Other Preferred Market Watch in the News

Preferred Market Watch in the News

State-of-the-Market

Prudential Preferred Properties
State-of-the-Market

In a challenging market such as what we are now experiencing, it is vital to implement a strategic sales plan when buying or selling real estate. The information below may be helpful to you.

Market Overview
National issues such as the war in Iraq and the weakening dollar shape consumers' attitudes and influence the economy. Additionally, this year's national election will impact the economic outlook for the foreseeable future. In September and December, the Federal Reserve stepped in to balance uncertainty by issuing rate cuts, bringing interest rates to new lows. A few bright spots - strong US exports and 5.4 million new jobs since August 2005 - also offer some promise in an otherwise challenging economy.

Though national issues are important to consider, we must also remember that real estate is local. The midwest real estate market is relatively stable compared to the constantly fluctuating business that the coasts experience. In October, the IAR reported that the Chicago Primary Metropolitan Statistical Area (PMSA) median home sale price was up 3.1 percent from October 2006.

Turn Obstacles into Opportunities
We can turn obstacles into opportunities by taking the time to refocus our goals.

Work with an Agent Who Follows a Business Plan:

• Set goals for the year with specific plans for their achievement
• Your PPP agent has some of the best online tools to help you buy or sell in this challenging market
• Prudential Real Estate has THE exclusive relationship with Yahoo! This means that your listing will appear toward the top of searches on Yahoo! Real Estate
• All listings are on 100+ websites, including ChicagoTribune.com enhanced and Realtor.com enhanced, giving you a competitive advantage in the market.
• Know that proper pricing is the key to success.
• Regularly review progress with your agent. Ask for updates on your area.

Keep in Mind:

• Homes priced right will sell
• Your agent can help you find ways to make your home stand out among every other home in its price range
• Your agent can review PPP Market Research reports with you.

 

With your Prudential Preferred Properties agent and strategic planning, you will be well-equipped to buy or sell in today's real estate market.

Sincerely,
Chris Eigel and Michael Pierson
January, 2008

A Mortgage Update from Jay Skwierawski for the week of May 4

Hello Everybody!

Another roller coaster week in mortgage rates and like most roller coaster rides, this one ended up pretty much where it started! There was A LOT of news on the economy released this week - some good for rates, some bad, and some downright confusing!

Tuesday brought news that Consumer Confidence had dropped, again, to a number that was worse than estimated. On Wednesday, the Gross Domestic Product news showed that the economy grew at a .6% pace in the first quarter of 2008. This was slightly better than the markets expected, but still anemic. It also was a positive number, which goes against the beliefs of those people that think that we are currently in a recession, since the definition of a recession is two straight quarters of negative growth. Although, .6% is pretty close to negative. The Chicago Purchasing Managers' Index (PMI) release on Wednesday was better than expected, but still a bad number. That's the kind of news week it was. Numbers were bad, just not as bad as expected. Wednesday afternoon brought the announcement that the Federal Reserve's Open Market Committee (FOMC) had voted to lower the Fed Funds rate by 1/4%. In doing so, they also "hinted" that they may be done lowering rates for this cycle. The market reacted very favorably to this news. Almost every other time that the Fed has dropped rates, the markets have had a negative reaction because lower interest rates can lead to higher inflation, and inflation has been a problem lately. So, the Fed signalling that they might not lower rates any more was welcome news to the bond markets. Thursday's news was on Personal Spending and Income. Spending came in higher than expected, but that may have been more as a result of inflation, and income came in slightly lower than expected. The big news on Thursday was the release of the Personal Consumption Expenditures and Core PCE. This is the Fed's favorite inflation gauge, and it came in a tad higher than expected, and a tad higher than the range accepted by the Fed. Normally, the markets would have sold off on this news, but inflation isn't new news right now, and with the Fed's announcement from the previous day, the markets pretty much shrugged it off. Initial Jobless Claims jumped to 380,000, much higher than expected. The Industrial Supply Managers index came in better than expected, but also a pretty bad number - just not as bad as the market was expecting. On Friday, the big numbers of the month were released - the monthly employment numbers. The Unemployment Rate decreased to 5.0% in April, down from 5.1% in March, and better than the 5.2% that the markets expected. Also, the economy lost 20,000 jobs, instead of the 80,000 that the market was expecting. The markets actually rallied on this news. The economy loses 20,000 jobs, and the market rallies. Again, because the news wasn't as bad as expected. Kind of like going to the dentist and he tells you that your teeth are fine, but your gums have to go!

So, the markets were up one day, down the next. Make that up one hour, down the next! It could have been worse with all of the news that was released. The markets will now focus on any news being released with the notion that the Fed probably won't be lowering rates again. There is not a lot of news coming out next week, which doesn't mean that we won't have mortgage rate movement. Every time there has been a "quiet week," some other news has come out unexpectedly that has caused rates to move. Time will tell!

News due this week:

Monday - Industrial Supply Manager's Service Index (Moderate)
Thursday - Initial Jobless Claims (Moderate)
Friday - Balance of Trade (Moderate)

The chart above shows the price movement of mortgage bonds over the past three months. Remember, green and up are good, red and down are bad. The longer the line for the day, more volatile the market was that day. The most recent day (Friday) is to the far right. It was quite a volatile day!

Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

A Mortgage Update from Jay Skwierawski for the week of April 27

Hello Everybody!

Interest rates rose slightly last week. The economic news was mixed, while there was some favorable news for one large bank, and less than favorable inflation news from abroad. Although it was a relatively quiet week, from a news standpoint, the news that was released caused much volatility in the mortgage bond market. The week ahead is chock full of news, including a Federal Reserve meeting, and the all important employment report.

First, let's take a look at the news that came out:

The week started on Monday with news that National City Bank announced that it was receiving a $7 Billion cash infusion from some investors. This was looked at very favorably, as it signaled that perhaps investors are starting to see value in the battered financial sector and just maybe we could be nearing the end of the credit crunch. On Tuesday, Existing Home Sales came in at 4.93 million units, slightly higher than the 4.92 million that were expected. Although the number was better than expected, it was still a large decline from the month before. On Thursday, Durable Goods Orders came in less than expected, while first time unemployment claims were reported at 342,000 vs. the 375,000 that was expected. Also on Thursday, New Home Sales came in less than expected at 526,000 units vs. 585,000 expected and 575,000 from the month before. The feeling is that the credit crunch is affecting the ability of some "would be" buyers of new homes to be qualified for mortgages. Finally, on Friday, the University of Michigan Consumer Sentiment report came in lower than expected. Gee, you think? Consumers are being hit over the head everyday with bad news on the economy and inflation, and are paying $4.00 per gallon for gas. One might suspect that consumer sentiment might be down.

Next week could be one of those trend setting weeks as far as mortgage rates are concerned, and that only has to do with the economic news that is expected to be released. Who knows what other surprises are in store for us. Here's what's coming up this week:

Tuesday - Consumer Confidence, another measure of the "mood of the consumer" - (Moderate impact on rates)
Wednesday - Federal Reserve Open Market Committee will announce their decision on short term rates - (HIGH impact on rates)
Wednesday - Employment Cost Index, measuring if inflation is making its way into our paychecks - (HIGH)
Wednesday - 1st Quarter Gross Domestic Product - will this number confirm that our economy is in a recession, or just really, really slow? The definition of a recession is when the GDP number is negative two quarters in a row. As you may recall, the 4th quarter GDP came in at a very slow .6%, but still positive. (Moderate)
Wednesday - GDP Price Deflator, a measure of inflation which is part of the GDP report - (HIGH)
Wednesday - Chicago Purchasing Managers Index (PMI), a measure of the economy in the Midwest (HIGH)
Thursday - Personal income and spending (Moderate)
Thursday - Personal Consumption Expenditures (PCE) and Core PCE, excluding food and energy - the Fed's favorite measure of inflation that is highly watched every month. (HIGH)
Thursday - First time unemployment claims, a measure of the number of people that are losing their jobs - (Moderate)
Thursday - The Industrial Supply Manager's report (ISM), a measure of the state of the economy across the country (HIGH)
Friday - The April Employment Report, including:
 New jobs created (In March, 80,000 jobs were lost. The market is anticipating the same size loss for April)
 Unemployment Rate (In March, this number jumped, unexpectedly to 5.1%. The market is expecting another increase to 5.2% in April)
 Hourly Earnings (an increase would signal another sign of inflation)
 Average Work Week (a decrease is expected)
 All of the employment numbers have a HIGH impact on mortgage rates

Individually, each of the numbers could have a HIGH impact on mortgage rates, but what will probably happen is that we will have some good numbers and some bad, and mortgage rates could have the same kind of week ahead that they did last week. A lot of volatility in the market up and down, and rates ending up the week only slightly changed from where they started out.

The chart above shows the movement of mortgage bond prices. Each bar represents a trading day, with the most recent (Friday) on the far left. On the chart, remember that green and up are good, red and down are bad.

Here's some good news:

SPRING HAS SPRUNG...

