Remember the old tag line from the show "Lifestyles of the Rich and Famous", as Robin Leach wished us all "champagne wishes and caviar dreams"? And sure enough, these days more and more people have the trappings of the rich. But is it the new home, maybe a shiny BMW, or more vacations? No. It's getting hit by the AMT or Alternative Minimum Tax, originally designed to hit only the ultra-wealthy. Not really the "you have arrived" feeling you had hoped for.
The nasty AMT isn't just for the wealthy anymore, as it is trapping an alarming amount of the middle class, especially those who own homes and live in states with high income tax rates. And it's getting worse. Pretty soon, over half those with incomes between $75k - $100k will be victimized by the AMT.
So what's the scoop with AMT, and what do we need to watch out for?
The AMT was first enacted nearly 40 years ago to ensure that wealthy taxpayers pay at least some federal income tax versus sheltering their entire income with big write-offs. This strategy worked at the time, but AMT has never been indexed for inflation, resulting in more middle-income taxpayers owing the additional tax.
All of us go through the AMT test each year. Our income is matched up with the tax brackets it falls into and the tax owed is calculated. But we also go through a second calculation - The AMT calculation. Many deductions are eliminated and the tax brackets are reduced. The tax owed under AMT is then compared to the tax owed under the bracket calculation. And guess which one you owe? The higher tax, of course.
More individuals will pay the higher AMT tax since it does not allow deductions such as certain interest on some home loans, property taxes, state and local income taxes, standard deductions, or personal exemptions for children and dependents that are normally deductible under the regular tax brackets. As stated earlier, certain interest on some home loans will be wiped out under the AMT. There are two types of home loans that can be eligible for tax deductibility.
First, there is Acquisition Debt, which allows interest to be deductible on a loan used to acquire or improve your primary or second home, with a loan limit of $1 million dollars. The good news about Acquisition Debt is that it remains deductible, even if you are subject to AMT. This makes Acquisition Debt very valuable. But once you pay off or reduce the balance of your Acquisition Debt, it is gone and only the interest on the remaining portion is deductible. So taking out a new loan at a higher amount will not give you that precious Acquisition Debt back.
The next best thing to Acquisition Debt is Home Equity Debt. Home Equity Debt has a limit of $100,000, which can be used over and above the Acquisition Debt Balance. And Home Equity Debt is flexible in that you can pay it down and pull it back out, which is not allowable for Acquisition Debt. But Home Equity Debt is eliminated under AMT...ouch. And with so many people being trapped by the AMT and also having loan amounts higher than what was used to acquire the property, the lost deduction is significant.
Monday, April 23, 2007
"ANYTHING THAT BEGINS WITH 'I DON'T KNOW HOW TO TELL YOU THIS' IS NEVER GOOD NEWS"
After a trend of gradually worsening over the past month, Bond prices and home loan rates finally got the good news they'd been waiting for...that pesky inflation rate finally appears to be moving lower. Early last week, the Consumer Price Index (CPI) showed core consumer price inflation as better than anticipated, falling to a year-over-year 2.5% rate, down from 2.7% reported last month. While lower prices on goods and services are certainly good news for all of us, the consumers; it was especially welcome for inflation-hating Bonds and home loan rates.
Following the news, home loan rates improved by .125%, and appeared destined to improve even more.
But this wasn't to be - what happened? Bond prices were feeling the love, home loan rates were improving - but right in the middle of the party, Bonds ran dead into a tough ceiling of technical resistance, stopping them cold and turning them back, causing them to lose some of the nice ground they'd made in the first part of the week. The path of least resistance ahead appears to be that Bond prices and home loan rates may worsen before they get better...but it all depends on the flavor of the news ahead.
Following the news, home loan rates improved by .125%, and appeared destined to improve even more.
But this wasn't to be - what happened? Bond prices were feeling the love, home loan rates were improving - but right in the middle of the party, Bonds ran dead into a tough ceiling of technical resistance, stopping them cold and turning them back, causing them to lose some of the nice ground they'd made in the first part of the week. The path of least resistance ahead appears to be that Bond prices and home loan rates may worsen before they get better...but it all depends on the flavor of the news ahead.
Tuesday, April 17, 2007
Things to consider when buying a home using FHA loans.
Maximum loan amount for Dallas, Kaufman, Collin, Denton, Rockwall and Hunt Counties is $200,160 (Sales price of 204,760 with the 2.25 downpayment)
Minimum Down Payment is 2.250% Buyer must make a 3% investment unless down payment is paid as a Grant/Charity (DAP) contribution.
