From the desk of: The Janet Jones Team
Your Bank of America Sr. Mortgage Loan Officer
NMLS ID: 432210

At Bank of America, we are committed to helping you manage and grow your business. We are pleased to bring you information each month that we hope you find valuable.

This month, we feature information about the Mortgage Forgiveness Debt Relief Act, and take a look at valuable information shared at the Bank of America® Opportunity Pavilion during the REALTORS® Conference & Expo in Orlando in November. You will also learn how mortgage loan service releases may affect short sales in process and how to make informed choices in smart technology.

Mortgage Forgiveness Debt Relief Act Extended through 2013

At Bank of America, we are dedicated to providing you with valuable information and insight regarding the changing mortgage environment.

Early last month, Congress extended certain provisions of the Mortgage Forgiveness Debt Relief Act through the American Taxpayer Relief Act of 2012 until December 31, 2013. This act benefits qualified homeowners who may have otherwise owed taxes on forgiven debt resulting from a short sale, reduced loan principal or foreclosure – which without the extension, would likely have been taxed as income.

For more information about the American Taxpayer Relief Act of 2012, please advise your clients to consult with a tax advisor.

I hope you enjoy this month’s issue.

What real estate professionals are saying

As a real estate professional, your experiences and perspective on a wide variety of industry topics are important and valued. That is why we encourage you to answer the frequently updated poll questions and review poll results on the home page of the Agent Resource Center.

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Learn Connect ShareTM at the REALTORS®
Conference & Expo in Orlando

Bank of America was pleased to participate in the 2012 REALTORS® Conference & Expo. At the Bank of America® Opportunity Pavilion we provided real estate professionals with ways to learn, connect and share through presentations, panel discussions, and meetings with product specialists and local industry experts including:

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Service release may impact short sales in process

Bank of America services mortgage loans for hundreds of investors. As a part
of normal servicing, investors may decide to release or transfer servicing from
Bank of America to another company.

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What you need to know about mobile technology

Aside from the benefits of going paperless, mobile technology has provided real estate professionals with more options for deepening their scope of service. Smartphones and tablets now help you make decisions faster, help you deliver more services, and help you maximize your time. Mobile devices also increase your customer service value, as more clients expect you to be constantly accessible and highly responsive.

Last Week in Review

Table Source: Mortgage Success Source

Last week, the Federal Housing Finance Agency (FHFA) reported that home prices rose by 0.6% in November from October, and that they are up 5.6% from the calendar year that ended in November. These numbers are based on data received from Fannie Mae or Freddie Mac mortgages. In addition, both Existing Sales and New Home Sales for December, though below estimates, were strong numbers for 2012.

But the housing market wasn’t the only area where we saw positive economic data last week. There was good economic news out of Germany, plus several companies here reported strong earnings, including Procter & Gamble and Honeywell. In addition, weekly Initial Jobless Claims dropped by 5,000 to 330,000 in the latest survey. This is the lowest level since January of 2008. It is important to note that estimates were used for three states, including Virginia and California, so the numbers could be distorted.

How were home loan rates impacted? The mix of good economic news last week caused investors to move their money out of bonds, which are considered safer investments, and into stocks in the hopes of taking advantage of gains. And since home loan rates are tied to mortgage bonds, as bonds worsened last week, so did home loan rates. But rates remain close to historic lows, and now is still a great time to consider a home purchase or refinance.

Forecast for the week

A slate of economic reports is ahead, with several key data points that could move the markets.
Thursday brings several key economic reports, including Initial Jobless Claims, Chicago PMI, Personal Income and Spending, and the inflation-reading Core Personal Consumption Expenditure, the Fed’s favorite measure of inflation.
We’ll get a sense of how the consumer is feeling with the Consumer Sentiment Index on Friday.
Rounding out the week, the all-important Non-Farm Payrolls will be reported along with the Unemployment Rate. Also on Friday, the ISM Manufacturing Index will be delivered.
In addition, the Federal Reserve will meet for its two-day meeting of the Federal Open Market Committee, with the monetary policy statement released at 2:15pm ET today. The statement will be dissected for any hints on the current purchase programs of mortgage backed and Treasury securities. If there is any talk of halting the programs this year, it could lead to lower bond prices and a push higher in home loan rates.

Remember: Weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates improve, while strong economic news normally has the opposite result.

Last Week in Review

Last week, there were more signs that the housing sector continues to improve. Read on for details.

Table Source: Mortgage Success Source

Housing starts surged by 12.1% in December to 954,000 units on an annualized basis. This was above expectations and the highest level since June 2008. Building permits, a sign of future construction, also increased, coming in slightly higher than the November reading.