...and that means it's time to wash away those winter blues! In fact, according to the Soap and Detergent Association - did you even know there was such a thing? - three-quarters of Americans engage in spring-cleaning. In fact, their surveys indicated that more than 80 percent of people who spring clean agree that it helps them save time throughout the year, and 96 percent of people donate or discard items during their spring-cleaning.

But the advantages can go much further than that. Check out these top ten spring-cleaning activities, compiled by www.medicinenet.com, that can help make your home healthier and safer:

1.  Thoroughly dust your home. Also clean any air conditioning and heating filters, ducts, and vents to minimize pollens and other airborne allergens.
2.  Organize your medicine cabinet. Throw away expired medications and old prescription medicines that you no longer need.
3.  Inventory your garage and basement. Get rid of any old paint, thinners, oils, solvents, stains, and other similar items you no longer need. Note: You may need to take these items to a hazardous waste drop off center.
4.  Inventory under your sinks and around your house. Dispose of old or potentially toxic cleaning products.
5.  Have your chimney professionally cleaned. This will help you lessen the chances of carbon monoxide exposure when the cold weather returns..
6.  Clean all mold and mildew from bathrooms and other damp areas. Use nontoxic cleaning products.
7.  Check your rugs. Make sure that rugs on bare floors have nonskid mats and that older or dusty mats are either washed or replaced.
8.  Inspect outdoor playground equipment. Make sure that all elements are sturdy and safe, especially guardrails, protruding bolts, and other potential sources of injury.
9.  Change your batteries. Do so for both smoke detectors and carbon monoxide detectors.
10. Collect old batteries throughout the house for disposal. Dispose of them in a battery recycling or hazardous waste center.

And make it easy on yourself - take it one room, one cleaning task at a time. You'll be more likely to accomplish more if you tackle each spring-cleaning project separately. And that's great advice...any time of year!

Have a great week!

Some of the information contained in this update comes from Mortgage Market Guide, a service that I subscribe to.

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of April 20

Hello Everybody!

There's a guaranteed way to partially beat inflation at the bottom of this update!

Last week wasn't a good one for mortgage rates. The good news is that the increase in rates was mostly a result of positive news on the economy, and not more bad news in the mortgage or banking industries. Some inflation talk by members of the Federal Reserve didn't help matters, either.

First, here's the news that came out:

Retail sales came out slightly higher than expected, which is a positive sign that perhaps consumers are ignoring all of the bad stuff they're reading in the papers. The Empire State Index came out much better than expected. This news on the economy in the New York area doesn't usually move markets too much, but on that day it was also reported that the Producer Price Index (PPI) for March was up a whopping 1.1% (which would be a 13% annual inflation rate) and double what was anticipated. If you a regular reader of my reports, you know how much bond traders dislike inflation. The markets sold off on this news, causing rates to rise. On Wednesday, housing starts and new house permits both came in higher than expected. Finally, some good news on the housing front, and the mortgage market sold off on the good news, causing rates to rise again. Also on Wednesday, the government reported that the Consumer Price Index (CPI - inflation at the consumer level) came in just as expected. This was a good thing. If the CPI would have come in higher, as the PPI did, then we would have seen a huge increase in mortgage rates. On Thursday, Industrial Production came in lower than expected (factories not producing as much - typical in an economic slowdown) while Capacity Utilization came in higher than expected. First time unemployment claims came in a little lower than expected, but still at a relatively high number. The Index of Leading Economic Indicators came in as expected, predicting a flat economy over the next six months. The final economic release of the week was the Philadelphia Fed Index, a measure of the economy on the east coast. Although it came in higher than expected, it was still an awful number.

All in all, the positive news on the economy won out over the negative news, and mortgage rates rose. Also hurting mortgage rates this week was some positive earnings reports released by giant companies like Google. Positive earnings reports cause people to want to invest in the stocks of those companies. So investors pull their money out of other investments, like bonds, and put it into stocks. When they pull their money out of bonds, it causes rates to go up.

By the end of the week, we saw mortgage rates rise by about 1/4% from where they started. Even though rates ticked up a little bit, it is still a great time to take advantage of historically low mortgage rates before rising inflation pushes rates higher. If you, or a friend, family member, coworker or customer is in need of any advice on the changes in the market, please have them get in touch with us.

Next week, there aren't as many market moving reports coming out. We have:

Wednesday - Existing Home Sales for March, which have a moderate impact on mortgage rates
Thursday - New Home Sales for March (Moderate)
Thursday - First time unemployment claims for last week (Moderate)
Thursday - Durable Goods Orders, which are defined as items that are durable - made to last at least three years, like autos, furniture, electronics, appliances, computers, games, etc. (Moderate)
Friday - University of Michigan Consumer Sentiment Index (Moderate)

As you will see from the chart at the top of this page, mortgage bond prices fell this week to a significant level of support - the 200 day moving average, which seems to have held, and mortgage rates have recovered for the time being. If the price had dropped below the blue line, that is often an indicator of higher mortgage rates to come. Since there isn't much market moving news scheduled for next week, we shouldn't see much happening in the mortgage markets. However, if we have more inflation talk coming out of Federal Reserve members or negative news from any large mortgage lenders or banks, we could see rates rise.

Now, how can you beat inflation, one penny at a time? Starting May 12th, the cost of mailing a 1 oz. letter goes up to 42 cents. You can still purchase the "forever" stamp for 41 cents. The "forever" stamp can be used forever to mail a 1 oz. letter. That's your way of beating inflation one penny at a time! In addition to the change in the cost of a stamp, some other changes coming at the USPS:

Express Mail - The cost will now vary depending on where the mail is going. Sending something overnight closer may be cheaper. Also, you will get a discount if you purchase postage online.

Priority Mail - You can also save on Priority Mail when you purchase postage online.

Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of April 13

Hello Everybody!

Last week, the mortgage market enjoyed a rather quiet week, and interest rates remained steady from Monday to Friday.

But before I get into the markets and economic reports, reading some articles in the newspaper this week reminded me of a story I had heard a few years back:

Mr. Johannson, the top real estate agent in the community, had commissioned a local artist to paint a portrait of his family as a surprise for his wife Buffy for Christmas. The artist was busy at the time, but promised Mr. Johannson that he would start the painting in August, and it would, indeed, be finished by Christmas time so he could present it to Buffy. In August, the artist contacted Mr. Johannson and said that he was ready to start the painting. Mr. Johannson responded that he had read in the newspaper that the housing market was taking a turn for the worse, and that, although his business was still going strong, he would have to cancel the portrait, because "bad times were on the way". Upon hearing this news, the artist contacted his home improvement contractor. He was just about to have his basement finished, but "with bad times on the way," he decided to hold off until things got better. The home improvement contractor had not yet heard this news, but when the artist told him what was about to happen, he called his new truck salesman. He had just negotiated to buy a new truck for his business, but with "bad times on the way," he would hold off on purchasing the truck, until he would have enough business to warrant a new truck. The new truck salesman was quite dismayed upon hearing the news. He and his wife had just decided that they wouldn't put off getting their daughter's braces until high school. They would take care of her cross bite in 7th grade, as the orthodontist had recommended. But, upon hearing that "bad times were on the way," they called the orthodontist to tell him that they weren't going to be able to afford the braces at this time, and they would contact him when times got better. This news certainly caught the orthodontist by surprise. He and his wife had just decided it was time to "move up" to the North Shore. However, now that "bad times were on the way," they decided they better hold off on moving, so they contacted their real estate agent - Mr. Johannson, and canceled their appointment with him to list their home and start looking at new times.

The moral of the story - don't believe everything that you hear. Interest rates are near all-time lows. There are still plenty of mortgage programs out there for qualified borrowers, and home prices in most areas are not dropping as much as the media would have you believe.

So, back to the news. Last week, there wasn't much economic news released, but what did come out was, for the most part, favorable for mortgage rates:

First time claims for unemployment came in quite a bit smaller than expected, but still high enough to be worrisome for the employment picture. The trade balance came in higher than anticipated, meaning we were importing more than we were exporting, however much of this could have to do with the high cost of oil. Finally, the University of Michigan Consumer Sentiment index came in at a 25 year low. Talk about your self fulfilling prophecies. The more that consumers hear about how bad consumers think things are, the more likely they are hold back on making large purchases (like homes and automobiles). This would, of course, not bode well for future economic reports, which could lead to a further economic slowdown and MAYBE lower interest rates.

Although last week's economic reports were a "wash" for mortgage rates, this coming week could see some real movement. There is a lot of news slated to come out this week, including:

Monday - Retail Sales - (HIGH impact on rates) - Were consumers out buying last month?
Monday - Retail Sales, excluding Autos - (HIGH)
Tuesday - Producer Price Index (PPI) and Core PPI (excluding food & energy) (HIGH) - The first inflation index for March - inflation at the producer level.
Tuesday - Empire Manufacturing Index (Moderate) - How are things going in New York?
Wednesday - Industrial Production (Moderate) - How are the nation's factories doing?
Wednesday - Capacity Utilization (Moderate) - Are those factories working to their limits?
Wednesday - Consumer Price Index and core CPI (HIGH) - Inflation at the consumer level
Wednesday - Housing Starts (Moderate) - Have builders started building houses, again?
Wednesday - New House Permits (Moderate) - Do those builders have plans to build more houses in the future?
Thursday - First time unemployment claims (Moderate) - Was last week's decrease in claims a fluke, or was the week before's huge jump over 400,000 claims a fluke?
Thursday - Index of Leading Economic Indicators (Low) - What do the next six months hold for the economy?
Thursday - Philadelphia Fed Index (HIGH) - How is the economy on the east coast, which is an indication of the US economy?

