Last Week in Review

"WISH ME LUCK!" Last words spoken by Niagara Falls barrel rider...But luck hasn't been on the side of home loan rates, as Mortgage Bonds tipped over the edge on Thursday, adding to the brutal cascade lower which began on May 8th, and causing home loan rates to move significantly higher along the way. Last week the damage was particularly dramatic, as Thursday brought the largest single-day worsening in Bonds and home loan rates seen in three years. Although Friday brought a small amount of recovery, home loan rates still increased by .25% across the board overall.

So what happened last week? There was a sell-off in Mortgage Bonds on the news of Central Bank rate hikes in other countries, as these hikes make other global investments more attractive than our US Bonds for those seeking higher yields. The reduced demand for Mortgage Bonds causes prices to fall and home loan rates to rise. But it was not the news of other Central Banks hiking rates that caused the extreme reaction - this event was simply the proverbial "straw that broke the camels back", as Bonds were primed for a move lower after blowing through another technical "floor of support". Keep reading to learn how important these floors of support are to home loan rates...

AND AS IF THE ACTION IN THE MARKET THIS WEEK WASN'T THRILLING ENOUGH, THIS WEEK'S MORTGAGE MARKET VIEW SPINS A VERY ALARMING TALE, DIRECTLY FROM THE MOUTH OF A FORMER HOME BURGLAR...READ THIS WEEK'S VIEW TO LEARN HOW TO PROTECT YOURSELF AND YOUR HOME.

Forecast for the Week

So will the volatility of last week spill over into the coming week? Strap yourself in and keep your hands on the safety bar...heck, you may even want to put on your crash helmet - the week ahead promises to be a very interesting ride, with several influential economic reports hitting the wires. Remember that positive economic news or the scent of inflation can cause Bond prices and home loan rates to worsen - and Traders will be paying special attention to Retail Sales numbers, as well as getting a look at inflation for both consumers and producers, with the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI).

Bonds seem to be on a very slippery slope lower, so if the news is hot, what will keep Bond prices from continuing their nauseating plunge and causing home loan rates to worsen further? Technical "floors of support" usually provide a slowdown mechanism and prevent freefalls lower - but ever since the powerful 200-day Moving Average was broken in early May, floor after floor has been demolished as Bonds scream lower and home loan rates increase.

Bottom line: If Retail Sales arrive showing that the American consumer is alive and well and spending merrily away - or if inflation is riding higher than anticipated - it's very likely that Bonds will crash through yet another technical floor of support and cause home loan rates to rise.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Jun 08, 2007)

The Mortgage Market View...

NOT TO BE AN ALARMIST...

But did you know that home security systems may actually attract burglars? Shocking, but true.

Each year, Americans spend more than $18 Billion on professional alarm systems. Unfortunately, according to security consultant Walter Shaw, some of those systems may actually be attracting burglars. Shaw, a former burglar, contends that when thieves see a house with a security system sign on it, they know it typically means that the house actually has something of value inside...which makes it a better target for them to consider breaking into.

In addition, Shaw notes that determined thieves can actually use those security system signs to their advantage. First, if the sign displays the name of the alarm system company, a thief may be able to use that information to research the system and figure out how to bypass it. Second, thieves may decide to test the system. By tripping the alarm on purpose, burglars can gain a better idea of how long they'll have to get in and get out before the police arrive!

So do alarm systems help at all?

The answer, thankfully, is YES! A recent study indicated that alarm systems are still the single most effective way to reduce the risk of burglary. Interestingly, some preventive measures such as deadbolts do little to dissuade burglars, since these measures cannot be seen until a burglar has already chosen a house...at which point they tend to pursue it and find a way in, regardless of the deadbolts.

Here's how to best protect your home.

First, make sure any alarm signs posted on or around your home are generic - without the name of the security company. In addition, you might want to consider adding security cameras-or even fake cameras-around your entrances and windows. No thief wants to be caught on tape...even if they're wearing a mask. Also, make sure that bushes and branches are cleared away from windows and entrances.

For more help with your house's security, you should seek advice from a professional security provider. Be sure to tell them about your specific concerns and ask how to best address them.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of June 11 - June 15

Last Week in Review

"BLUE MOON...YOU SAW ME STANDING ALONE..." The Marcels Even a wish made on last week's semi-rare "Blue Moon" - the second full moon in one month - couldn't help Bonds shake off their own blues, worsening again for the fourth week in a row and causing home loan rates to rise by about .125%.

