European Concerns Increase Roger Odoardi Increased concerns about Europe helped mortgage rates improve this week, although the impact of the recently passed extension to the payroll tax reduction is beginning to push up mortgage rates for certain loans (discussed below). The news from Europe was mostly negative this week. Economic growth in Germany was slower than expected. Negotiations on restructuring Greek debt did not progress as planned, increasing the risk of default. S&P is downgrading the debt of several European countries, including France. Finally, the European Central Bank (ECB) provided no relief, as it gave no indication that it would increase the level of aid available to troubled countries. As a result, investors shifted funds to relatively safer investments, including US mortgage-backed securities (MBS), which helped mortgage rates move lower. The recently passed extension to the temporary payroll tax reduction contained a lightly publicized revenue raising provision to increase the guarantee fees charged on Fannie Mae and Freddie Mac loans. This fee results in higher rates for borrowers, and mortgage rates for loans not expected to close within the next month or so have begun to reflect this coming increase in guarantee fees. Also Notable: • Consumer Sentiment jumped to the highest level since May • Retail Sales ex-autos posted its first monthly decline since May 2010 • The Fed’s Beige Book reported that economic activity expanded at a “modest to moderate” pace • The European Central Bank (ECB) made no change in rates Average 30 yr fixed rate: Last week: 0.00% This week: -0.05% Stocks (weekly): Dow: 12,300 -100NASDAQ: 2,700 +25 Week Ahead The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Industrial Production, an important indicator of economic growth, will come out on Wednesday. Housing Starts will be released on Thursday, and Existing Home Sales will come out on Friday. Philly Fed and Empire State will round out the schedule. Mortgage markets will be closed on Monday in observance of MLK Day. To learn more about news impacting interest rates and mortgage markets, go to www.mbsquoteline.comTo learn more about the newsletter, please call 800-627-1077All material Copyright © Ress No. 1, LTD and may not be reproduced without permission. Roger Odoardi Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.