With so many reports due out next week, it is bound to be a crazy week for mortgage rates. There hasn't been a lot of news out on mortgage companies and mortgage investments, so perhaps we're due for some of that too! The big news of last week was when Washington Mutual announced that they were closing most of their retail mortgage branches, and phasing out of the wholesale business where they purchased mortgage loans from mortgage brokers. This was not totally unexpected. If there are any other big stories reported, we will be sure to keep you in the loop!

In the meantime, have a great week!

Above is this week's candlestick chart (courtesy of Mortgage Market Guide, a paid subscription service that I subscribe to which helps to keep me informed of happenings in the economy which affect our business). Remember, green is good, up is good, red and down are bad. As you will notice, market movement lately has been very flat, which means mortgage rates are holding steady.

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of April 6

Good Morning Everybody!

It's baseball season, finally! A sure sign of Spring.

The Box Score!

Last week's economic reports were, for the most part, mortgage rate friendly, including the all important employment reports released on Friday. We saw both Industrial Supply Manager's indexes come in slightly higher than anticipated, but still showing recessionary levels. Initial claims for unemployment soared to over 400,000, a number not seen in several years. Then, on Friday, the labor department reported that the economy lost 80,000 jobs in March, much worse than the 50,000 job loss that was expected. In addition, January and February's numbers were both revised downward to show an additional 70,000 jobs lost. The unemployment rate also climbed to 5.1% from 4.8%, also much higher than expected. As a result of these numbers, the mortgage bond market rallied and we saw mortgage rates end the week slightly better than where they started.

This week is a slow week as far as economic reporting goes, with the following reports set for release:

Tuesday - The minutes of the Federal Reserves most recent policy setting meeting are released. These can have a HIGH impact on mortgage rates, because it is a good measure of the "pulse of the Fed", and what it thinks about the economy and inflation.
Wednesday - Crude Oil Inventories are released (Moderate Impact on mortgage rates)
Thursday - Balance of trade and weekly initial jobless claims are released (Moderate impact on mortgage rates)
Friday - University of Michigan Consumer Sentiment Index. This is a widely expected measure of how consumers feel about the state of the economy and how they are doing financially.

Know your starting line-up at game time!

In addition to the above mentioned economic reports, there have been a lot of changes in the mortgage industry within the past several weeks regarding underwriting, pricing, private mortgage insurance and condo financing. Now more than ever, it is extremely important for you to have confidence in your mortgage lender. It seems like the major mortgage investors (FNMA, FHLMC and other large buyers of mortgages) are changing guidelines on an hourly basis! If you are dealing with a mortgage lender that is not paying attention, your deal could suffer as a result. Some of the changes that have been announced have gone into effect immediately upon notification, while others have come with some advanced warning. If you have a transaction already in process, and it hasn't been "locked in" with an investor, and the program changes or, worse yet goes away, then it's conceivable that you may be turned down for your mortgage. Also, if you have been pre-approved for your financing, it is very important that your loan officer check the status of the pre-approval as you are making an offer. There have been many instances where buyers have been pre-approved under certain mortgage programs that weren't available when the buyer finally found a house. If you are on the listing end of an offer, and the pre-approval letter that you are being presented is older, or even if it's not older, it would be a great idea for you to verify that the pre-approval is still good with the lender that issued it. Be wary of cheesy-looking preapprovals! We are more than happy to take a look at your pre-approval letters to give you our opinions of them.

Get in the game!

Even with all of the changes that have taken place, now is still a great time to buy. There are still great programs available for qualified buyers. Interest rates are extremely favorable right now for purchasing or refinancing. If you are a buyer that purchased within the last few years, and took out an adjustable rate mortgage because you were planning to move during that initial three to five year period, talk with a lender today. There are great deals and mortgage rates that can be had right now. You may also consider refinancing into a fixed rate if your moving plans have changed.

The Scorecard

Above is the candlestick chart for this week. Remember that green is good, red is bad, up is good, down is not so good! The trend still seems to be upward and green!

Thank you for the trust that you've placed in us as your mortgage partner! If you have any questions regarding any of this information, or any other mortgage related questions, please give your loan officer or me a call!

Thank you!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312-268-7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of March 30

Hello Everybody!

I have just returned from spending a week with my family in Gulf Shores, Alabama. I have never been there before, and wasn't sure exactly what to expect. I was pleasantly surprised with whole experience! If you'd like to hear more about my trip, I've added a little bit about it under the chart at the bottom of the page!

As another volatile week in the mortgage bond market has ended, a new one is set to begin. The news out on the economy last week was, for the most part, market friendly, but that doesn't mean that it was without drama. As you'll see by the Japanese Candlestick chart above, Monday and Friday had some wild trading, while Tuesday, Wednesday and Thursday were fairly steady. When it was all said and done, mortgage rates finished the week little changed from where they began.

First, the news out on the economy, as reported last week:

Existing home sales came in higher than expected. This was certainly good news for us. Are buyers finally thawing out?
The first report of consumer confidence for the week came in much weaker than expected. With all the bad news being reported, who could blame the consumer for being depressed about the state of the economy?
Durable Goods Orders (those large items expected to last at least three years) came in much lower than expected.
New Home Sales came in higher than expected. That hasn't happened in quite some time. Buyers are looking at new homes, too!
Initial first time unemployment claims came in slightly lower than expected.
The final revision of the 4th quarter Gross Domestic Product came in as previously reported (+.6%), which was quite slow.
The Fed's favorite gauge of inflation - the Personal Consumption Expenditures (PCE) and core PCE, excluding food and energy, both came in slightly lower than expected. This was some very welcome, favorable news on inflation. The number came out within the Fed's target range for inflation.
Personal Income came in a little higher than expected, while Personal Spending came in as expected (slow!).
The final measure of consumers' moods - the University of Michigan Consumer Sentiment Index came in worse than expected.
The positive news on housing, which initially caused rates to go up was offset by the negative consumer and durable goods numbers, and then the market really liked the inflation figures. It was a pretty decent week for the mortgage bond market.

Next week there aren't a lot of market moving reports coming out, but the numbers that are due out are big ones!

Monday brings the Chicago Purchasing Managers' report, which has a HIGH impact on mortgage rates.
Tuesday's report is the ISM index, which also has a HIGH impact on mortgage rates.
Thursday has the ISM Services index (HIGH) and first time unemployment claims (Moderate)
Friday brings the monthly employment report (which happens on the first Friday of every month). The employment report includes information on new jobs created, the unemployment rate, average hourly earnings and average number of hours worked. The employment report typically has the HIGHEST impact of all monthly reports.

In addition to the economic reports, the markets will be watching the price of oil, any news out on the mortgage industry and mortgage investments, and the impact of recent changes in the mortgage industry on the housing market. Will last weeks advancements in existing and new home sales be affected by measures that FNMA, FHLMC and PMI companies have recently put into place to reduce and/or compensate for risk in the mortgages that they back? Hopefully you didn't miss our special report last week. FNMA and FHLMC have recently announced new risk based pricing that will mean that borrowers with credit scores under 720, that put down less than 40%, will be a higher rate due to their increased risk. It wasn't too long ago that if somebody had a 680 credit score, we would probably tell them that their score was "pretty good", and that their rate wouldn't be affected by their score. If they had a score of 700, we would probably tell them that their score was "very good", and they would most likely be eligible for reduced PMI costs and reduced documentation. The major PMI companies have announced that they will no longer insure any loans with less than 3% down. This will severely limit the number of options available for the "no down payment borrower". The Nehemiah program is still an option, especially with the new FHA loan limits. 80/20 loans went away months ago. Also this week, the state's first time homebuyer program (see IHDA.org) announced an increase in their minimum downpayment to 5% from 3%, and re-announced that they have a maximum debt to income ratio of 41%, which they had become laxed in sticking to.

With all of the changes that have been announced, mortgage rates are still very attractive. Hopefully some of the recent favorable press on the housing market will get more buyers out!

We will keep you posted on any new major developments in the economy and mortgage industry.

In the mean time, have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of March 23

Hello Everybody!

Talk about roller coaster rides. Last week's mortgage market certainly would top anything that Six Flags has to offer!

It started unusually early, with the announcement last Sunday by JP Morgan Chase that they were purchasing investment banker Bear Stearns. At the same time, the Federal Reserve announced that they were dropping the discount rate by 1/4% and were going to allow investment bankers like Bear Stearns to start to borrow directly from the Fed. This opportunity had only been available to regular banks before. Investment firms like Bear Stearns and Morgan Stanley are heavily invested in mortgage bonds - both the good ones and the bad ones. The trouble that they have seen with mortgages lately has been impacting the availability of mortgage funds. Now that they can borrow directly from the Fed, at it's discount rate, they may be more in a position to weather the continuing storm.