Seller can contribute up to 6% of the Sales Price without using a Charity (DAP) contribution.
No Termite Inspection Required.
No Non-Allowables required for the seller.
FHA is now using the standard Fannie Mae appraisal form- No more VC sheets!
Any contributions that the seller is contributing should be included in 12A1B on your contract UNLESS they are using a Down Payment Assistance Program (DAP).
If any monies are being paid as a contribution towards buyer’s down payment, DO NOT include those fees in 12A1B . Instead, add that to your “Special Provisions” #11. You will need to verify with your mortgage lender the amount of the contribution to be specified. Special Provisions to read “Seller to contribute $____ towards a Down Payment Assistance Program”.
FHA Mortgage Insurance is paid upfront (1.50%) rolled into the mortgage amount and .5% paid monthly in the payment. The .5% can be cancelled once the buyer has a 78% LTV and a minimum of 5 years (which ever is the later) has been paid towards the mortgage and the mortgage history has been satisfactory.
A 30 year Fixed Rate mortgage for a Single Family Residence is a Section 203B. A Condo has a 234C Section (the section is a part of The Third Party Financing Addendum #C for FHA).
A Condo does not require upfront FHA Insurance added to the mortgage and a survey is not required. A Condo must meet the FHA guidelines of no less than 51% Owner Occupied and be an FHA Approved complex.
Make sure the executed date is on the contract.
Minimum Down Payment is 2.250% Buyer must make a 3% investment unless down payment is paid as a Grant/Charity (DAP) contribution.
Seller can contribute up to 6% of the Sales Price without using a Charity (DAP) contribution.
No Termite Inspection Required.
No Non-Allowables required for the seller.
FHA is now using the standard Fannie Mae appraisal form- No more VC sheets!
Any contributions that the seller is contributing should be included in 12A1B on your contract UNLESS they are using a Down Payment Assistance Program (DAP).
If any monies are being paid as a contribution towards buyer’s down payment, DO NOT include those fees in 12A1B . Instead, add that to your “Special Provisions” #11. You will need to verify with your mortgage lender the amount of the contribution to be specified. Special Provisions to read “Seller to contribute $____ towards a Down Payment Assistance Program”.
FHA Mortgage Insurance is paid upfront (1.50%) rolled into the mortgage amount and .5% paid monthly in the payment. The .5% can be cancelled once the buyer has a 78% LTV and a minimum of 5 years (which ever is the later) has been paid towards the mortgage and the mortgage history has been satisfactory.
A 30 year Fixed Rate mortgage for a Single Family Residence is a Section 203B. A Condo has a 234C Section (the section is a part of The Third Party Financing Addendum #C for FHA).
A Condo does not require upfront FHA Insurance added to the mortgage and a survey is not required. A Condo must meet the FHA guidelines of no less than 51% Owner Occupied and be an FHA Approved complex.
Make sure the executed date is on the contract.
Sunday, April 15, 2007
THIS BLOG IS HEREBY CERTIFIED AS BEING 100% "IMUS FREE"
But just in case you didn't get enough of the Don Imus story that seemed to infiltrate every minute of news time last week...just turn on the television or radio for 30 seconds and you're sure to catch an update. The market had a busy week on its own...and the Fed took center stage, with the "Minutes" from the last Fed meeting being released, as well as several members out and about on the speaking circuit.
While the Fed speakers didn't give any market-rattling comments, the Fed Meeting Minutes were a different story. Remember that the Minutes are the "Fed Unplugged", giving all the commentary between voting and non-voting members, before the carefully crafted formal Policy Statement is released to the public. The Fed intentionally delays the release of the Minutes, so the market has time to interpret and adapt to the Policy Statement itself, before they throw the "off the record" discussion into the mix for review and analysis.
The Minutes revealed that although the decision at the meeting was to leave the Fed Funds Rate unchanged, Fed members remain concerned about inflation, as recent indicators show that inflation is stubbornly remaining at a level above the Fed's comfort zone of 1 - 2%. Bonds didn't like the inflationary concerns, and lost some ground...with home loan rates worsening just slightly. The Fed is leaving an open door for more hikes ahead - as well as the possibility of cuts - completely dependent on what the incoming economic data tells them in the coming months. And a highly watched measure of inflation is due out next week - read on to know what to be looking for.