Why are Bonds experiencing so little love? Stronger than expected economic news driving investor money into Stocks and out of Bonds, and renewed concerns from the Fed about inflation. Let's unpack the major headlines.

Last week brought the Fed "Meeting Minutes", which give the behind-the-scenes talk amongst the Fed members from their last meeting. The commentary revealed that the Fed believes inflation, the arch enemy of Bonds and home loan rates, to still be "uncomfortably high". And even though last weeks Core Personal Consumption Expenditure report showed year-over-year inflation at 2%, finally within the Feds target zone of 1 - 2%, it just wasn't enough to help Bonds or home loan rates improve.

Additionally, the job market remains hot, as evidenced by the release of May's Jobs Report, showing stronger than expected job creations of 157,000. A tight labor market can lead to more inflation, so for one more week, Bonds and home loan rates remained out of luck, and out of love.

AND HAVE YOU FALLEN OUT OF LOVE WITH YOUR CELL PHONE PROVIDER...YET YOU'RE STUCK IN A "TIL DEATH DO WE PART" CONTRACT? NOW THERE'S AN ANSWER TO YOUR CELL PHONE CONTRACT BLUES - READ THIS WEEK'S MORTGAGE MARKET VIEW.

Forecast for the Week

After last week's star-studded line up of economic headlines, the week ahead will be a big change of pace, with a super slim economic calendar containing few scheduled releases to impact market movement. But in the absence of economic report activity, Traders turn greater attention to other factors, such as technical signals and other markets like Stocks.

Stocks have been on a blazing path higher, so investors have been pulling money from Bonds and moving them into Stocks to "get on the ride". And think about it - anytime the demand for something decreases, the price gets lower. (Think 8-track tapes and Walkmans.) So as the demand for Bonds gets lower in favor of Stocks, which are presently providing a much juicier rate of return, the price of unpopular Bonds gets lower and lower, meaning home loan rates are worsening.

So Stocks aren't helping matters much in terms of home loan rates - and technical factors really aren't running in favor of Bonds either. The chart below shows how Bond prices have been on an ugly downward sloping trend since May 8th. Again, this means that home loan rates have been moving higher.

What's ahead? Unfortunately, very likely more of the same...meaning home loan rates will continue to move higher, at least until some catalyst arrives to stop the ugly worsening trend.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Jun 01, 2007)

The Mortgage Market View...

STUCK IN THE MIDDLE WITH YOU...

Those infamous cell phone contracts can make anyone feel like they are stuck for life, caught in a nasty web of legal jargon with no way out. And with many service providers offering tasty incentives coupled with better than ever low price calling plans, it is no wonder that many people want to jump ship from one provider and start sailing with a new one. But with pricey early termination fees that can easily be up to $250 or more, customers are virtually held hostage, locked up in contracts that sometimes last for years.

But now - there may be a solution that sets you free!

Rather than waiting for a contract to expire, there's a new alternative that allows cell phone customers to avoid the early termination fee and keep their cell phone numbers. Here's how it works.

You can actually sell the balance of your cell phone contract to someone else who wishes to take it over...and more people are opting to do this every single day. As the seller, you get out of your contract with no termination fees and are free to move on. The buyer of your contract gets a short term cell phone plan with no activation fee! In some cases, the seller sweetens the pot further by throwing in their existing phone for free, or even offering a cash incentive to the buyer.

Simply logon to either http://www.celltradeusa.com/ or http://www.cellswapper.com/, enter all of the information about the contract you want to get out of, then simply wait for someone to jump on the deal and offer to take over your contract. Once someone shows interest, the service provider is contacted and the buyer needs to obtain normal credit approval to take over the plan. As long as the buyer checks out, the service provider will make the change. The cost to the seller for this service ranges from $0 - $19.99 but in comparison to an early termination fee, it's pretty minimal.

In some cases, cell phone service providers may amend your contract if you can prove that a life change has happened that no longer makes their service usable, such as a move to an area that is not covered within their network. But if you just want out...try selling your contract, and be set free!

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of June 04 - June 08

JUNE IS HERE, AND WITH IT BEGINS THE SUMMER VACATION SEASON. But before you embark on the great American vacation, you'll want to plan accordingly.

For example, if your vacation plans include a roller coaster or Ferris Wheel this summer, you should get the scoop on your favorite amusement park-including directions and safety info. And, to make sure the memories last longer than the bills you rack up, read the tips below on using your credit card.