In addition to this news, there were several economic reports out in the shortened holiday week:

New home starts came in higher than expected, while new home permits came in lower than expected. The Producer Price Index (PPI) came in just as expected, while the Core PPI (excluding the cost of gas and food) came in a bit higher than expected. This is inflationary, and the markets didn't like it. Crude Oil Inventories came in higher than expected, which could mean oil prices could drop in the future. First time jobless claims came in much higher than expected, at near recessionary levels. The Index of Leading Economic Indicators came in lower, as expected. And, finally, the Philadelphia Fed Index came in with a very bad reading, although a worse one was expected.

Plus, the following events also took place last week, impacting treasury and mortgage bond rates:

Three investment bankers - Morgan Stanley, Lehman Bros., and Goldman Sachs all came out with better earnings reports than expected. This was very good news coming on the heels of the problems with Bear Stearns. On Tuesday, the Federal Reserve reduced the rate on the Fed Funds Rate by 3/4%. This news was followed by an increase in mortgage rates, as it has been almost every time that the Fed has dropped rates. However, the fact that the Fed only went 3/4%, instead of a full 1% as was expected, probably kept rates from jumping too high. A full 1% drop would have been thought of as being very inflationary.

All in all, it ended up being a good week for mortgage rates, and we saw most of them dip by about 1/4% from where they started the week.

This week, we have the following economic reports due. (Shown with their typical impact on mortgage rates):

Monday - Existing Home Sales - how many existing homes went under contract last month? (Moderate)
Tuesday - Consumer Confidence - how do John and Jane Q. Public feel about the economy? (Moderate)
Wednesday - Durable Goods Orders - are big ticket items, like cars, being purchased? (Moderate)
Wednesday - New Home Sales - Is the nicer weather and great mortgage rates leading buyers into builders subdivisions? (Moderate)
Wednesday - Crude Oil Inventories - this number has been rising lately, which could bode well for oil and gas prices. (Moderate)
Thursday - Existing Jobless Claims - this number has also been rising. If people aren't working, then they can't be buying. (Moderate)
Thursday - Gross Domestic Product - the final revision for the 4th qtr of 2007. Was the economy really as slow as reported? (Moderate)
Friday - Personal Income and Spending - did incomes rise, and were people willing to spend what they were making? (Moderate)
Friday - Personal Consumption Expenditure (PCE) and Core PCE, excluding food & energy - the Fed's favorite inflation gauge (HIGH)
Friday - Consumer Sentiment - another measure of how consumers feel about the economy (Moderate)

Above is the candlestick chart of mortgage rates through the end of last week. Remember that on this chart, green is good, red is bad, up is good and down is not! The chart shows a pattern that seems to be going in the right direction!

As if this full menu of reports wasn't enough, I'm sure there will be other "events" this week that will affect mortgage rates. We will keep you updated on any major developments through the week.

Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of March 16

Hello Everybody!

And on the seventh day...

Sunday.

The day of rest. The day that nothing ever happens in the markets. Well, almost never. Today would be different!

Today, J.P. Morgan Chase, in a move orchestrated with the help of the Federal Reserve, announced that it would purchase Bear Stearns, the Wall Street brokerage firm that has been in business since 1923, for $2 per share. This follows Chase's announcement on Friday that it was giving a short term loan to Bear Stearns to help it avoid a bankruptcy filing. That announcement wasn't enough, and rumors were flying that Chase would take over Bear Stearns, and that's what happened today.  As I am writing this on Sunday evening, markets overseas were tumbling on the news, as it increased fears of a credit meltdown in the United States.

At the same time that Chase announced that it was buying Bear Stearns, the Fed was up to it's own tricks, with a surprise 1/4% cut in the Fed's Discount rate. The discount rate is the rate that member banks pay the Fed for funds they borrow directly from the Fed. At the same time, the Fed will now allow large financial institutions that are not normally allowed to borrow from the Fed to do so. This, hopefully, should make credit more readily available. The Fed will most likely drop the Fed Funds rate as soon as tomorrow, one day prior to the next meeting of the Fed's Open Market Committee, the body that governs short term interest rates. An emergency cut in the Fed Funds rate would help to prevent a major sell-off in world stock markets, including our own.

Buckle up, it looks like we're in for a bumpy ride this week!

This comes after a week when we actually saw mortgage rates drop a little bit from where they started the week. For the most part, the economic reports last week were "mortgage friendly":

Crude Oil inventories in the U.S. rose, this could mean lower oil and gas prices in the future
Retail Sales, and retail sales excluding autos, both came in substantially lower than expected - is the media finally getting to the consumers?
First time unemployment claims came in slightly lower than expected, but still high
The consumer price index (CPI) and the core CPI both came in much better than expected at "flat" for the month - what inflation? This could certainly leave the door open for a 3/4% cut by the Fed on Tuesday when they meet.
Consumer sentiment came in about as expected, at a very low level

Other news out last week included the Chase/Bear Stearns news and the news that another investment fund that invests a lot in mortgage backed securities was having trouble staying afloat.

This week will bring a slew of economic reports that are all market movers. Combine those reports with a Federal Reserve meeting, chaos in world stock markets, questions about the stability of the credit markets and a short work week and its bound to be wild, wild, wild!

Here's what news is coming out this week and it's typical impact on mortgage rates:

It all starts tomorrow.
Monday - Empire State Index, the measure of the economy in the New York area. (Moderate)
Monday - Industrial Production, the measure of goods produced in the nation's factories were last month. (Moderate)
Monday - Capacity Utilization, how well those factories used their resources last month. (Moderate)
Tuesday - Producer Price Index (PPI) and Core PPI (less food and energy), the measure of inflation at the wholesale level (Moderate)
Tuesday - Housing Starts, how many new homes were actually started last month? (Moderate)
Tuesday - New Housing Permits, how many permits were taken out to start new houses last month? (Moderate)
Tuesday - At 1:15pm, Central Time, the Fed will announce their interest rate decision from their FOMC meeting (HIGH)
Wednesday - Crude Oil Inventories, are high gas prices forcing consumers to cut back on gas purchases? (Moderate)
Thursday - Philadelphia Fed Index, a measure of the economies on the East coast (HIGH)
Thursday - First time unemployment claims - how many people lost their jobs last week, how many continued to look for jobs last week? (Moderate)
Thursday - Leading Economic Indicators - a measure of how the economy might behave in the future (Moderate)

As I said, it's going to be a very busy week. Be sure to watch for any SPECIAL ALERTS from me for breaking news on the mortgage and interest rate front.

The candlestick chart above shows the movement in the mortgage bond market for the past 90 days, with the most recent days on the right side. Keep in mind a few things - green is good, a rising trend is good and long bars indicate a very volatile market, which is what we have been in lately.

Have a great week!
 
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

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A Mortgage Update from Jay Skwierawski for the week of March 9

Hello Everybody!

Monday, Monday, can't trust that day,
Monday, Monday, sometimes it just turns out that way,
Oh Monday morning, you gave me no warning of what was to be
Oh Monday, Monday, how could you leave and not take me....

What a difference a week makes!

If you read my update last week, I was very optimistic about the future course of interest rates. The mortgage market had just gone through a period of four great days, and all indications were that this new-found euphoria in the market was going to continue.

But then came Monday, and like the Mamas and Papas song lyrics above suggest, sometimes Monday gives no warning of what was to be!

The week started out with some members of the Federal Reserve warning of higher inflation ahead and by now you know that the interest rate markets hate inflation. Also on Monday, the ISM Manufacturing number came out slightly higher than expected. Although it wasn't much higher, the markets have been quick to sell off (causing rates to go up) on any positive signs in the economy. The market sold off on Monday, but that wasn't too unusual, coming off of a great run the previous four days. Tuesday the market would surely reverse course and rates would continue their trek downward, right? WRONG! Tuesday, there were no significant economic reports out, but there was a lot of "Fed-speak", including a couple of speeches by two of the inflation hawks on the Fed. In addition, Citigroup announced that they were going to be seeing more large losses having to do with subprime loans. So the market sold off on Tuesday. No big deal, the markets would surely regain their composure and rates would retreat on Wednesday, right? WRONG! News released on the economy was mortgage rate friendly, but for some reason, the mortgage bond market sold off and interest rates jumped, leaving rates higher than they were before the positive run they had the week before. Certainly this sell-off was overblown, and rates would go down on Thursday, right? WRONG! The only economic news out on Thursday was first time unemployment claims, which came in slightly lower than expected, while the continuing jobless claims came in at a level consistent with an economy teetering on a recession. This should have been positive news for mortgage rates. But, the mortgage bond market rallying, and interest rates retreating, we saw the mortgage bond market sell off with a vengeance, and mortgage rates jumped. In fact, it was one of the quickest, steepest run ups in mortgage rates over a four day period in history. Now, I like being a part of history just like the next guy, but this was ridiculous! By the end of the day, we found out what caused the sell off on Thursday. Two large mortgage holders - Thornburg Mortgage and The Carlyle Capital Group had recently experienced such large losses in their mortgage holdings, that they had some of their financial backers ask for some of their cash back in the form of a "margin call". Because these two didn't have enough capital to cover these margin calls, they were forced to sell some of their "good" mortgages on the secondary mortgage market. This huge influx of mortgages for sale on the open market caused a huge, rapid increase in rates. Okay, so the damage was done for Thursday, but Friday would certainly be a better day for mortgage rates, wouldn't it? YES! Friday brought news that the economy had lost 63,000 jobs in February, instead of a 25,000 gain in jobs as the market expected. Also, December and January's numbers were revised downward. The unemployment rate, itself, went down to 4.8% from 4.9%, but the reason given for this was that a certain number of people had "given up" finding a new job, and were no longer being counted as unemployed. The mortgage market rallied on this news, and the news from earlier in the day that the Federal Reserve had announced that it was going to be adding more liquidity to the economy, in the form of low rate auctions. This was seen as a positive move by the Fed, without being as inflation causing as a reduction in short term rates.

