come after last week's worse-than-expected reports on Housing Starts and Building Permits in May. Those disappointing reports may be good for the housing industry in the long run, however, since reduced inventory may help sales of the homes that are already on the market.

On Wednesday the Fed will release their rate decision and Policy Statement at the conclusion of their Federal Open Market Committee meeting. There is speculation that the Fed may lower their 2010 and 2011 growth targets for GDP...and lowering the target may give the Fed enough ammunition amongst its members to maintain their "extended period" language, although the concerns amongst Fed members about this language staying in place has been on the rise. In any case, it is all making for a very interesting and important Fed Meeting next week, as it could have an important bearing on the direction of rates.

We'll also see news on the production and consumption of goods and services this week, beginning with Durable Goods Orders on Thursday and followed by the Gross Domestic Product on Friday.

In employment news, we'll get another weekly read on Initial Jobless Claims on Thursday. Last week, Initial Jobless Claims rose by 12,000 in the latest week to 472,000 and above the 450,000 that was expected, signaling that the job market remains weak. Finally, we'll see how consumers feel about the economy in the Consumer Sentiment Index on Friday.

In addition to those reports, the Treasury Department will auction $108 Billion in 2-, 5- and 7-Year Treasury Notes. This seemingly endless supply of Treasury auctions is one reason why Mr. Greenspan expressed concern about a spike higher in yields.

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, Bonds and home loan rates ended the week slightly better than when they began... but Bond prices have stalled out near historic high levels, with home loan rates near historic low levels. Again - do not wait to get in touch with me to see if the current rate climate might benefit you or someone you know.

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Chart: Fannie Mae 4.0% Mortgage Bond (Friday, June 18, 2010)

The Mortgage Market View

Kids and Credit Cards

Economic Calendar for the Week of June 21 - June 25

In This Issue

Last Week in Review: Fed members did a lot of talking...find out what they're saying and what it means for home loan rates.

Forecast for the Week: Inflation, housing, and manufacturing reports are ahead. Plus, will the Euro show signs of stabilization?

View: Travel safely with these tips from Kiplinger.com on avoiding travel scams.

Last Week in Review

"ACTIONS SPEAK LOUDER THAN WORDS," or so the popular saying goes. But the words from various Fed members on the actions they feel need to be taken are getting pretty loud. And what could all this potential action mean for home loan rates? Read on to learn more.

There has been growing debate among Fed members about when to begin raising the Fed Funds Rate. What is the Fed Funds Rate? It's the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans. A higher Fed Funds Rate tends to slow economic activity, as it means the cost of borrowing to finance a purchase will be higher, while a lower rate helps to stimulate activity, a ripple effect that expands into all sectors of the economy. As you can see in the chart below, the Fed Funds Rate is currently at a range of 0.0-0.25%, and it has been this low for over a year to help stimulate our economy and move us from recession to recovery.

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Fed Funds Rate

If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a "double dip" recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result...and inflation concerns were a big reason for all the Fed chatter last week. Remember, inflation is the arch enemy of Bonds and home loan rates.

With mounting debt in the US and concerns that US debt will overtake GDP by 2012 - as well as the problems in Europe - there are many factors the Fed needs to consider before taking action. For instance, last week Fed Chairman Ben Bernanke said that the Unemployment Rate is likely to remain high for a while and he noted that the Fed "can't wait until unemployment is where we'd like it to be" before tightening credit, or inflation could too easily get out of control. That said, recent reports like May's Jobs Report and Retail Sales Report - which showed the first monthly decline since September 2009 - indicate that our economic recovery is still fragile at the moment. This means the Fed won't want to act too quickly, either.

The next Fed Meeting is June 22-23rd, and while the Fed will most likely not raise the Fed Funds Rate at this time, more and more Fed members are expressing concerns about the current very accommodative monetary policy in place. Although home loan rates are not tied to the Fed Funds Rate, I'll be watching this situation very carefully as it continues to unfold.

In addition, Bonds and home loan rates have benefitted lately from the situation in Europe, as global investors have sought the safe haven of our US Bonds. However, as the Euro's freefall is finally showing some signs of stabilization, traders and investors can be very fickle in unwinding or reversing these trades pretty quickly. This could reverse the improvement we've seen in home loan rates, and we saw a sign of that last week. Bonds and home loan rates ended the week a bit off their best levels of the week...but are still incredibly low overall.