While the Fed speakers didn't give any market-rattling comments, the Fed Meeting Minutes were a different story. Remember that the Minutes are the "Fed Unplugged", giving all the commentary between voting and non-voting members, before the carefully crafted formal Policy Statement is released to the public. The Fed intentionally delays the release of the Minutes, so the market has time to interpret and adapt to the Policy Statement itself, before they throw the "off the record" discussion into the mix for review and analysis.
The Minutes revealed that although the decision at the meeting was to leave the Fed Funds Rate unchanged, Fed members remain concerned about inflation, as recent indicators show that inflation is stubbornly remaining at a level above the Fed's comfort zone of 1 - 2%. Bonds didn't like the inflationary concerns, and lost some ground...with home loan rates worsening just slightly. The Fed is leaving an open door for more hikes ahead - as well as the possibility of cuts - completely dependent on what the incoming economic data tells them in the coming months. And a highly watched measure of inflation is due out next week - read on to know what to be looking for.
PLEASE MISTER POSTMAN, LOOK AND SEE...IF THERE'S A LETTER, A LETTER FOR ME...
Perhaps the reason neither the Beatles nor the Marvelettes hadn't received that important letter was simply incorrect postage. And with the postage increases that seem to come more and more frequently, it's not a crazy assumption to make. So here it comes again - starting May 14th, new higher postal rates will go into effect. If you don't want your loved ones - not to mention your creditors - waiting by the mailbox, now is the time to prepare.
The cost of postage for a standard one ounce first class letter is increasing from 39 cents up to 41 cents. And you know the drill - each time the post office bumps up the rates by a penny or two, it requires an annoying trip to the post office to purchase a book of one or two cent stamps.
But now - you can wave goodbye to those pesky one and two cent stamps that clutter up your desk or your wallet...the post office has finally created a stamp that will last "FOREVER".
The new stamp is called the "Forever" stamp and was created to do just what the title states....last forever. Once the stamp is purchased, the stamp can be used forever to mail one-ounce First-Class letters anytime in the future regardless of postage increases. The current price of each Forever stamp is 41 cents, and you can buy Forever stamps at that rate until the next postage increase. When the postal rates increase in the future, new Forever stamps sold at that time will go up in price too - but you can use up all your previously purchased Forever stamps without having to deal with buying and using the inconvenient make-up stamps for the difference. Forever stamps can now be purchased online at http://www.usps.com/ or at post offices nationwide.
Thursday, April 12, 2007
FHA "FLIPPING" Guidelines
Because FHA is rapidly becoming the "IN" loan, I am getting phone calls because some lenders didn’t know about the flipping guidelines until the last minute. Below you will find the guidelines on flipped properties when pertaining to a buyer that is using FHA to purchase the property.
Remember, “Flipped Properties” are defined as those properties that have been acquired within a twelve (12) month period.
If sold in a 0-90 day period after acquisition:
According to FHA guidelines, a property of re-sale occurring 90 days or less from the date the seller acquired the property is not eligible for FHA insurance.
If sold in a 91-180 day period after acquisition:
A property re-sale occurring between 91-180 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
A second FHA appraisal is required from another approved FHA appraiser. The cost of the second appraisal CANNOT be charged to the homebuyer. If the seller is paying for the second appraisal, the real estate contract should reflect the seller is paying for the second appraisal.
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If both appraisals supported the increased valuation of the property, the conditional commitment will be issued based on the lowest value of the two appraisals.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
If sold in a 181-360 day period after acquisition:
A property re-sale occurring between 181-360 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
Remember, “Flipped Properties” are defined as those properties that have been acquired within a twelve (12) month period.
If sold in a 0-90 day period after acquisition:
According to FHA guidelines, a property of re-sale occurring 90 days or less from the date the seller acquired the property is not eligible for FHA insurance.
If sold in a 91-180 day period after acquisition:
A property re-sale occurring between 91-180 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
A second FHA appraisal is required from another approved FHA appraiser. The cost of the second appraisal CANNOT be charged to the homebuyer. If the seller is paying for the second appraisal, the real estate contract should reflect the seller is paying for the second appraisal.
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If both appraisals supported the increased valuation of the property, the conditional commitment will be issued based on the lowest value of the two appraisals.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
If sold in a 181-360 day period after acquisition:
A property re-sale occurring between 181-360 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
Sunday, April 08, 2007
IT'S IN THE "FINE PRINT"...