So, here we are at the beginning of another week that could hold as much volatility as the week that just passed. I certainly don't want to sound too optimistic about mortgage rates in the week ahead. I was optimistic last week, and look where that got us - mortgage rates about 3/8% higher than they were the week before. Fundamentally, mortgage rates should be dropping. We should have rates sitting at or near historically low levels. But, there is so much more than fundamentals affecting mortgage rates these days, that it's hard to tell what will happen. For instance, mortgage bonds and 10 year U.S. Treasury Bonds often trade similarly to one and other. If rates on the 10 year go up, then rates on mortgages typically go up. Recently, however, Treasury Bonds and Mortgage Bonds have become disconnected. This was certainly true this week. As we saw the stock market sell off to its lowest level in 18 months, we saw money flow from the stock market into the bond market. This caused the 10 year Treasury rate to drop, but there was not a like trade into mortgage bonds, and we actually saw mortgage rates head the opposite way.

This week, the following economic reports will be coming out (shown with their typical affect on mortgage rates):

Thursday - Retail Sales (HIGH Impact) - Our economy is consumer driven - was the consumer out spending in February?
Thursday - Retail Sales, ex-auto (HIGH Impact) - Because auto sales cause wild swings in sales, it is reported with and without auto sales
Thursday - First time unemployment claims (MODERATE impact) - Will the number of first time claims continue its upward trend this week?
Friday - Consumer Price Index (CPI) (HIGH) - Is inflation continuing to rise, as the markets have been worrying about?
Friday - CPI, less food and energy costs (HIGH) Did inflation rise, even excluding volatile food and energy costs?
Friday - Consumer Sentiment Index (MODERATE) Can consumers possibly get over their doldrums about the economy, and start to buy things like houses?

Although it's not a huge week for economic reports, there will undoubtedly be more news out on the state of the mortgage industry that will cause rates to move one way or the other. We will keep you posted on any wild swings either way.

The chart above shows the movement of the market this week. The four large red bars on the right side represent the sell-off in mortgage bonds from Monday through Thursday, followed by the lone green bar at the end on Friday, when the price of these bonds regained some of what was lost earlier in the week. The dark blue line across the bottom is the 200 day moving average for these mortgage bonds. If the bars go below this line, as they did on Thursday, it is sometimes an indication that we are headed for a period of higher mortgage rates for months to come. Fortunately, the bond was able to fight its way back above the blue line on Friday. This week will bring a tug of war above and below this line. Above - good, below - bad. Let's all hope that good prevails!

Monday, Monday, so good to me,
Monday, Monday, it was all I hope it would be...

Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

A Mortgage Update from Jay Skwierawski for the week of March 2

Happy Spring! According to most meteorologists, Spring starts on March 1, which was yesterday. Hopefully the housing market will follow this same schedule. The mortgage rate market this week should certainly help, especially if this week's trend in mortgage rates continues.

This week, some fairly favorable news on the economy, combined with market-friendly testimony by Federal Reserve Chairman Ben Bernanke before congress, led to a decent decline in mortgage rates.

First the news:

Existing home sales came in slightly higher than expected, but still showing a struggling real estate market.
The Producer Price Index (PPI) and the Core PPI came in higher than expected, but the inflation problem is no longer a surprise to the markets.
Consumer Confidence came in much lower than expected, and at its lowest level in years.
Durable Goods Orders came in much lower than expected, for the fourth month in a row.
New Home Sales came in lower than expected, also showing the continuation of the struggling real estate market.
Gross Domestic Product (GDP) came in lower than expected at +.6%, which is next to nothing for growth in the economy.
Personal Income came in slightly higher than expected.
Personal Spending came in slightly higher than expected, but when adjusted for inflation, came in flat for the 3rd month in a row.
Personal Consumption Expenditures (PCE) and Core PCE, two of the Fed's favorite inflation gauges, came in slightly higher than expected.
The Chicago Purchasing Managers Index (PMI) came in much lower than expected.
Consumer Sentiment came in slightly higher than expected.
First Time Claims for Unemployment came in much higher than expected, as did continuing unemployment claims.

So, the reports that came in higher than expected were, for the most part, only slightly higher than expected, while the reports that came in worse than expected were a lot worse. So, in the end, bad news won the week, and we saw mortgage rates have a much hoped for decline.

In addition to the news that came out, Ben Bernanke, the Chairman of the Federal Reserve testified before Congress on Tuesday and Wednesday. He said that the Fed will continue to lower rates to help the economy, and that although the inflation numbers out recently have been elevated, the slowing economy should help to lessen the risk of runaway inflation. In other words, there is more risk in the economy slipping into a recession than there is inflation going wild, and the Fed's main focus has to be to rev up the economy right now.

The coming week will bring only a few economic reports, but those reports are major, and could shape the future direction of interest rates:

Monday - The ISM Index (like the Chicago PMI, but a national number) has a HIGH impact on interest rates.
Wednesday - The Productivity index has a LOW impact on rates
Wednesday - The ISM Services Index, which shows how the service sector is doing, has a MODERATE impact on rates
Wednesday - The "Beige Book" is released, giving an idea of how the economy is doing in each of the Federal Reserve Bank areas
Thursday - Initial Jobless Claims, which have been rising of late, has a MODERATE impact on rates
Friday - THE BIGGIES! - The employment report is released, with news on the unemployment rate, new jobs created, hourly earnings and the average hourly work week. All of these reports can have a HIGH impact on interest rates. This report can be the biggest report of the month, and will often determine the future direction of interest rates.

Mortgage rates dropped as much as 1/2% from Monday to Friday. It was a great week. The candlestick chart above shows the price of bonds over the past quarter. On this chart, remember the following:

Green is good, red is bad
The higher the lines go, the better!
The highest red line in the middle is what happened to rates immediately following the Fed's last rate decrease. Mortgage bond prices jumped, and rates fell to their lowest level in years, but on that same day, the rates shifted course and rose for a couple of days before treading water for about eight days and then selling off wildly for the next two weeks. It's been a very wild ride, but mostly down the wrong tracks! This week, we finally seem to be seeing the light at the end of the tunnel, and I don't think it's another train heading towards us!

Watch for my special report on recent underwriting and PMI changes, coming shortly.

Have a great week!

Happy Spring!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

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A Mortgage Update from Jay Skwierawski for the week of February 24

Hello Everybody!

Mortgage bond prices swung wildly this past week, with mortgage rates moving by a full 1/4% on two separate days. When it was all said and done, mortgage rates rose about 1/4% for the week.

What caused it? Bond traders hate inflation, and the news out on the Consumer Price Index (CPI) this week showed inflation running at its highest level in years (although only slightly higher than the markets were expecting). Reports out on housing and manufacturing helped to soften the blow, and it was a case of one day up, two days down for rates. Then, on Friday, the President of the Dallas Fed, Richard "Loose Lips" Fisher, spoke again, and spooked the markets with his take on inflation and the economy. Were it not for his speech on Friday afternoon, we may have seen rates hold steady for the week. Inflation erodes the purchasing power of the fixed rate of return that comes from bonds, so any inflationary news is usually a catalyst for an increase in bond and mortgage rates.

A quick recap on the news that was:

New Housing Starts came in slightly higher than expected, as did permits to start new homes. Both of these would seem like good news, however the expectations were so low that, even though they were beat, it still showed a new housing market that continues to struggle. The Consumer Price Index (CPI) came in at up .4%, higher than the up .3% that was expected, and the Core CPI (excluding food and energy costs) came in at up .3%, as expected. These numbers showed that inflation is running at or above the Fed's maximum target rate for inflation. Although these numbers were not welcome news, the Fed is so set on trying to prevent a recession, that the markets actually reacted favorably to the news. There's an old saying in the markets "sell on the rumor, buy on the fact", and that's what happened this week. The markets were fearing a bad inflation number so much, that rates rose in the days leading up to the report. Once the report came out, the markets had nothing to fear anymore, and rates actually went down.
Initial Claims for Unemployment were higher than anticipated, and continuing claims came in at a near recessionary level. The Index of Leading Economic Indicators (a gauge for measuring the economy up to 6 months in advance) came in lower for the fourth month in a row, and finally, the Philadelphia Fed Index (a barometer of the economy on the east coast) came in much, much lower than expected. All in all, it should have been a decent week for rates. If not for the Fed President's speech on Friday.