If you or anyone you know would like to take advantage of the exceptional opportunity that exists in the home loan marketplace at this point in history, please don't hesitate to call or email. Or forward this newsletter on to anyone you think may benefit as well!

PLANNING A VACATION IS AN ACTION MANY OF US TAKE DURING THE SUMMER. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR TIPS FROM KIPLINGER FOR AVOIDING TRAVEL SCAMS.

Forecast for the Week

There will be plenty of inflation news for the Fed to gather this week, ahead of its meeting later this month. First, there's Wednesday's Producer Price Index, which measures inflation at the wholesale level, which will be followed by Thursday's Consumer Price Index. As mentioned above, inflation is the arch enemy of Bonds and home loan rates, so it will be important to see what these reports reveal.

Housing, manufacturing, and job news are also in store this week, with Wednesday's Housing Starts and Building Permits Reports (which give us an update on the health of the new construction sector of the housing market) and Thursday's Philadelphia Fed Report (which gives us an update on the manufacturing sector).

We'll also have another weekly Initial Jobless Claims Report. Initial Jobless Claims numbers have remained stubbornly high. The most troubling numbers in last week's report are the additional 5.13M people claiming EUC (Emergency Unemployment Compensation), which are benefits lasting longer than 26 weeks, up to 99 weeks in total.

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, Bonds and home loan rates have rallied in the last few months, helped by the uncertainties in Europe. But remember, traders are fickle, and stabilization in Europe could bring an end to this rally. I'll be watching closely to see what happens this week.

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Chart: Fannie Mae 4.0% Mortgage Bond (Friday, June 11, 2010)

The Mortgage Market View

Six Travel Scams to Avoid
All of these deals are too good to be true.
By Cameron Huddleston, Kiplinger.com

The summer travel season is almost here. If you're looking for deals, make sure you don't become the victim of a scam when trying to score a bargain. I spoke with SmarterTravel.com contributing editor Ed Perkins to find out which scams are most common and what you can do to avoid them. Here's his list:

1. Phony airline tickets

How it works: A Web site or travel agency offers a deal better than anyone else's, won't accept credit cards and instead demands direct transfer of funds. What you get is a plane ticket that's worthless.

How you can avoid this scam: Don't deal with an outfit you've never heard of. See our list of the 28 best travel sites for legitimate companies. Don't purchase airline tickets or any travel accommodations through a group that won't accept a credit card. If you have a dispute with a merchant -- for example, you were sold a phony plane ticket -- you may have an easier time working out a solution if you paid with a credit card.

2. Pay now for future travel

How it works: You're approached to enroll in a club that will enable you to take future vacations for an upfront fee of thousands to tens of thousands of dollars. After enrolling, you try to book a vacation but are told that the location or time period you want is unavailable. Then you might be asked for more money to gain access to more upscale spots that would be available.

How to avoid this scam: Unless you know someone who participates in a particular program and is happy with the service, stay away from these clubs. Even if your friend recommends a club, do some research of your own. See Resources to Help You Check Out a Company.

3. Travel like a travel agent

How it works: You receive a promotion in the mail or e-mail telling you that you can travel like a travel agent or sell travel from your home. The group purports to be a large travel agency that will provide back-office support while you sell travel packages. For a fee (usually $495 or $4,900), you'll receive training and a travel agent ID card that you can use when making reservations to get a special rate.

How to avoid this scam: "There's hardly an airline or hotel that doesn't know about these phony IDs," Perkins says. Even legitimate travel agents have a tough time getting discounts on airfare. Toss the promotion in the trash or hit "delete."

4. No-ticket event packages

How it works: A tour operator offers a package for a big event, such as the Super Bowl, but doesn't actually have tickets to the event.

How to avoid this scam: Ask the tour operator if it has event tickets in hand. Of course, the representative could lie. So it's best to buy through an organization you know.

5. Phony insurance

How it works: A travel agent sells you a "protection plan" that's supposed to reimburse you if you have to cancel your trip. The policy, however, is unlicensed and you won't get your money back.