Credit card companies do a great job at disclosing all of their terms and conditions...but do so in an exceptionally hard to read font and verbiage, designed to dissuade you from really reading the infamous "fine print". But failing to understand the terms can be costly.
Most people know that when your bill arrives, it needs to be paid on time or you'll be hit with a hefty late fee - but many don't know that paying late usually entitles the credit card company to raise your rate immediately and significantly. And worse yet - did you know that paying late on one of your credit cards also entitles all your other credit card companies to raise the rates you are paying them as well? You bet - it's called the "Universal Default Clause", and it basically means that if you are late on one credit card account, all other credit card companies that you have accounts with can increase the interest rate too, even if their accounts have been paid completely on time.
But the plot thickens further - this goes beyond late payments on credit cards alone.
If one of your credit card companies has the Universal Default Clause noted in their disclosure - and most of them do - this clause states that they have the right to penalize a consumer with an increased interest rate if a late payment is reported to ANY other creditor, including utilities, car loans, and home loans. Better believe that credit card companies with this clause sit back and wait for the opportunity to increase the interest rate...and continually monitor their customer's credit reports, just waiting for the opportunity to do so.
And just when you thought it couldn't get any worse...
...it's not just late payments that trigger the Universal Default Clause; interest rates can be increased if a consumer exceeds a credit limit, bounces a check, or applies for additional credit. All of these signs may be read by the credit card company that a consumer is "high risk". The penalty? You guessed it - a higher interest rate.
Further, if an offer seems too good to be true, it probably is. This popular phrase rings true for many consumers that sign up for zero percent interest offers. Although these offers sound great and every consumer goes in with the best intentions of paying the balance in full before the zero percent interest term expires, the vast majority of people do not pay off the bill before the offer ends. And what consumers do not realize is if the account is not paid in full, the creditor does not start charging interest from the date the deal expires, the creditor goes back to the day the purchase was made and charges interest on the balance for the entire period.
Or - back to the Universal Default Clause, if you are late on another credit card payment during the introductory time period with the zero percent rate offer - the card issuer of that sweet deal could prematurely break it off and force a steamed up interest rate, retroactively charged back to the original date of purchase. That smoldering rate could mean paying double or even triple for the purchased merchandise.
Try your best to only charge what you can afford to pay off in full, on a monthly basis.
Beyond being just good advice, here's another little known credit card fact that could cost you.
If you charge and then pay the account in full, there is no interest due. But if you charge and choose to only pay half of the bill when it arrives, guess what - you get charged interest not just on the remaining balance, but for the entire charged balance, regardless of your paying half the bill in full. If the bill is not paid in full the following month, this game continues until the account is paid in full.
So although the fine print can be a real snoozer to read, taking the time to become familiar with credit card terms and conditions can save you some serious dollars. Review your current credit card terms and conditions and take the time to find a credit card company that truly matches your spending habits and needs. You will save yourself a few sleepless nights - and more importantly, save yourself a lot of money too!
Most people know that when your bill arrives, it needs to be paid on time or you'll be hit with a hefty late fee - but many don't know that paying late usually entitles the credit card company to raise your rate immediately and significantly. And worse yet - did you know that paying late on one of your credit cards also entitles all your other credit card companies to raise the rates you are paying them as well? You bet - it's called the "Universal Default Clause", and it basically means that if you are late on one credit card account, all other credit card companies that you have accounts with can increase the interest rate too, even if their accounts have been paid completely on time.
But the plot thickens further - this goes beyond late payments on credit cards alone.
If one of your credit card companies has the Universal Default Clause noted in their disclosure - and most of them do - this clause states that they have the right to penalize a consumer with an increased interest rate if a late payment is reported to ANY other creditor, including utilities, car loans, and home loans. Better believe that credit card companies with this clause sit back and wait for the opportunity to increase the interest rate...and continually monitor their customer's credit reports, just waiting for the opportunity to do so.
And just when you thought it couldn't get any worse...
...it's not just late payments that trigger the Universal Default Clause; interest rates can be increased if a consumer exceeds a credit limit, bounces a check, or applies for additional credit. All of these signs may be read by the credit card company that a consumer is "high risk". The penalty? You guessed it - a higher interest rate.
Further, if an offer seems too good to be true, it probably is. This popular phrase rings true for many consumers that sign up for zero percent interest offers. Although these offers sound great and every consumer goes in with the best intentions of paying the balance in full before the zero percent interest term expires, the vast majority of people do not pay off the bill before the offer ends. And what consumers do not realize is if the account is not paid in full, the creditor does not start charging interest from the date the deal expires, the creditor goes back to the day the purchase was made and charges interest on the balance for the entire period.