Next week brings a lot of market moving news on the economy:
Monday - Existing Home Sales, which has a moderate impact on rates
Tuesday - The Producer Price Index (PPI), and the Core PPI, which also has a moderate impact on rates
Tuesday - Consumer Confidence - Moderate
Wednesday - Durable Goods Orders - Moderate
Wednesday - New Home Sales - Moderate
Thursday - Gross Domestic Product (GDP) 4th Qtr Revision 1 - Moderate
Thursday - GDP Price Deflator (one of the Fed's favorite inflation measures) - 4th Qtr Revision 1 - HIGH
Thursday - Initial Jobless Claims and continuing claims - Moderate
Friday - Personal Spending and Income - Moderate
Friday - Personal Consumption Expenditures and Core PCE (another inflation measure) - HIGH
Friday - Chicago Purchasing Manager Index (PMI) - HIGH
Friday - Consumer Sentiment - Moderate

We will keep you posted on any wild swings in the market in the week ahead.
Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL  60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of February 17

Hello Everybody!

Before I get into my mortgage market update, it's...

POP TRIVIA QUIZ TIME!

Today is President's Day. Here are 10 questions for you to test how much you know about the people that have held the most powerful position in the free world. The answers are on the bottom!

1) What president approved the "Star Spangled Banner" as the national anthem?
2) Who is the only president buried in Washington D.C.?
3) Which president was the first son of a president?
4) Which president was the first to travel underwater in a submarine?
5) Who was the first president born in a hospital?
6) Who was the second president to die by assassination?
7) Who was the first president to visit all 50 states?
8) Who had the largest feet of any president?
9) Who was the only president to be the grandson of a president?
10) Who was the only president to be married at the White House?

As far as the mortgage bond market is concerned, we've had better weeks.

Now, the news wasn't all that bad for mortgage rates, but the bond market spent the week reeling from comments made by one of the voting members of the Federal Reserve - Dallas Fed President Richard "Loose Lips" Fisher. The reason that what he had to say on February 7th has spooked the markets so much is that he was the only Fed member voting against lowering interest rates at the last Fed meeting. Since his remarks about his concerns over inflation, mortgage bonds have lost 187 basis points - that translates into from 3/8 to 1/2% higher for mortgage rates. That's a pretty substantial jump in a week.

Here's the news that came out last week:

Retail Sales came in higher than expected, which is not good for mortgage rates.

The Trade Balance (deficit) between the U.S. and the rest of the world came in less than expected, not much impact on rates, however, the report showed import prices rising higher than expected, which is inflationary.
The Empire State Index, showing how the economy is doing in the N.Y. region came in tremendously lower than expected, which is good for rates.
Industrial Production and Capacity Utilization came in as expected - no impact on rates.
First Time Unemployment Claims came in slightly lower than expected, while continuing claims continue to rise - this was a wash.
Consumer Sentiment came in at its lowest level in 16 years.

Below is a candlestick chart of the price of mortgage bonds:

The highest green and red lines, after January 17, represent the price of mortgage bonds on the day the Fed made the surprise 3/4 point drop in rates and the day after. What these lines show is that on the day the Fed dropped rates, the market rallied. The day after (red line), the market started the morning rallying to its highest point (meaning lowest rates) in years. However, the line is red because the market ending up losing all of its momentum that day, and closed lower than where it had started before the Fed dropped rates. The market spent the next nine days treading water, before starting a rather pronounced plunge for the next seven trading days, especially the last three. Keep in mind, again, that the price of bonds moves opposite interest rates.

So, what's in store for the week ahead? The markets will be closed on Monday, and all of the week's reports will be coming out on Wednesday and Thursday, but that doesn't mean that the week's volatility will be limited to those days. Any negative news on the mortgage industry or mortgage backed bonds, or any wild swings in the stock market will be sure to wreak havoc on mortgage rates, as this market figures out what it wants to do.

The economic reports scheduled to be released this week include: (with typical impact on mortgage rates)

Wednesday - New Housing Starts (Moderate)
Wednesday - New Housing Permits (Moderate)
Wednesday - Consumer Price Index (CPI) (HIGH) A high inflation number will mean higher mortgage rates, a low number would mean lower rates
Wednesday - Core CPI, excluding food and energy (HIGH)
Wednesday - The minutes from the last Federal Reserve Meeting are released - Traders will be watching for inflation concerns
Thursday - First time unemployment claims (Moderate)
Thursday - Index of Leading Economic Indicators (Moderate)
Thursday - Philadelphia Fed Index (how the economy is on the east coast) (HIGH)

There are more reasons for rates to be going down right now than up, but for some reason they continue to rise. It could be a fear of inflation, it could be a fear that the insurance companies that insure mortgage backed bonds are going to lose their high ratings, making previously issued bonds even riskier than they already are, or it could just be a market that doesn't know what it wants to do with itself.
Trivia answers (hold computer screen upside down if you're used to reading trivia answers that way!
1) Herbert Hoover approved the "Star Spangled Banner". He was also the first president born west of the Mississippi River
2) Woodrow Wilson is interred at Washington National Cathedral
3) Who said George Bush? It was John Quincy Adams, the son of John Adams
4) Harry Truman was the first president to travel in a submarine
5) I was surprised by this one - Jimmy Carter was the first president born in a hospital
6) James Garfield was assassinated in 1881, after only two months in office
7) Richard Nixon was the first to visit all 50 states, the first to visit China and the first to resign
8) I bet you thought Abe Lincoln. Actually, it was Warren G. Harding. Size 14, if you were wondering!
9) Benjamin Harrison was the grandson of William Henry Harrison, the president who holds the record for shortest term - he died of pneumonia one month after delivering his 105 minute outdoor inaugural speech without wearing an overcoat or hat. Your mom was right.
10) Grover Cleveland was married in a ceremony at the White House on June 2, 1886. How nice, a June wedding!

Have a great week, and watch for my mid-week special report on changes coming to underwriting guidelines and private mortgage insurance guidelines and premiums.

Jay Skwierawski
President
First Sterling Mortgage Services,LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of February 10

Hello Everybody!

Interest rate rose slightly last week from where they started the week. There were only two bits of information out on the economy, and both should have been mortgage rate friendly. The ISM Services index, which is a measure of the service side of the economy came in much lower than expected, and at a number that is considered recessionary. The first time claims for unemployment number came in higher than expected, and the continuing claims for unemployment number came in at it's highest level in years.

So, why did rates go up? More bad news in the mortgage industry and some unfavorable words by a couple members of the Federal Reserve. One of the members - Dallas Fed President Richard Fisher (Loose Lips, as he is known in economic circles), who was the only Fed member to vote against decreasing rates at the last Fed meeting, said in a speech in Mexico City that he thought that what the Fed had done so far in lowering rates should be given some time to work before lowering rates anymore, especially before inflation doesn't give more signs of letting up. So, the markets took this to mean that the Fed is done lowering rates. Even though the bet is now for the Fed to lower rates, again, when they meet in March. This coming week, we have Ben Bernanke, the Chairman of the Fed speaking before Congress. The markets will be listening closely for any signs from him that the Fed is or isn't done lowering rates.

In addition to the Fed Chairman speaking next week, the following news is set to be released (including its potential impact on mortgage rates):

Wednesday - Retail Sales (HIGH Impact)
Thursday - Balance of Trade (Moderate Impact)
Thursday - First time Unemployment Claims (Moderate)
Friday - Empire State Index (Moderate)
Friday - Industrial Production and Capacity Utilization (Moderate)
Friday - Consumer Sentiment (Moderate)

The mortgage rate markets will be watching these economic releases for signs of a recession. They will be listening to Chairman Bernanke's speech for any signal of what the Fed's next move might be. Finally, the mortgage rate market may take its cue from the stock market - a huge jump in stock prices usually means an increase in mortgage rates, as investors pull their money out of mortgage back bonds and go into the stock market. On the other hand, a large dip in the stock market usually signals lower mortgage rates, as investors pull their money out of stocks and put it into the safe haven of U.S. Treasury and mortgage backed bonds. I read somewhere this weekend, that it is unusual for the stock market to move more than 2% in any direction on any given day. In the past three years, it has happened only once. So far this year, it has happened six times! When this does happen, it sometimes signals a "bottoming" out of stock prices. That could bode well for our stock investments and 401-k's, but maybe not so much for mortgage rates.