How to avoid this scam: Make sure the product you're being sold really is a licensed insurance policy. You can see a list of licensed travel insurance companies at the U.S. Travel Insurance Association site. See The Case for Travel Insurance to learn more about what travel insurance covers. You can compare policies at InsureMyTrip.com.

6. "We will sell your timeshare"

How it works: Groups charge an upfront fee to sell your unwanted timeshare. "The bottom line is they don't," Perkins says.

How to avoid this scam: Avoid any group that promises to sell your timeshare for a fee (other than cheap listing fee). If you have a timeshare you just can't unload, consider posting on Craigslist with an offer to give away your timeshare for free to anyone who will take over the commitment.

Reprinted with permission. All Contents © 2010 The Kiplinger Washington Editors. www.kiplinger.com.

Economic Calendar for the Week of June 14 - June 18

In This Issue

Last Week in Review: The Stock market takes a hit...and the latest read on US employment was a surprise!

Forecast for the Week: The economic calendar is thin this week, but some heavy hitters arrive on Friday.

View: Avoid these financial pitfalls that can strain even the strongest relationship!

Last Week in Review

"YOU'RE RIDING HIGH IN APRIL AND SHOT DOWN IN MAY..." Just like the old Sinatra tune "That's Life," the Dow Jones Industrial Average traded as high as 11,258 in mid-April - but May wasn't quite so good for Stocks, as the Dow lost 8% in May, suffering its worst one-month decline in 70 years.

In the end, May was quite a slippery month all the way around, dominated by headlines of Greece and Oil...and so far in the first week of June, it hasn't been much different.

But one important economic report that managed to break through the news from across the globe was the official Jobs Report, which came in far worse than most estimates. The bad news pressured Stocks lower on Friday - and with the money flowing out of Stocks and into Bonds - helped home loan rates see a bit of unexpected improvement on Friday.

As you can see in the chart below, the headline number in the Jobs Report showed 431,000 jobs created in May. On the surface, this would seem like a very good thing, but that number was not only well below the 500,000 that were expected, but also was primarily made up of temporary census workers hired by the government. In fact, 411,000 of the 431,000 hires were exactly this - temporary census workers who are certainly glad to have a job, but who will join the ranks of the unemployed once again when the 2010 Census has been completed.

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Chart: U.S. Nonfarm Payrolls (By Month)

The headline job creations number that you hear about in the media comes from the business or Establishment Report, also known as Current Employment Statistics...and it can be misleading, as it includes something called the "birth-death ratio," which is a model or estimate of businesses created or closed within a given month, and based on historical data, supposedly foretells how many jobs were created or lost as a result. And this estimating method can be very highly inaccurate, particularly during times of changes in business cycles and the economy, such as we are going through presently.

But even the Household Survey - which previously showed 1.1 Million jobs created over the past three months - showed 35,000 jobs lost during May. This is important because the Household Survey or Current Population Survey (CPS) may be a more accurate reading, since actual households are contacted. Additionally, this is the survey that gives us the Unemployment Rate.

Overall, the Jobs Report was disappointing, but at least there still were some modest job creations. Additionally, average hours worked did improve, which is a good sign. And the Unemployment Rate did drop from 9.9% to 9.7%. So a bit of good news was found in the Report, and as Sinatra might say. "You Can't Take That Away From Me."

DESPITE SIGNS THAT THE ECONOMY IS STABILIZING, THERE ARE STILL UPS AND DOWNS THAT IMPACT THE MARKETS AND INDIVIDUAL CONSUMERS. THOSE FLUCTUATIONS CAN BE PARTICULARLY CHALLENGING FOR NEWLYWEDS TRYING TO COMBINE INCOMES, EXPECTATIONS, AND BUDGETS. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR 6 TIPS THAT CAN DECREASE TENSION AND INCREASE HARMONY IN A MARRIAGE.

Forecast for the Week

After a full load of economic reports last week, we'll see a little breathing room this week. In fact, we won't see the first major economic report until the Beige Book is released on Wednesday. The Fed's Beige Book - officially known as the Survey on Current Economic Conditions - contains anecdotal information on the current economic and business conditions. Although some people consider the Beige Book to be a lagging report, it can serve as a helpful indicator of the Fed's policy decisions. It reflects data from bank reports, as well as interviews with key business contacts, economists, market experts, and other sources.