As always, please feel free to forward this issue to friends, family members or coworkers - and do call or email if you need any personal assistance at this time!

Each year, approximately 300 million people visit amusement parks across the country. The rides can be a lot of fun... but before you jump on that roller coaster, Ferris Wheel, or the famous tea cup ride, you may want to jump on the web first.

With just a few clicks of the mouse you can find out everything you want-and don't want-to know about popular theme parks in the United States, Canada, Europe, Asia, and Australia, simply by visiting http://www.themeparkinsider.com/. Once on the site, hit the "Safety Data" link and view a complete list of verified accident reports, reports awaiting verification, and learn tips on how to keep you and your family safe on theme park rides.

Additionally, click on the "Browse Parks" link and review the ratings and reviews of popular theme and amusement parks, or browse the top ten favorite parks, best attractions, best roller coasters, and even the "most disliked" attractions, so you don't get stuck wasting your time waiting in line for a bad ride.

You can even look up your favorite theme or amusement park and learn the history, get directions, find out the best time to visit, where to purchase tickets, review safety reports specific to the park, and view the list of attractions and their ratings. You can also research dining options, shop hotels, and review featured articles like "How to Save Money with Theme Park Deals and Discounts."

Summer is short, so do your research now and enjoy the ride!

As you embark on your family vacation this summer, you may want to consider how you'll pay for your trip. Most families use a combination of cash and credit cards to finance the fun. But before you swipe your card, make sure you understand the terms and conditions.

Credit card companies do a great job at disclosing all of their terms and conditions...but do so in an exceptionally hard to read font and verbiage, designed to dissuade you from really reading the infamous "fine print." But failing to understand the terms can be costly.

Most people know that when your bill arrives, it needs to be paid on time or you'll be hit with a hefty late fee-but many don't know that paying late usually entitles the credit card company to raise your rate immediately and significantly. And worse yet, did you know that paying late on one of your credit cards also entitles all your other credit card companies to raise the rates you are paying them as well? You bet-it's called the "Universal Default Clause," and it basically means that if you are late on one credit card account, all other credit card companies that you have accounts with can increase the interest rate too, even if their accounts have been paid completely on time.

But the plot thickens further-this goes beyond late payments on credit cards alone.

If one of your credit card companies has the Universal Default Clause noted in their disclosure-and most of them do-this clause states that they have the right to penalize a consumer with an increased interest rate if a late payment is reported to ANY other creditor, including utilities, car loans, and home loans. Better believe that credit card companies with this clause sit back and wait for the opportunity to increase the interest rate... and continually monitor their customer's credit reports, just waiting for the opportunity to do so.

And just when you thought it couldn't get any worse...

It's not just late payments that trigger the Universal Default Clause; interest rates can be increased if a consumer exceeds a credit limit, bounces a check, or applies for additional credit. All of these signs may be read by the credit card company that a consumer is "high risk." The penalty? You guessed it-a higher interest rate.

Further, if an offer seems too good to be true, it probably is. This popular phrase rings true for many consumers that sign up for zero percent interest offers. Although these offers sound great and every consumer goes in with the best intentions of paying the balance in full before the zero percent interest term expires, the vast majority of people do not pay off the bill before the offer ends. And what consumers do not realize is if the account is not paid in full, the creditor does not start charging interest from the date the deal expires, the creditor goes back to the day the purchase was made and charges interest on the balance for the entire period.

Or, back to the Universal Default Clause, if you are late on another credit card payment during the introductory time period with the zero percent rate offer-the card issuer of that sweet deal could prematurely break it off and force a steamed up interest rate, retroactively charged back to the original date of purchase. That smoldering rate could mean paying double or even triple for the purchased merchandise.

Try your best to only charge what you can afford to pay off in full, on a monthly basis. Beyond being just good advice, here's another little known credit card fact that could cost you.

If you charge and then pay the account in full, there is no interest due. But if you charge and choose to only pay half of the bill when it arrives, guess what: you get charged interest not just on the remaining balance, but for the entire charged balance, regardless of your paying half the bill in full. If the bill is not paid in full the following month, this game continues until the account is paid in full.

So although the fine print can be a real snoozer to read, taking the time to become familiar with credit card terms and conditions can save you some serious dollars.

Review your current credit card terms and conditions and take the time to find a credit card company that truly matches your spending habits and needs. You will save yourself a few sleepless nights-and more importantly, save yourself a lot of money too!

HEY SKINNY! Last week, Steroid-pumped Stocks kicked sand in the face of the 97-pound weakling Bond market, and home loan rates worsened by about .125% across the board. What happened?

Here's the story - money invested out in the financial markets generally flows back and forth between Stocks and Bonds. This means that when Stocks are doing well, money is flowing out of Bonds as investors move their "safe" holdings into what they hope are winning positions in the Stock market. On the other hand, when the Stock market takes a turn for the worse, money flows right back out of Stocks and right back over into "safe haven" Bonds. This happens over and over, and is true on a large and small scale; from individual investors on up to massive institutional investors...the mindset is exactly the same.

As the Stock market has rocketed higher in recent days, investors want to get in on the action, and that money has to come from somewhere...and that's right, it's coming from Bonds. And when money is pulled out of Bonds, it means that Bond prices worsen, and home loan rates move higher like they did last week.

What should have helped Bonds was a friendly Consumer Price Index report, showing that inflation appears to be moderating. Inflation is the arch-enemy of Bonds, which deliver an investor a fixed return - the value of which is eroded by inflation. But just like the 97-pound weaklings wimpy friend at the beach, the good news on inflation wasn't strong enough to help Bonds or home loan rates regain their legs.

SPEAKING OF THE BEACH...EVER SEE THOSE DUDES GOING AROUND WITH METAL DETECTORS, AND WONDER JUST WHAT THEY'RE UP TO? MIGHT BE SEEKING OLD WAR RELICS, OR PERHAPS A VALUABLE COIN - BUT YOU WON'T NEED A MACHINE TO FIND A NEW COIN THAT'S WORTH ROUGHLY 50 TIMES IT'S FACE VALUE DUE TO A MINT ERROR. IT COULD BE IN YOUR POCKET RIGHT NOW, SO DON'T MISS THIS WEEK'S MORTGAGE MARKET VIEW.

What's in store for the week ahead? First, a short - but relevant - history lesson. World War I was sometimes called the "War of the Trenches", because of the unique way that ground battles were fought. A long trench was dug by each opposing force, and they would fight between the two trenches, using the trench itself for cover as needed. Whichever side won that particular battle would advance forward, taking over their opponent's trench and proceeding to fight forward. Now - look at the chart below, and imagine you are in a hot air balloon, looking down over a WWI battlefield. C'mon, use your imagination.

You can see that the 200-day Moving Average has been a very tough "trench" held firmly by the Bond Bulls, who have kept Bond prices above this level for the past nine months running and subsequently, kept home loan rates low. But just this week, the Bond Bears have finally penetrated and defeated this tough trench. And as Bond prices have fallen, home loan rates have risen. And in the past, this particular trench - the 200-day Moving Average - has been a real tough one to beat. In fact, last time Bond prices fell below this level, it took an eighteen month battle to win the trench back, and help home loan rates improve!

This means that the overall trend for home loan rates doesn't look too positive in the coming months, unless some very Bond-friendly news makes its way to the front lines. And with a thin economic calendar in the week ahead - don't expect any significant improvements in the near term.

HAIL TO THE CHEF!

Oops...meant to say "Chief!" Errors are common, but generally not for the US Mint. Because they rarely make a mistake, their recent mishap is causing the value of some newly minted - yet flawed - coins to skyrocket.

The United States is honoring our nations Presidents by issuing Dollar coins, which feature their images. And as a side bonus, the US also saves money, because coins stay in circulation longer than paper currency - yet it remains to be seen if we will adapt to clunky coins instead of paper in our pockets. The new coins will feature four different Presidents each year, appearing in the order in which they served, beginning in 2007 with Washington, Adams, Jefferson, and Madison. The Dollar coins will be unique in design with each having the name and likeness of the President, the term of office, and a number indicating the order in which the President served. Additionally, the standard inscriptions traditionally found on the face of coins have been moved to the edge. The inscriptions "E Pluribus Unum (out of many, one)", "In God We Trust", the year of minting, and the mint mark have all been moved to the edge of the coin.

And with any big change to design...there is always room for error. Sure enough, some of these new coins will quickly come off the market, because the US Mint made a mistake. The value of these rare coins is now up 5000%, and still climbing.

Here's what happened. The U. S. Mint placed a significant, but undisclosed, amount of new dollar coins into circulation without the inscriptions around the edge. These $1 coins are now worth $50 a piece to collectors! That's right, fifty times the actual face value. Obviously, something went wrong during the six-step process to allow this to happen. Here's the procedure:

Blanking - The U.S. Mint buys strips of metal rolled in a coil that are about 13 inches wide and 1,500 feet long. The coil is fed through a blanking press which punches out round disks called blanks.