CONGRESS SENDS ECONOMIC STIMULUS BILL TO PRESIDENT BUSH - As expected, Congress passed the economic stimulus bill, H.R. 5140 (read more about it at this link: http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.05140: ). Part of the bill allows for taxpayers (and some non-taxpayers) to receive a "tax rebate" from the U.S. Treasury. Another part of the bill calls for an increase in the maximum loan amounts that FNMA and FHLMC can purchase from the current maximum level of $417,000. Unfortunately, from what I have been able to gather so far, it doesn't appear that Chicago is one of the markets that is going to be affected by this change. So far, it looks like most of the areas affected by the change are on the east and west coasts. I hope that the information that I have seen so far is wrong, and I will keep you posted on the correct information AS SOON AS I RECEIVE IT. It's like being a kid in school, and everybody has been talking about the "big party on Friday night", and everybody, including you, is talking about it and getting excited about it, and then, and then, and then (repeated for dramatic effect!) you find out you're not invited to the party! The reason that the answer is not yet known is that Congress pegged the new limits to an index that doesn't readily exist - the HUD Median Sales Price for counties and MSMA's around the country. It DOES appear that we will see an increase in the maximum FHA loan amount but, again - the amount is pending.

Interest Rates -

I have been asked to include the current rate in my updates. Unfortunately, this is not easily done, especially given the new FICO pricing increases mandated by FNMA. A borrower's interest rate will vary, greatly, depending on loan program, loan amount, loan to value, FICO score, term of lock period, and other risk factors. It would be impossible for me to list all of the different variations of the current rates. So, what I am going to do is list one interest rate that you can watch to at least get an idea of the trend in interest rates. I would urge you to check with your loan officer to get an exact quote for your borrower rather than quote this interest rate.

30 year conventional fixed rate mortgage (assuming 680+ credit/30 day lock/95% ltv or lower): 5.875%

Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

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A Mortgage Update from Jay Skwierawski for the week of February 3

Hello Everybody!

It happened again this week.

What would the next six weeks be like? Would there be six more weeks of winter, or would we see an early Spring market?

No, not Punxsutawney Phil, but Federal Reserve Ben Bernanke. The Federal Reserve gathered this week, as they do every six weeks, to decide on monetary policy. As widely expected, they decided to lower the Fed Funds rate by 1/2%. This followed the surprise 3/4% cut from last week. Mortgage rates reacted favorably to the news, but the response was not tremendous, and mortgage rates finished Wednesday about where they started. On Thursday, the news on the economy was favorable for mortgage rates, but they finished flat on the day. Finally, Friday's employment report was very favorable for mortgage rates, the mortgage bond market started out strong, but then sold off in the face of a rally in the stock market. By the end of the day, and week, mortgage rates had finished only slightly lower than where they started the week. Considering all of the interest rate favorable news, we should have seen mortgage rates drop.

First, a quick peek at the news that came out this week:

News that was favorable for mortgage rates:

New home sales came in less than expected
Consumer confidence fell, although not as much as expected
The Gross Domestic Product (GDP) came in much less than expected
First time claims for unemployment came in much higher than expected
The Chicago Purchasing Managers Index (PMI) came in lower than expected
New Jobs created, hourly earnings and average work week, and consumer sentiment came in lower than expected

News that was not favorable, or had no impact on mortgage rates:

Durable Goods Orders came in much stronger than expected
The Fed dropped rates by 1/2%, as expected
Personal income and spending came in higher than expected
The PCE (the Fed's favorite measure of inflation) came in exactly as expected
The Unemployment Rate came in lower than expected (at 4.9% vs 5.0%)
The ISM index came in higher than expected

All in all, the news should have pointed to lower mortgage rates. There was no bad news on the subprime front. There had been some rumors that some major bond insurers were having difficulty covering losses due to the subprime mess, but by the end of the week, they were dispelling the rumors, and a group of banks stepped in to say that they would help back the bond insurers.

Next week, we only have two pieces of news scheduled to be released on the economy: Tuesday's release of the ISM Services Index and Thursday's weekly first time claims for unemployment. Neither report typically has much impact on mortgage rates. Mortgage rates could drift lower as a result of last week's news. However, a rally in the stock market could cause mortgage rates to go up, while a sell-off in stocks could cause mortgage rates to plummet.

An article in this morning's Tribune quoted a Senator as saying that the stimulus package should be all done by February 15. The article didn't give many specifics, like did that mean that the Senate would be finished by then, or would the bill be on the President's desk by that day? It also didn't go into specifics about any of the changes that the Senate might make to the stimulus package. Either way, it looks like we could have an increase in conforming loan limits, and possibly FHA loan limits by the end of February. You'll hear it from us when it becomes official!

Looks like it could be a good year for the stock market. Since the SuperBowl began 42 years ago, the stock market has finished higher in 81% of the years when one of the original NFL teams wins the SuperBowl. The New York Football Giants are one of those teams, and they just defeated the previously undefeated New England Patriots 17-14 in SuperBowl XLII!

Have a great week!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

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A Mortgage Update from Jay Skwierawski for the week of January 27

Hello Everybody!

Click - click - clank - click - click - clank.

The noise the roller coaster makes as it rises up the first steep incline, before plummeting its cars and riders downward to whatever thrill awaits.

If you listened closely this week, you may have heard this noise within the stock and bond markets, as they went up and down, wildly, all week. The U.S. markets were closed on Monday for the Martin Luther King, Jr. holiday, but world markets were still open and experiencing a major sell-off of anywhere from 5 to 7%. The U.S. stock market was sure to follow on Tuesday, but at 7:30 Tuesday morning, the Federal Reserve unexpectedly dropped short term interest rates by .75%. The Dow Jones Industrial Average opened lower on Tuesday, dropping over 500 points, before recovering to end the day down only 128 points. The bond market, which impacts mortgage rates, rallied and we saw a large decrease in mortgage rates, almost down to the historically low levels we saw in 2001 and 2002. Wednesday morning, the stock market again dropped and bonds rallies some more, sending mortgage rates down even lower and causing mortgage loan officers around the country to start dancing in the streets! But, just as fast as the markets dropped on Wednesday, they recovered. The Dow Jones Industrial Average went from being down 300 points to up 300 points - a 600 point swing. This was enough to cause a sell-off in the bond market, which was unlike one that we have seen in quite some time. Rates jumped and then jumped again. Most mortgage lenders had several intraday price changes for the worse, which is very unusual. On Thursday, the buying continued in the stock market and the selling continued in the bond market. Mortgage rates rose again. Friday morning started with the market up on the day, and mortgage bonds relatively flat. However, by the end of the day, stock traders decided that they had gotten ahead of themselves in this buying frenzy, and started to sell stocks. The Dow closed down over 170 points on the day, and the mortgage bond market rallied. By the end of the week, we had the stock market up about 108 points on the week, and mortgage rates slightly higher than where they were when the week started. With all the news that is set to come out, next week could very well be as much of a roller coaster ride as this week was, if not more.

A quick look back at the news that came out last week. The big news stories of the week were the Fed's surprise move and the U.S. House of Representatives announcing that they had come up with an economic stimulus plan that would have most taxpayers receiving some sort of a rebate check in the coming months AND would increase the maximum loan amounts on conventional conforming and FHA loans. The Senate still has to pass a plan of their own, then the two plans have to be hashed out and the President would have to sign the bill before it goes into effect. The House passed their version of the plan in one week's time, which is quite amazing. The Senate will probably take longer, and it appears like there are going to be some stark differences between the two plans. The other news out this week was that Existing Home Sales were lower than expected (favorable for rates) and first time claims for unemployment were also lower than expected (not favorable for rates).

Next week, this is the news that we can anticipate, and it's anticipated effect on mortgage rates:

Monday - New Home Sales (Moderate)
Tuesday - Durable Goods Orders (Moderate)
Tuesday - Consumer Confidence (Moderate)
Wednesday - 4th Quarter Gross Domestic Product (GDP) - This will show whether the economy really is heading into a recession. (Moderate)
Wednesday - Chain Deflator, a key inflation measure in the GDP report. (High)
Wednesday - Federal Reserve Meeting - will they announce that they are lowering interest rates more? (High)
Thursday - Personal Consumption Expenditures - the Fed's favorite inflation gauge (High)
Thursday - Personal Income and Personal Spending (Moderate)
Thursday - Weekly first time jobless claims (Moderate)
Thursday - The Chicago PMI - a widely watched business barometer. (High)
Friday - January Employment Report (unemployment rate, nonfarm payrolls, etc.) (High, and probably the most important report every month)
Friday - ISM Index - Like the Chicago PMI, but a business barometer for the whole country (High)
Friday - Consumer Sentiment

Hopefully some time this week, we will also get more information on the increase in maximum loan amounts from FNMA, FHLMC and FHA. When that news breaks, you can count on hearing it from us!

There are so many important economic reports coming out this week that could affect rates. Add to these reports stock market volatility, sub-prime mortgage news and economic stimulus news, and it could prove to be a wild ride!

Buckle your seatbelts, pull the safety bar firmly on your laps and hold on tight!

Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601

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A Mortgage Update from Jay Skwierawski for the week of January 20

A Mortgage Update from Jay Skwierawski
President of First Sterling Mortgage Services, LLC
Mortgage Update the Week of January 20

Hello Everybody!