We'll also see the Balance of Trade report on Thursday. Remember, a negative balance of trade - or a deficit - occurs when imports surpass exports. The US merchandise trade balance has been in a deficit since the mid-1970s.

Initial Jobless Claims will also be reported on Thursday. It does appear that over the past few weeks Jobless Claims have shown some stabilization...and while it isn't getting much better; at least it isn't getting much worse. The markets will be watching to see if that trend continues this week.

The week wraps up on Friday with the Consumer Sentiment Index and Retail Sales for May. Retail Sales will be the big economic report of the week. In last month's report, Retail Sales doubled expectations and marked the seventh consecutive monthly increase. The report can be volatile from month to month, but the recent string of improving reports does signal that the consumer is starting to spend more money.

In addition to those reports, the Treasury Department will auction off $70 Billion in 3- and 10-Year Notes and 30-Year Bonds. It will be interesting to see how these auctions perform with yields at very low levels.

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, Mortgage Bonds have been extremely volatile since May 6, when the "Flash Crash" occurred.

Overall, Bonds and home loan rates ended the week slightly better than when they began. But the Bond market's good fortune may not last very long - so be sure to give me a call if I can help explain the current rate situation and how it might benefit you.

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Chart: Fannie Mae 4.5% Mortgage Bond (Friday, June 4, 2010)

The Mortgage Market View

Six Money Mistakes of Newlyweds

By Erin Burt
Kiplinger.com

Whether you're planning a walk down the aisle soon or you've already gotten hitched, watch out for these financial pitfalls that can strain even the strongest marriage.

Four words no one wants to hear soon after his or her wedding day: "We made a mistake."

I'm talking about financial choices - not your choice of spouse. Unfortunately, many newlyweds set themselves up for failure soon after they say "I do." If you bring bad money habits to the marriage or fail to come up with a plan to merge your financial lives, you could potentially doom your relationship to money trouble - and endless arguments. Not exactly "happily ever after."

However, nothing says "I love you" like the desire to start your marriage on the right financial foot (roses, schmoses). Here are six common pitfalls that trip up new couples. Steer clear of these, and you'll decrease the money tension and increase the harmony in your new life together.

1. Keeping money secrets

Money is one of the most common sources of arguments in a marriage, so it's best to simply avoid the subject altogether, right?

Wrong! Some of the most heated arguments stem from failing to discuss financial backgrounds, expectations and attitudes from the start. Communication is key to the survival of any relationship, and bearing your financial soul to your partner is no exception.

Ideally, you want to have this conversation before walking down the aisle. After all, there are good marital surprises ("Didn't I tell you I'm a gourmet chef?") and bad surprises ("Didn't I tell you I have $20,000 in credit card debt?"). Full disclosure is in order here - and that includes your shoe fetish or gambling habit. For tips on what to discuss, see Ten Questions to Ask Before Saying 'I Do.'

2. Not having a budget

Now that you're settling into your new life together, it's time to discuss the b word. No, not baby. Budgeting. You're merging two spending habits and two saving habits into one household. So even if you had a budget when you were single (pat on the back), you've got to make a new one with your husband or wife to include his or her income, debts and monthly expenses. That will help to ensure you have enough money left over for that other b word - Bahamas.

Use our budget worksheet to start. Your first step is to write down your fixed expenses - such as your rent, car payment, insurance premiums and student loan payments. You should also make a habit of contributing to your savings or investments as if you were paying a fixed bill each month. Then write down your flexible expenses, such as utility and phone bills, transportation costs, groceries, trips to the ATM, and miscellaneous purchases. Track your actual spending for a couple of months to see where your money really goes, then find the spending leaks and plug them. Building a budget is a great way to set common spending and saving goals, identify problems, and work together to fix them.

3. Giving one person the financial reins

The honeymoon's over, and it's time to get down to the nitty-gritty of the daily finances. Who will physically pay the bills, monitor the investments and crunch the taxes? One person may be more inclined toward these tasks, or you may decide to split the responsibility or trade off each month.

There's nothing wrong with letting one person take over the family finances, as long as both partners are okay with that decision. But that doesn't mean the other partner should be excluded. It's important for each person not only to feel involved in the big financial decisions but also to have an understanding of the day-to-day finances. You each need to know all your different account information, passwords and bill due dates in case anything were to happen to the other person. And no matter how you divide the responsibility, it's a good idea to have a regular "money date" each month or so to make sure each of you is in the loop. You should go over your budget, review your savings progress and discuss upcoming expenses together. How's that for keeping the romance alive?

Also, if you choose to combine your finances after you wed, make sure that major purchases and savings accounts are held in both of your names so that each of you has equal access and can maintain a credit rating. You don't want to find out in the event of a divorce that your name wasn't actually on the car title or savings accounts.

4. Dragging debt down the aisle

What's his is hers, and what's hers is his. Whether you decide to combine your finances or maintain a separate approach, if one of you brought debt into the marriage, it becomes a problem for both of you. You'll need to work together to come up with a plan to pay it off. However, you should never officially commingle your debt. Doing so could hurt the credit score of the other partner and make it difficult for one or both of you to get credit later. Keep existing credit-card and loan accounts in the original holder's name.

If you can help it, it's best to avoid beginning your marriage in the red. Many newlyweds make the mistake of going too far into debt to pull off the wedding of their dreams, go on an exotic honeymoon, or buy brand-new furniture and appliances for their home. Before you dig too deep, you should sit down together to determine which expenses are necessary and which are worth a splurge - and come up with a plan to pay for it all before you spend it.

5. Sweating the small stuff

Marriage is about compromises and simply letting some things slide. So she squeezes the toothpaste tube from the middle, and he doesn't pick up his socks. Big deal. You'll both soon learn to pick your battles and save your energy for issues that really matter.

That goes for picking your money battles, too. I remember my first financial argument with my husband. We had been married two weeks, and we were doing our grocery shopping together. He wanted to buy the brand-name chocolate chips, and I felt strongly that we should save 75 cents and go with the off-brand chips. After a lengthy and heated exchange, we divided up the rest of the shopping list so that we wouldn't have to look at each other for the rest of our outing. Then we drove home in a huff. Lesson learned: Never go grocery shopping when you're hungry, tired and irritable. Oh, wait. Financial lesson learned: Don't sweat the small stuff. Was the argument really worth 75 cents? No way.

Of course, if all the little stuff is adding up to a big drain on your finances and causing you to live beyond your means, bring it up at your next money date and work together to find ways you can both cut back. (Ah, there's that compromise idea again.) But take note: It's important that you build a little "mad money" into your budget for each person to spend at his or her own discretion. (Can you imagine asking your spouse for permission every time you wanted to buy a cappuccino and a muffin, or grab a drink with some friends after work?) But as far as the big stuff goes, make it a rule to consult the other on major purchases. You don't want to come home and unexpectedly find a brand-new Mercedes in the driveway, and the bill that goes with it.

By the way, I now go grocery shopping alone. We decided as a couple it's what's best for our marriage.

6. Failing to plan for an emergency

No one likes to think about bad things happening, but in all the excitement of your engagement, planning your wedding and moving in together, it's easy to overlook this important aspect of financial planning. One of the best gifts you and your spouse can give each other is financial security and protection from life's storms.

First, assess your emergency stash of cash. Every couple should have enough money available to cover from three to six months worth of living expenses. You never know when the car will break down, one of you will lose a job or you'll have an unexpected medical bill. Learn more about how to build your financial foundation and where to keep the money.

Then, you need to make sure you have adequate insurance coverage, including health, auto, renters or homeowners, and possibly life insurance. Learn more about the types of insurance everyone should have, and how to get the appropriate coverage.

Did you get married without a prenuptial agreement? It's not too late to protect the financial interests each partner brought to the marriage. Consider drafting a post-nup with your lawyers. Plus, make sure you each have written a will to divide your assets in the event of your death.

See Also: Secrets to Marital and Money Bliss, 10 Questions to Ask Before Saying 'I Do', A Primer on Prenups

Reprinted with permission. All Contents c 2010 The Kiplinger Washington Editors. www.kiplinger.com.

Economic Calendar for the Week of June 07 - June 11