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SEC proposes comprehensive reforms to bring increased transparency to credit rating process

National Mortgage Professional
Jun 15, 2008

The Mortgage Press Gauge: June 2008 Part IIMortgagePress.comindustry, statistics, market trends, FOMC, retail sales, wholesale prices, consumer confidence Provided exclusively to The Mortgage Press by David Beadle, president of BestInfo Inc., the BestRates cell, pager and e-mail rate alert service for mortgage industry subscribers. Send your inquiry to [email protected] for full details on a free two-week trial subscription. A reading of "1" has the lowest impact on rates, while "10" has the highest. Although carefully verified, data are not guaranteed as to accuracy or completeness. BestInfo Inc. cannot be held responsible for any direct or incidental loss or liability incurred by applying any of the information or opinions in this feature. June 17 May Producer Prices Rate Impact: 8 To demonstrate the amazing disconnect between the government's inflation statistics and what's truly going on, one need look no further than local gasoline station signage. At the end of May, the national-average price of a gallon of regular was $3.96. That was up from $3.61 a month earlier for a nearly 10 percent rise. And the price at Memorial Day 2007 was $3.19, which translates into a roughly 20 percent annual gasoline inflation rate. Yet, the federal entity which presents the numbers consistently paints a benign month-to-month and year-over-year picture. Whats worse, the financial markets have been buying the story whether it pertains to airline prices or other textbook examples of soaring inflation with the only people who seem to know what's going on being 300 million American consumers. Even babies are now reportedly complaining about the latest announced hike in diaper prices. We'll see if this report is any more realistic than the previous ones. June 25 May New Home Sales Rate Impact: 5 The news from the housing front is no longer causing much of a tizzy in the bond or stock markets. That's because the real-estate industry is considered to be in a long-term slump. Therefore, bad news is seen as "baked in the cake" and good news is seen as transient. For example, mortgage rates jumped higher in late May and analysts immediately predicted any recovery in the housing market would be delayed as a direct result. But the April new home sales results did show a glimmer of hope. The annualized pace came in at 526,000 units, which was an improvement over downwardly revised March figures. The inventory of unsold homes fell to 10 months from 11 months. And the median price moved higher by 1.5 percent after a long series of declines. A separate weekly report showed that while applications for refinance transactions had fallen, purchase mortgage activity had held steady. June 25 FOMC Meeting Results Rate Impact: 10 One piece of new information which is likely to move the financial markets is the one which arrives from the Federal Open Market Committee at 2:15 p.m. Eastern Time. This is when we'll find out if the Fed is ready to change its bias from one which favors growth over inflation fighting to one where upward price pressures are acknowledged to be the new "front burner" issue. Some Federal Reserve officials have said in recent speeches the lowering of the Fed Funds Rate from 5.25 percent last September to two percent in March contributed to the dramatic rise in commodity prices and must be stopped even if the economy doesnt bounce back immediately. The markets have now built-in an expectation of a Fed hike by the end of the year. Today's communiqué will determine whether or not traders move up their forecast of when the Fed will take action to hike the short-term lending rates which it controls. June 27 May Personal Spending Rate Impact: 7 The stimulus checks from Congress are making their way into the economy and it will be interesting to see if they have any impact on GDP growth during the current second quarter. This was not the case during April because the government was busy grabbing cash from taxpayer wallets for its own uses. But with some of the money having returned in May, it might have helped ease the burden of higher gasoline and food prices. But the government's hopes a vast majority of people would use the cash to purchase services from American companies or goods from American manufacturers may not come to pass. Instead, many analysts believe the funds will be spent on household necessities or placed into piggybanks, thereby calling into question the matter of if it made sense for the politicians to borrow $150 billion from foreign governments and others at rising interest rates to improve their flagging image before they began their run for re-election in November.
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