This was a good week for interest rates, and long term mortgage rates appear to be headed lower. Will they reach the historically low levels that we saw earlier this decade? That remains to be seen, but it sure is looking that way! Here's a recap of the news that came out last week:

Tuesday's News:

Retail Sales, which were expected to be flat for the month of December, actually came in lower than expected. That doesn't bode well for an economy that relies on consumers to spend, spend, spend. The Empire State Index, which shows how the economy is in New York, also came in lower than expected. The Producer Price Index (PPI), which shows the cost of goods on the wholesale level, came in down .1%, which was lower than the expected increase of .2% and MUCH LOWER than last month's increase of 3.2%. The "Core" PPI showed wholesale prices, excluding food and energy costs, came in as anticipated at .2%, which is a fairly tame number.

Wednesday's News:

Wednesday brought the release of the Consumer Price Index (CPI) - the cost of goods at the consumer level. The CPI came in at up .3%, which was a little bit higher than the anticipated up .2%, but MUCH LOWER than last month's increase of .8%, and the Core CPI came in at up .2%, as expected. Capacity Utilization and Industrial Production both came in slightly higher than expected.

Thursday's News:

New housing starts came in much lower than expected, showing the largest drop in new housing starts in three decades. Permits for new homes also came in much lower than expected, which means future housing start numbers may be bleak. First time unemployment claims came in lower than expected, and the Philadelphia Fed Index came in MUCH LOWER than expected.

Friday's News:

Finally, on Friday, we saw the index for Leading Economic Indicators (LEI) come in lower for the third month in a row. The LEI is an indicator of how the economy is going to be six to eight months out. Consumer Sentiment came in higher than expected.

So, what does it all mean? The news was a fairly mixed bag of good and bad. Interest rates went up one day, and then down the next, and finished the week slightly lower than where we started. That was good. The news on retail sales and housing were both pretty bad for the economy, and may point to the U.S. heading into a recession. During the week, we had the Chairman of the Federal Reserve testifying before Congress that there should be some sort of stimulus package to help the economy avoid a recession (if it's not too late) or to help us get out of one (if it is too late). Then, the President made a proposal that would have every taxpayer receiving a check for $800 and every family receiving a check for $1,600. The idea being that everybody will go out and spend those checks and rev up the economy. This has worked in the past, but is it enough to help housing? I don't think a $1,600 check is going to help those sub-primer borrowers who have fallen behind on their mortgages. It's also not going to be enough to convince fence-sitters to go out and buy a new home. What's going to help them is lower interest rates. I had been predicting since last Spring that we would see rates fall firmly below 6% by this spring, and that has happened. Now I am ready to make a bolder prediction! I think we may see rates hit the historically lower levels that we saw in the beginning part of this decade. That would put the 30 year fixed rate, conforming mortgage, in the 5 - 5.25% range. Now, THAT should get things moving. Stay tuned to see if I am right!

Next week there is very little in the way of news out on the economy. The only releases on the calendar are Existing Home Sales and Weekly First Time Jobless Claims - both due out on Thursday. Of course, other news will develop that will move mortgage rates, and as it comes out, I will update you on it.

If you, or somebody you know, currently has a mortgage with an interest rate higher than 6.25%, or an adjustable rate mortgage that will be adjusting soon, you should contact us for a free, no obligation analysis of your current mortgage situation. If you've been thinking about moving, but thought that rates were too high, now may be the best time to contact us to see how today's near-historically low mortgage rates can increase your purchasing power.

Finally, I would like to welcome the following new additions to our staff:

Matt Lissner - Loan Officer working out of the Lincoln Park office

Richard Pearlman - Loan Officer working out of the Lincoln Square office

Cindy Smolin - Loan Officer working out of the Northbrook office

Other new hires to be announced soon!

Thank you!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, Suite 1900
Chicago, IL 60611
312.268.7601

WE CLOSE ON TIME - EVERY TIME!

A Mortgage Update from Jay Skwierawski for the week of January 13

A Mortgage Update from Jay Skwierawski
President of First Sterling Mortgage Services, LLC
Mortgage Update the Week of January 13

Hello Everybody!

It was supposed to be a quiet week!

In last week's update, I said, "There is almost no significant news anticipated next week. Just the first time jobless claims report on Thursday and the Balance of Trade report on Friday. Neither report has a major impact on mortgage rates. Events that could affect rates this week include an increase or decrease in the cost of oil, political turmoil abroad, major bad news on the US mortgage front."

So, what happened? We had an increase and a decrease in the cost of oil (above $100 and then below) and some major news (although not BAD news) on the US mortgage front. As you have probably heard, Bank of America is in the process of acquiring Countrywide Mortgage. This is huge news for both the mortgage and real estate industries. There was wide speculation that Countrywide was teetering on the brink of bankruptcy. It wasn't a matter of if, but when. If Countrywide would have filed for bankruptcy, it would have caused a further slowdown in the U.S. economy. Countrywide is the largest mortgage lender in the United States. If you think the headlines are already filled with gloom and doom about the real estate market, imagine if the headlines read "Countrywide - Largest U.S. Mortgage Lender Files For Bankruptcy". This could have cost the housing recovery a year or two. There would have been widespread panic of many people that have their mortgages through Countrywide. Some people have the misconception that if their mortgage lender goes bankrupt, that they could lose their homes. Countrywide purchases a lot of mortgages that are originated through their wholesale division from mortgage bankers and brokers, alike. A bankruptcy petition would have stopped a source of mortgage money, and further muddied mortgage lending. It is not known how exactly the acquisition by Bank of America will affect Countrywide. Bank of America closed down its own wholesale lending divisions within the past six months. Wholesale lending (purchasing loans from mortgage brokers and mortgage bankers) is a major part of Countrywide's business. It is probably unlikely that Bank of America will close down Countrywide’s wholesale division, or they would be doing away with a large portion of their purchase.

Another favorable aspect of Bank of America purchasing Countrywide has to do with interest rates. Mortgage rates are likely to fall as a result of this, for a couple of reasons. First of all, one way that Countrywide has been attracting money to fund their mortgage operations has been by paying higher than market rates on CDs and Money Market accounts through its bank. This has caused other banks to have to pay higher than market rates on their CDs and Money Market accounts. When banks have to pay more to attract funds, they have to pass those added costs on to whoever they lend money to, like mortgage borrowers. Secondly, because a bankruptcy filing by Countrywide has been widely anticipated, major mortgage lenders have been "pricing in" the added risk of a Countrywide bankruptcy filing. If Countrywide would have filed for bankruptcy, rates would have jumped, and any lenders with outstanding loan commitments would have stood to lose a lot of money on pending or recently closed loans. The way that mortgage lenders deal with risk is to charge higher rates to "prepay" for it. Now that it appears that a bankruptcy filing by Countrywide is not going to happen, that added risk factor can be removed from mortgage rates, and we should see rates fall. Hopefully now we’re headed towards the low 5s for conforming loan amounts!

What's in store for the week ahead? A lot of news comes out on the economy next week, which could impact mortgage rates, including:

Day	News	Impact on mortgage rates
Tuesday	Empire State Index - (how the economy is doing in the state of New York)	Moderate
Tuesday	Retail Sales for December - (did cash registers ring enough for the holidays?)	HIGH
Tuesday	Retail Sales, excluding autos (ditto, less auto sales)	HIGH
Tuesday	Producer Price Index (PPI) - Inflation at the wholesale level	Moderate
Tuesday	Core PPI, excluding volatile food and energy costs	Moderate
Wednesday	Consumer Price Index (CPI) Inflation at the consumer level	HIGH
Wednesday	Core CPI, excluding volatile food and energy costs	HIGH
Wednesday	Industrial Production (how much our factories are producing)	Moderate
Wednesday	Capacity Utilization (how much is being produced vs how much could be)	Moderate
Thursday	Housing Starts (how many new homes were started last month)	Moderate
Thursday	Housing Permits (how many permits were taken out for new homes)	Moderate
Thursday	First time jobless claims (how many people started unemployment)	Moderate
Thursday	Philadelphia Fed Index (how the economy is doing on the right coast)	HIGH
Friday	Leading Economic Indicators (how the future looks for the economy)	Low
Friday	Consumer Sentiment (how consumers feel about the economy)	Moderate

Wow, that's a lot of news that could affect mortgage rates one way or the other. Of course there are other things that could affect mortgage rates this week, like the usual suspects - more bad news in the mortgage industry, the price of oil and the weather. That's right, the weather could affect interest rates. It's supposed to get extremely cold by the end of the week. Cold weather means that more oil will be used to heat our homes. The more oil that is used, the higher the price of oil goes. An increase in the price of oil causes inflation fears. Inflation fears cause mortgage rates to go up. Wow. What can we do? Pray for warmer weather, I suppose! On the news front, in addition to the Countrywide news, there were rumors on Friday that Chase is in talks to take over Washington Mutual. That could also cause some waves in the week ahead.

I will keep you posted on any major news that affects mortgage rates!

Have a great week! Only 22 more days until the spring Market officially starts (if I am to believe what I heard this week - the spring market typically starts the day after the SuperBowl)!!!

Have a great week.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC