Moorestown, NJ

Last week was another good positive one for mortgage pricing as we picked up about another .250 in pricing improvement. The stock market was very volatile, but by the end of the week stocks were only slightly down after a negative start in January. Overall, stocks are down about 7% since the most recent high just a few weeks ago, which has been positive for bonds and mortgage pricing.

The Week Ahead:

This week brings us the release of only three relevant economic data points, but we will have three Treasury note auctions to contend with as well. Given the current defensive sentiment, experts are expecting the auctions to go well - which would be bullish and supportive of current mortgage pricing.

Overall this week, look for the Treasury Auctions (Tues-Thurs), along with the Retail Sales and Weekly Jobless claims reports to be the most impactful to mortgage bonds and pricing. Also keep an eye on the stock markets. If stocks continue to retreat and sell-off, this would be generally good for bonds and mortgage pricing. If, however, a correction has been made and stocks start to trend back upwards, this would be generally negative for mortgage pricing.

Monday: No reports or bond auctions.

Tuesday: We will get a view of the level of Wholesale inventories in the morning, but more importantly we will get the 3-year Note Au ction at 1:00 ET which could be impactful to mortgage pricing that day.

Wednesday: We will get a view of the US Trade Balance in the morning, but the 10-year Note Auction at 1:00 ET will be watched very closely by bond traders. This auction, along with the Thursday auction, could be expected to be the most impactful for mortgage pricing this week.

Thursday: We will get a very important report of the week in the morning for the January reading of retail sales. Retail sales are being watched very closely as all eyes are on the US consumer since their spending represents two-thirds of US GDP. A strong reading would be negative for bonds and mortgage pricing, while a weaker reading would be good for mortgage rates. Also in the morning, we will get the Weekly Jobless Claims number and it can be impactful for mortgage pricing. We will also get the 30-year Note Auction at 1:00 ET and it could be very influential for mortgage pricing.

Friday: The University of Michigan Consumer Sentiment Report is issued in the morning and can often be a market mover. If consumer sentiment is stronger than expected it would be negative for mortgage bonds, while a weaker report would be positive for mortgage pricing.

Economic Calendar:

Monday, 2/8/10

No Reports or Note Auctions

Tuesday, 2/2/10

1:00 3-year Note Auction - *HIGH*

Wednesday, 2/3/10

8:30 US Trade Balance - Low

1:00 10-year Note Auction - *HIGH*

Thursday, 2/4/10

8:30 Jan. Retail Sales - *HIGH*

8:30 Weekly Jobless Claims - *HIGH*

1:00 30-year Note Auction - *HIGH*

Friday, 2/5/10

9:55 Univ. of Michigan Consumer Sentiment - *HIGH*

Mortgage Market Advisory Disclaimer

This is only our opinion and cannot be guaranteed to be in the best interest of any or all parties. This service is provided for informational purposes only and is not intended for trading purposes. None of the information provided constitutes a solicitation, offer, or recommendation by NHLA to buy or sell any security, or to provide legal, professional, tax, accounting, or investment advice. Every lender's price desk has their own strategies and reactions to market movements. Our information is simply based on market movements and does not predict or report potential pricing adjustments by particular lenders.

Copyright © 2010 National Home Loan Advocates LLC

The Clock is Ticking...
Extended and Expanded Tax Credit Expires 4/30/10

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts as huge tax credits are about to expire. Here are important details for you to know:

Tax Credit for First-Time Homebuyers (FTHBs)
FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners
The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What Are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What's So Great About a "Tax Credit"?
The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps
The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

It's also important to note another upcoming deadline as the Federal Reserve winds down a program that has been keeping home loan rates artificially low. The fact is that the lowest rates of 2009 were driven down to their attractive levels because of the Fed's Mortgage Backed Securities (MBS) purchase program, which the Fed once again emphasized in its January 27, 2010 Rate and Policy Statement will end on March 31, 2010. As the Fed's program winds down and ends, rates could rise over time since MBS will have less support from the Fed.

If you have any questions regarding the tax credit, pick up the phone and call me. I'm here to help you take advantage of one of the greatest opportunities homebuyers may ever have.

Sincerely,

Karl Peidl
Pleasant Valley Home Mortgage Corp.
856-252-1224
kpeidl@pvhmconline.com