Annealing, Washing and Drying - The blanks are then heated in an annealing furnace to soften them and then run through a washer and dryer.

Upsetting - The blanks go through an upsetting mill to raise the edges of the coins.

Striking - Coins go to the coining press and they are stamped with the designs and inscriptions.

Inspecting - Press operators use magnifying glasses to spot-check struck coins.

Counting and Bagging - Coins are dropped into bags, sealed shut, and held in a vault until shipped to the Federal Reserve.

Nabbing one of these could turn a tidy profit for you with an even greater price tag in the future. But be careful - The US Mint has issued a warning on their website that scam artists are actually grinding the rims of Presidential $1 Coins to remove the inscriptions, then marketing them as US Mint "error coins".

In Philadelphia or Denver, you can actually take a fascinating tour of a US Mint location. To learn more - or take a virtual tour - click here: Tour the US Mint

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of May 21 - May 25

"HEY KIDS, SHAKE IT LOOSE TOGETHER - THE SPOTLIGHT'S HITTING SOMETHING THAT'S BEEN KNOWN TO CHANGE THE WEATHER..." Elton John, "Benny and the Jets" And sure enough, B-B-B-Benny and the Fed held the spotlight last week, as Chairman Bernanke and his team of inflation fighters at the Fed released their latest Interest Rate Decision and Policy Statement. And the tone of the Statement did indeed change the weather for Bonds and home loan rates.

As expected, the Fed voted to leave the Fed Funds Rate holding steady at 5.25%. However, it was the tone of the Policy Statement that was not so nice for Bonds or home loan rates, which worsened a bit following the release. Why? Because the market was looking for some loving lyrics from the Fed, particularly in regards to inflation. Recent inflation and wage data has all been friendly, and the economy is slowing a bit as well. So the markets were expecting a nice ballad from the Fed about inflation being under control...but instead, the Fed said their predominant concern is that inflation will "fail to moderate as expected". While the Fed's primary mission is to be on guard against inflation, the market was hoping for a little more love on this front, and was a bit displeased with the tone of the Statement.

Retail Sales slipped lower in April, bringing the worst reading in seven months. The declines were seen in clothing, restaurants, sporting goods, cars and home products. Possible reasons? The price of gasoline is back up, and this means consumers may be forced to cut back on their buying of other retail products. Additionally, food costs are significantly higher in recent months, due to a variety of factors including crop freezes early in the year, and many corn products being diverted for use as fuel. Because they are so volatile, neither food nor energy costs show up in the important Core inflation numbers - but when it comes to a consumers actual day-to-day spending habits which will always include gas and groceries, these factors will absolutely have an impact on spending. The weak Retail Sales report was good news for Bonds, but not good enough, and home loan rates still ended slightly higher on the week overall.

BUT IF YOU'RE THINKING ABOUT SAVING A FEW BUCKS BY WASHING YOUR CAR AT HOME RATHER THAN THE LOCAL CAR WASH...THINK AGAIN, AS IT COULD COST YOU BIG IN THE LONG RUN. READ THIS WEEK'S MORTGAGE MARKET VIEW FOR THE WHOLE SCOOP.

The week ahead brings a blend of news, including a look at inflation and housing, which continue to be hot topics of late. Particularly on the heels of the Fed stating they remain concerned about inflation, Tuesday's Core Consumer Price Index will certainly garner a great deal of attention. Housing numbers have been mixed of late, but many experts are grudgingly acknowledging that maybe the housing market is not as bad as they originally predicted. Wednesday brings a look at the new construction sector, with Housing Starts and Building Permits.

The chart below shows how Bond prices have been "bouncing" up and down in a tight range, causing home loan rates to move higher and lower by about .125% with each "bounce". As Bond prices move higher, home loan rates move lower, and vice versa. So the chart indicates that Bonds appear poised for a bounce higher, with home loan rates moving lower. But first, Tuesday's inflation measuring Consumer Price Index will need to prove inflation is tame before another favorable bounce higher and help home loan rates improve.

Chances favor a mild inflation number in light if the recent economic reports, and also when compared to last years elevated reading. But if the Report reeks badly of continued consumer inflation, Bonds won't like it, and may proceed to bash right through the floor and cause home loan rates to worsen. The good news on this front is that the 200-day Moving Average is a very strong floor of support, and it would take some very Bond-unfriendly news to force prices below this floor and cause home loan rates to worsen.

"Well those cars never seem to stop coming, keep those rags and machines humming...working at the car wash..." ~ Rose Royce

With summer fast approaching, most people want to have their car looking good. Driving a nice clean car just feels good - and it can also help to preserve its appearance and resale value.

So what's the best way to clean your car? Is it better to take the car to the car wash or wash it by hand at home?

Believe it or not, an automatic car wash is not only more convenient, but it can also be much safer for your car than washing the car at home. Why? If your car is washed by hand in direct sunlight, the drops of water turn into mini magnifying glasses, which can cause the sun's rays to burn spots into the paint - and this could cost you big when going to resell the vehicle. Additionally, many use harsh household soap products which remove protective wax and leave a chalky residue on the surface. Taking this into consideration makes the $10 to $15 automatic car wash fee look pretty reasonable.

But at the car wash, there's all the "extras", which can add up fast and quickly double the cost of a quick car wash! Before you agree to the "works" package, find out what is included and decide if it is really worth the extra money to have a fresh scent sprayed in the interior, or a spray-on wax applied to the exterior.

Here are some tips: Undercarriage rust proofing and spray-on wax may be a couple of extras to pass on. Most new cars are rust proofed at the factory, and spray-on wax simply adds shine. A few to consider getting would be an undercarriage bath, a hand-applied wax, and tire dressings. An undercarriage bath could wash away crud from the winter months and prevents buildup, a hand-applied wax restores oils and provides a UV-protective film, and tire dressings remove dirt and brake dust.

And remember to always opt for a brushless car wash. Older car wash facilities may still be using brushes which tend to leave light scratches in the paint and can remove the clear coat that was applied by the factory to protect the paint. And don't ever agree to have the engine cleaned. High pressure water is used to perform the engine cleaning and can cause serious engine problems in new vehicles.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of May 14 - May 18

TIME STANDS STILL FOR NO MAN, WOMAN, OR CHILD. And neither does inflation. In fact, every year the costs associated with higher education shoot up an average of 5%. So make sure you plan ahead. The article below includes important tips to help you get started-including how your mortgage can help cover your child's college expenses.

College isn't the only thing that'll cost you in the future. Did you know that nursing homes cost about $70,000 a year? Worse yet, Medicaid doesn't kick-in until your assets are used up. If you or someone you know is planning on leaving even a modest inheritance, you'll want to read the article below!

As always, feel free to pass this newsletter along to family members, friends, and coworkers. And if you have any questions or need any assistance, please contact me anytime.

When the Beach Boys sang about school colors, they weren't exactly referring to the color GREEN! But, they may as well have been. These days, higher education is all about the green. In fact, college grads earn 75% more than those without degrees!

The problem is, college also costs a lot of green-anywhere from $13,000 per year for an in-state college to around $30,000 a year for a private college. And with the cost inflating approximately 5% annually, those numbers are on the rise.

As a parent who wants your child to attend college, what can you do? Plan early! Let's look at a tale of two parents to illustrate how important it is to get started right away.

A Tale of Two Families

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it, their kids would be off to college.

Taylor's parents are prepared. They recently sat down with a mortgage professional and learned that completely funding Taylor's four-year education at the local college would cost either $300 per month in savings or-by using the equity in their home-only $133 per month after tax. "What a relief to know it's all taken care of!" they commented to Max's parents. But Max's parents replied, "Hey, what's the rush? Look, the kids are only knee-high right now...we'll worry about this later."

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max's parents just learned that for him to attend the very same college as Taylor, it would now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor's parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow-but it's twice as much per month as Taylor's parents, who planned ahead and started earlier.

The Moral of the Story?

If you want to save for your child's college expenses, start the investment early. The money you put away today will have more time to gain interest and multiply-which means you won't have to struggle to save as much. Don't be discouraged by the amount you think you can put away. Every little bit helps. And you can even structure your mortgage so that your child's college costs are taken care of...without struggling to save huge amounts of money every month!

You should also encourage your children to save a portion of the money they receive from allowance and from side jobs such as mowing lawns or babysitting. They'll learn important lessons about planning for the future and the value of a college education.

Finally, as the college years approach, you should explore scholarships, financial aid, and federal direct aid, which is money that does not have to be repaid. Of course, when your children are young, you don't know whether they'll be star athletes or straight "A" students-so it's always best to plan ahead. If scholarship money does become available, then you'll have more than enough money in savings, due to your good planning.