Or - back to the Universal Default Clause, if you are late on another credit card payment during the introductory time period with the zero percent rate offer - the card issuer of that sweet deal could prematurely break it off and force a steamed up interest rate, retroactively charged back to the original date of purchase. That smoldering rate could mean paying double or even triple for the purchased merchandise.
Try your best to only charge what you can afford to pay off in full, on a monthly basis.
Beyond being just good advice, here's another little known credit card fact that could cost you.
If you charge and then pay the account in full, there is no interest due. But if you charge and choose to only pay half of the bill when it arrives, guess what - you get charged interest not just on the remaining balance, but for the entire charged balance, regardless of your paying half the bill in full. If the bill is not paid in full the following month, this game continues until the account is paid in full.
So although the fine print can be a real snoozer to read, taking the time to become familiar with credit card terms and conditions can save you some serious dollars. Review your current credit card terms and conditions and take the time to find a credit card company that truly matches your spending habits and needs. You will save yourself a few sleepless nights - and more importantly, save yourself a lot of money too!
Forecast, Week of April 9th
What's on the docket this week? A few reports of note - and one of the more interesting items on the calendar will be the Federal Reserve Board's "Meeting Minutes" from the March 21st meeting, due for release this Wednesday afternoon. Why so intriguing? Because unlike the carefully crafted Policy Statement released just following the actual Fed Meeting, the Meeting Minutes is like the Fed "unplugged"...where all the commentary and discussion between Fed members is unbridled and unleashed to the public. Not all members vote at each meeting - but they all have a voice. Was the decision to keep the Fed Funds Rate in a paused position unanimous? Or did non-voting Fed President Jeffrey "the Dissenter" Lacker raise his voice in favor of more hikes? We'll all find out later this week - and the comments could be market movers, so stay tuned.
The chart below shows that Bond pricing has been skidding lower of late, meaning home loan rates have worsened right along with them. And the next "floor of support" to catch them is lower still - indicating that Bond pricing and home loan rates will likely get a bit worse before they get better.
The market may see some added volatility early in the week, as last Friday's trading session was condensed into just a few hours of trading before a market close in observance of Good Friday. Stocks should improve off the strong Jobs Report, which could hurt bonds and home loan rates.
The chart below shows that Bond pricing has been skidding lower of late, meaning home loan rates have worsened right along with them. And the next "floor of support" to catch them is lower still - indicating that Bond pricing and home loan rates will likely get a bit worse before they get better.
The market may see some added volatility early in the week, as last Friday's trading session was condensed into just a few hours of trading before a market close in observance of Good Friday. Stocks should improve off the strong Jobs Report, which could hurt bonds and home loan rates.
Reality. TV.
"TELEVISION IS NOT REAL LIFE. IN REAL LIFE, PEOPLE ACTUALLY HAVE TO LEAVE THE COFFEE SHOP, AND GO TO JOBS." Bill Gates
Right on Bill...and last Friday, the Department of Labor reported that another 180,000 Americans left the coffee shops and found jobs during the month of March, with another 32,000 jobs added to prior month's reports. The Unemployment Rate dropped to 4.4%, matching the lowest rate in six years - and Average Hourly Earnings were up as well, rising to $17.22 per hour. So it was all good news for the US job market...but bad news for home loan rates, since a strong labor market can lead to inflation, the arch-enemy of Bonds and home loan rates. On the release, Bond prices slipped lower, causing home loan rates to rise slightly across the board.
And the Fed was watching too...remember that the pop in new job formations and stronger wages creates that risk of further inflation ahead, and this news comes on the heels of a higher read on inflation from the Fed's most closely watched indicator - The Personal Consumption Expenditure Index. So, despite the media and many "so called" experts saying the Fed has to cut rates soon - don't expect a cut in the near future, as the Fed's main priority is controlling inflation.
Right on Bill...and last Friday, the Department of Labor reported that another 180,000 Americans left the coffee shops and found jobs during the month of March, with another 32,000 jobs added to prior month's reports. The Unemployment Rate dropped to 4.4%, matching the lowest rate in six years - and Average Hourly Earnings were up as well, rising to $17.22 per hour. So it was all good news for the US job market...but bad news for home loan rates, since a strong labor market can lead to inflation, the arch-enemy of Bonds and home loan rates. On the release, Bond prices slipped lower, causing home loan rates to rise slightly across the board.
And the Fed was watching too...remember that the pop in new job formations and stronger wages creates that risk of further inflation ahead, and this news comes on the heels of a higher read on inflation from the Fed's most closely watched indicator - The Personal Consumption Expenditure Index. So, despite the media and many "so called" experts saying the Fed has to cut rates soon - don't expect a cut in the near future, as the Fed's main priority is controlling inflation.
Wednesday, April 04, 2007
Some great things about FHA Loans
- NO Minimum FICO score is required
- There are NO “non-allowables” for sellers any longer
- FHA now uses the same appraisal forms as Freddie and Fannie
- Buyer CAN currently be in chapter 13 BANKRUPTCY
- Sales Price up to $206,000 (and should be up to $275,000 by year end)
- It is an assumable loan (important when rates go to 8% and they are at 6%).
- There are NO prepayment penalties (unlike many 80/20 High Risk loans)
- Can have federal tax liens and not have to pay them off
- Can have unpaid collections
- Experienced Loss Mitigation staff dedicated to help homeowners avoid foreclosure
…And all this with a market interest rate!
Monday, April 02, 2007
BASEBALL BEEN BERRY, BERRY GOOD TO ME...
BASEBALL BEEN BERRY, BERRY GOOD TO ME..." Garrett Morris as Chico Escuela on Saturday Night Live
And as the first pitch of the 2007 baseball season is thrown, Bond Players could be saying the same thing about Fed Chairman Ben Bernanke. Big Ben halted the long string of rate hikes even though inflation is a bit higher than the Fed wants, so Ben has "played ball" by patiently waiting for inflation to settle down to the desired range between 1% - 2%. But while "Ben-Ball" has been "berry berry" good to bonds so far, all that may change after last week's economic data.
The Fed closely watches the rate of inflation and uses the Core Personal Consumption Expenditure (PCE) Index as its favorite gauge. And last week the Fed was thrown a curve, as the PCE increased more than expected during February for the largest monthly spike since August. As previously mentioned, the Fed wants inflation no higher than 2%, and the annual rate of PCE just rose to 2.4% from the previous reading of 2.3%.
Also of note, the Personal Savings Rate remains negative at -1.2%. It appears that achieving a meaningful amount of savings for many Americans is as tough as hitting a pitch from Mariano Rivera. Mortgage Bonds worsened during the week, causing Home Loan Rates to increase modestly.
SLOWER BASE RUNNERS ARE NOT THE ONLY ONES CAUGHT STEALING - THE BIGGEST CREDIT CARD SCAM IN HISTORY WAS UNCOVERED - AND YOU COULD HOLD ONE OF THE 45 MILLION CREDIT CARD NUMBERS STOLEN. LEARN HOW TO PROTECT YOURSELF IN THIS WEEK'S MORTGAGE MARKET VIEW.
And as the first pitch of the 2007 baseball season is thrown, Bond Players could be saying the same thing about Fed Chairman Ben Bernanke. Big Ben halted the long string of rate hikes even though inflation is a bit higher than the Fed wants, so Ben has "played ball" by patiently waiting for inflation to settle down to the desired range between 1% - 2%. But while "Ben-Ball" has been "berry berry" good to bonds so far, all that may change after last week's economic data.
The Fed closely watches the rate of inflation and uses the Core Personal Consumption Expenditure (PCE) Index as its favorite gauge. And last week the Fed was thrown a curve, as the PCE increased more than expected during February for the largest monthly spike since August. As previously mentioned, the Fed wants inflation no higher than 2%, and the annual rate of PCE just rose to 2.4% from the previous reading of 2.3%.
Also of note, the Personal Savings Rate remains negative at -1.2%. It appears that achieving a meaningful amount of savings for many Americans is as tough as hitting a pitch from Mariano Rivera. Mortgage Bonds worsened during the week, causing Home Loan Rates to increase modestly.
SLOWER BASE RUNNERS ARE NOT THE ONLY ONES CAUGHT STEALING - THE BIGGEST CREDIT CARD SCAM IN HISTORY WAS UNCOVERED - AND YOU COULD HOLD ONE OF THE 45 MILLION CREDIT CARD NUMBERS STOLEN. LEARN HOW TO PROTECT YOURSELF IN THIS WEEK'S MORTGAGE MARKET VIEW.
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