In addition, research firm CoreLogic reported that home prices rose by 7.4% in the calendar year that ended in November. This figure, which includes the sales of distressed properties, was the largest year-over-year increase since 2006 and it has been positive for nine straight months. Also, the Obama Administration’s December Housing Report showed that home prices had solid annual gains for the calendar year that ended in October, with the Federal Housing Finance Agency (FHFA) and Case-Shiller housing price indices up 5.6% percent and 4.3%, respectively, from one year ago.

It’s also important to note that RealtyTrac’s year-end 2012 foreclosure report showed that foreclosure activity increased in 25 states. However, median home prices also increased in 25 states, which pulled 1.6 million homeowners out of negative equity in 2012.

What’s the takeaway? Goldman Sachs has reported that the fundamentals are pointing towards larger gains for housing prices in the next couple of years. And with home loan rates remaining near record lows, great opportunities are available.

As always, one thing that’s important to monitor is inflation. Since inflation reduces the value of fixed investments, inflation has negative effects on bonds, and, therefore, on home loan rates, which are tied to mortgage bonds.However, last week’s wholesale-measuring Producer Price Index and the Consumer Price Index showed that inflation remains tame, meaning inflation is not a factor at this time.

It continues to be a great time to consider a home purchase or refinance, as home loan rates remain near historic lows.

While there was little economic report news during the first full week of January, the markets still had plenty of other news to digest. Read on for details.

Table Source: Mortgage Success Source

The only economic report to note last week was Thursday’s Weekly Initial Jobless Claims Report. Initial Jobless Claims rose by 4,000 in the latest week to 371,000. This was above expectations and the highest number in a month. While the recently released Jobs Report for December showed that the labor market is continuing to improve, though at a slow pace, it’s also important that we see these weekly initial jobless claims numbers continue to decline.

Also in the news last week, Fannie Mae reported that its national housing survey showed that 43% of those consumers polled feel that home prices will rise in 2013. However, 20% said that their financial situations will deteriorate this year due to the debt ceiling worries and the rise in taxes. And in news overseas, European Central Bank President Mario Draghi said that he sees further risks to the region’s economic outlook.

What does this mean for home loan rates? Stocks did reach five-year highs last week, at the expense of bonds and home loan rates, after the fiscal cliff deal was reached and investors felt that the pace of economic growth would increase due to the deal passing. However, uncertainty both here at home (due to the debt ceiling worries) and overseas (due to the continuing debt crisis in Europe) means that investors will likely continue to see our bond market as a safe haven for their money. This could ultimately benefit bonds, and home loan rates, which are tied to mortgage bonds, in the process.

Last week the Fed’s words and actions were both important, the Federal Open Market Committee (FOMC) met for its final regularly-scheduled meeting of 2012. Read on to learn what the Fed said, and what happened to home loan rates.

Table Source: Mortgage Success Source

As expected, the Fed announced a fourth round of bond buying (known as Quantitative Easing or QE4) in an effort to continue to spur on economic growth and keep home loan rates low. What took markets by surprise was the Fed’s decision to tie the Fed Funds Rate (the rate banks charge each other for lending money overnight) to the unemployment rate. Instead of staying with their plan of maintaining low rates until “at least mid-2015,” now the Fed will hold the Fed Funds Rate steady as “long as the unemployment rate remains above 6.5%.”

One of the biggest takeaways from this decision is that the Fed may be more tolerant of a rise in inflation. Lower unemployment would mean that the economy is gaining some momentum, thanks in part to the stimulus programs, like QE3 that are currently underway, and inflation that could easily trend higher in an improving economy. Remember, inflation has a negative effect on bonds, and therefore, on home loan rates. Home loan rates are tied to mortgage bonds and inflation can reduce the value of fixed investments like bonds.

As of now, however, inflation at the wholesale and consumer levels remains moderate. The wholesale-measuring Producer Price Index (PPI) fell by 0.8% in November, while the Consumer Price Index (CPI) fell by 0.3%, which was below expectations. However, when inflation manifests, it tends to do so quickly. This is a key area to monitor in the weeks and months ahead.

What does this mean for home loan rates? If inflation does start to heat up, bonds and home loan rates could be negatively impacted. However, the continued uncertainty in the markets, both here with the ongoing fiscal cliff situation and overseas with the debt crisis in Europe, means that investors will likely continue to see our bond market as a safe haven for their money. This could benefit bonds and home loan rates in the process.

Home loan rates still remain near historic lows, making this a great time to consider a home purchase or refinance.

The unemployment rate, also a major headline, dropped from 8.3% to 8.1%. How did this happen with the weaker than expected headline job creations reading? The civilian labor force shrank by nearly 400,000. The reduction in the labor force is clearly seen in the Labor Force Participation Rate (LFPR), which reached its lowest level since early 1981. This is significant because if less people are “participating” or have a job, this makes it more difficult to pay down our debt.

What does all of this mean for home loan rates?

There is a very real possibility that the Fed will announce further stimulus measures (known as Quantitative Easing or QE3) at the Fed Meeting on Thursday, September 13th at 12:30pm ET. It’s important to note that once an official announcement of QE3 is made, bonds and home loan rates could suffer as stocks would likely rally. However, the weak economic data here and the continued problems in Europe mean that investors will likely still see our bonds as a safe haven for their money. And as home loan rates are tied to mortgage bonds, this would help home loan rates in the process. We saw some evidence of this last week, as bonds and home loan rates rallied Friday after the weaker than expected Jobs Report was released.

The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows.

Last week in review (July 30- August 3, 2012)

Last week, several important economic reports were released. Read on to find out what they said — and what they mean for home loan rates.

Table Source: Mortgage Success Source

Last Friday, the Labor Department reported that 163,000 total jobs were created in July with 172,000 private gains offsetting modest government sector job losses. Also, Consumer Confidence jumped to 65.9 in July, the best reading since April and above expectations. The July increase stopped a 4-month streak of declining readings. In addition, the Personal Consumption and Expenditures Index (PCE), the Fed’s favorite indicator of inflation, also came in without major concerns.
There was some negative news within the Jobs Report. The Unemployment Rate ticked up to 8.3% and downward revisions to the prior two months erased 6,000 jobs from what was previously reported. Also, the Labor Force Participation Rate decreased, and there was no pickup in hours worked.

What do these reports mean for our economy, and for home loan rates? Perhaps the bigger question to ask is: Is any of this news good enough to keep the Fed from doing another round of bond buying (known as Quantitative Easing or QE3)? After last week’s meeting of the Federal Open Market Committee (FOMC), the Fed said that economic activity decelerated somewhat over the first half of this year, but they also stopped short of announcing plans for additional stimulus at this time.

Remember that if the Fed opts for more stimulus, the goal of QE3 will be to promote a stronger economic recovery. And once an official announcement is made, bonds (and therefore home loan rates, which are tied to mortgage bonds) could suffer as stocks would likely rally. However, there are many uncertainties on the horizon which should also support bonds and home loan rates, including the ongoing turmoil in Europe.

The bottom line is that home loan rates remain near historic lows and now is a great time to consider a home purchase or refinance.

Last week in review (July 9-13, 2012)

When it comes to our economy, “slowing” seems to be the operative word lately. Read on for details and what they mean for home loan rates.

Table Source: Mortgage Success Source

Last week there was more evidence of a slowing U.S. economy, as the National Federation of Independent Businesses stated that its small business optimism index saw its largest one-month drop in two years, falling 3 points to 91.4. The 91.4 number is the lowest level since October. Consumer Sentiment for July also came in at its lowest level this year.

Some very well respected economists and thinkers believe we are either in a recession already or about to enter one. It is difficult to argue with this notion as the labor market and manufacturing numbers have come in over recent months, with those trends likely to continue lower in the face of so much uncertainty here and abroad. In addition, corporate earnings are starting to come out and companies are reporting numbers below already lowered guidance and citing uncertainty into the future.

What does all of this mean for home loan rates? Recessions are deflationary (i.e. consumer prices moving lower) and deflation is good for bonds as the fixed interest payment to the end investor goes further if consumer prices are moving lower. This means deflation is also good for home loan rates, as rates are tied to mortgage bonds.

If the economic data continues to be weak, the Fed will likely do another round of bond buying, known as Quantitative Easing or QE3 – and in fact, the Fed Minutes for the June Meeting showed that a couple of members had an appetite for more easing, but there was no consensus. Remember that additional hints of QE3 could initially push stock prices higher, shifting cash out of the bond trade and hurting home loan rates in the process.

The bottom line is that now continues to be a great time to purchase or refinance a home, as home loan rates continue to reach historic lows.

Last week in review (July 2-6, 2012)

The Labor Department’s Jobs Report for June was not promising. Read on for details and what it means for home loan rates.

Last Friday, the Bureau of Labor Statistics reported just 80,000 jobs created in June, with 84,000 private job gains offsetting 4,000 government job losses. Revisions to previously reported April and May numbers resulted in an additional 1,000 jobs lost. For the first quarter of 2012, the US economy added an average of 225,000 jobs. But in the second quarter, the economy averaged just 75,000 job creations.

In addition, the Unemployment Rate held steady at 8.2% and the Labor Force Participation Rate (LFPR) was unchanged at 63.8, remaining at a 31-year low. This is a real headwind to the US economy as we need more people “participating” or working relative to those who are not. And that is simply not going to happen as long as the US economy continues to struggle with 2% GDP growth.

The real question to ask is: Was the report negative enough to guarantee another round of bond buying, known as Quantitative Easing or QE3? It’s important to note that additional hints of QE3 could initially push stock prices higher, shifting cash out of the bond trade and hurting home loan rates (which are tied to mortgage bonds) in the process. This is an important news story to watch in the weeks ahead.

The bottom line is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home.