By exploring your options and taking steps now, you can help make sure your child's college expenses are taken care of in the future. If you have friends or family members who are struggling to save for their children's education, be sure to share these strategies and tips with them as well.

We may laugh about our children picking our nursing home. But it might not be a joke when your kids find out nursing homes cost about $70,000 per year! Worse yet, Medicaid only pays nursing home bills after your assets are basically used up. Which means, many children and family members who are expecting even a modest inheritance, often watch the money quickly disappear.

The good news? With a little knowledge, you can act now to protect yourself and your family before it's too late.

First, Medicaid has always had a "look-back" period, where they literally look back a certain number of years at gifts made to family in particular, knowing that this may have been done so to remove assets, and therefore to qualify for Medicaid assistance earlier. The time frame used to be a "look-back" is now extended to five years.

So if nursing home care is needed within five years of giving a gift, proof may be required to show that at the time of giving the gift, the donor was in excellent health, and was not giving the gift with the express intention of transferring assets to avoid paying nursing home expenses. If the individual is unable to prove this, the asset will be counted towards a waiting period until Medicaid assistance can be received. For example, if a father gives his daughter a $50,000 gift and subsequently needs nursing home care, expected to cost $5,000 per month, the waiting period would be ten months before any Medicaid could be received...even if the gift money is long spent and gone. Worse yet, the waiting period clock used to start "ticking" at the time the gift was given-but it now starts ticking at the time Medicaid is applied for. If the father is in immediate need of medical care, this could present some very serious problems.

Next, the equity in your home will come under scrutiny...and if you have more than $500,000 equity in your home, you will be ineligible for nursing home coverage from Medicaid. States have the ability to raise the limit to $750,000-but it has been questioned why any state would make this decision, since it would result in higher Medicaid costs for the state. Since many Americans strive to pay off their home by retirement age, this could impact many people who are simply unaware of the rules.

What can you do to protect yourself and your loved ones?

Be informed and plan now. For more information, visit http://www.elderlawanswers.com/, or the Kaiser Family Foundation information site at http://www.kff.org/. New strategies may need to be developed for your retirement, including not leaving equity trapped in your home where it could work against you for retirement assistance. Many are reconsidering the wisdom of having a home paid for in full, and are planning to instead leverage the equity via a refinance into a financial plan that works for them, not against them.

Because these laws are so complex, it's always best to consult a professional to determine the best plan for your own retirement, or that of your loved ones.

TALK DERBY TO ME...If you did tune in to watch the biggest horse race of the year, you know that "Street Sense" was the lucky horse who won the "Run for the Roses", the Kentucky Derby. And the news from Wall Street was also galloping in fast and furious last week - so let's make some horse sense out of the major headlines that helped Bonds and home loan rates end up slightly improved for the week overall.

First, the Fed's favorite gauge of consumer inflation, Core Personal Consumption Expenditure Index (PCE), showed a year over year reading of 2.1%, which is very close to the Fed's target zone of 1 - 2%. With inflation moderating, the Fed might start thinking about making a cut to the Fed Funds Rate in the 2nd half of 2007. This tame read on inflation was very good news for Bonds, as the value on their fixed returns get eroded by the impact of inflation.

Then, the Jobs Report arrived, with new jobs created in April being reported at 88,000, below what most analysts expected. Additionally, revisions took 26,000 jobs away from previous months reports, the Unemployment Rate rose slightly to 4.5%, and Average Hourly Earnings were reported slightly lower than expected at 0.2%. Overall, the Job Report suggests the strong labor market is softening a touch and wage based inflation pressure is moderating - more good news for Bonds and home loan rates. Wage-based inflation comes into play when the job market is tight and therefore employers are forced to pay their employees more. This naturally results in more dollars being injected into the economy for spending - as well as the cost of doing business moving higher for employers - all of which can cause prices on goods and services to rise.

DON'T MISS THIS WEEK'S MORTGAGE MARKET VIEW, WITH TIPS ON SAVING MONEY ON HOMEOWNERS INSURANCE...QUICK, SIMPLE HITS THAT ARE "SO EASY, A CAVEMAN CAN DO IT."

Benny and the Fed will take center stage this week, as they release their Interest Rate Decision and Policy Statement on Wednesday afternoon. It is highly unlikely that the Fed will make a change to the Fed Funds Rate at the meeting, but it will be especially interesting to hear the tone of the Policy Statement in light of softer Employment Report and moderating inflation.

Speaking of inflation, Fed Chairman Ben Bernanke has to be smiling, as the latest data suggests the Fed is doing a great job in handling the economy. Recent reports have shown moderate, stable economic growth and inflation pressures easing.

The chart below shows that Bonds and home loan rates may be making a move soon. The ceiling and the floor of the current technical range are putting pressure on Bonds, squeezing prices from both above and below...so they'll have to make a breakout soon. And the tone of the Fed's Policy Statement on Wednesday might just be the catalyst for a move. If it suggests that inflation is controlled, Bonds and home loan rates will like this news, and see some improvement - but if the Fed still sounds overly concerned about inflation, Bond prices and home loan rates will worsen.

What do these slogans remind you of? "You're in good hands with..." "Like a good neighbor..." "Own a piece of the rock."

That's right, insurance. And premiums are costing us more and more every year. But there may be some savvy steps you can take to trim the bill and still have your valuables in good hands.

Items that push premiums higher include a pool with a slide or diving board, having a trampoline, or even a dog that has a record of biting others. These factors could be part of higher premium costs, so contact your insurance agent and see if changes can reduce your premium payments.

There are also interior items that can impact the cost of insurance. The coziness of the wood-burning stove may be appealing to the homeowner, but to the insurance agent it could look like a fire hazard, and result in a higher premium.

If you have not done so already, investing in a good alarm system may enable you to shave some of the cost of insurance, while giving you some added protection. And be sure to ask your insurance agent about combining auto and home policies, this could help trim the overall cost of your insurance bill too.

Often times, once the insurance policy is purchased it sits in a drawer until the need arises to file a claim. But taking the time to review your personal insurance policy, just once a year, provides the opportunity to lower the overall annual premium and make sure your valuables are adequately protected. It is also the perfect time to make any additions for personal possessions that may have been purchased or acquired during the year, like art, home furnishings, and jewelry. Additionally, if the home has been remodeled discuss the upgrades that have been made with your insurance agent to insure that all upgrades are covered in the policy. And most importantly, if you need a recommendation to a great insurance agent - just give me a call!

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of May 07 - May 11

Last Week in Review

"THE ONE FUNCTION THAT TV NEWS PERFORMS VERY WELL IS THAT WHEN THERE IS NO NEWS - WE GIVE IT TO YOU WITH THE SAME EMPHASIS AS IF THERE WERE." David Brinkley No kidding...and although the week did start out with little real economic news for talking heads to deliver with drama, the calendar picked up steam in a hurry. Mixed news arrived for both New and Existing Home Sales - and on the heels of the recent strong housing starts and building permits that had the bad-news loving media choking, they attempted to paint a very dismal picture on housing - but it should be taken with a grain of salt. Most closings in March were likely originated in February, which was an incredibly cold month across the US - not the best month to be out home shopping or mucking around construction sites. With spring on the way, there could be some strength in housing in the upcoming months.

This week also brought an interesting report called the Employment Cost Index - one of former Fed Chair Alan Greenspan's favorites - which measures the change in employment costs like wages and benefits. This report showed that costs are increasing, with wages increasing by 3.6% and benefit costs increasing by 3.1% over the past year. So not only are employers having to pay more in salaries due to a tight labor market, but the benefits they are providing to their employees are costing more too. What's a business owner to do? You got it - consider raising the price of their goods and services to cover the rising costs of their employees...and higher prices means inflation. Not good news for inflation-hating Bond prices and home loan rates, which lost the improvements made earlier in the week and ended unchanged to slightly worse for the week overall.

THE JOB MARKET IS TIGHTENING, AND A COLLEGE EDUCATION IS MORE IMPORTANT THAN EVER - YET 97% OF AMERICAN FAMILIES HAVE NOT PLANNED PROPERLY FOR THEIR CHILD'S COLLEGE FUND. THINK YOU'VE GOT ALL KINDS OF TIME BECAUSE YOUR KIDS ARE YOUNG? WAITING COULD COST YOU...READ THIS WEEK'S MORTGAGE MARKET VIEW FOR A CAUTIONARY TALE OF TWO PARENTS, AND LEARN WHY YOU SHOULD GET STARTED SAVING RIGHT AWAY.

Forecast for the Week

This week's economic calendar is front and back-end loaded with potentially high impact reports. Right out of the gates, Monday brings the Personal Income and Spending report with the imbedded Core Personal Consumption Expenditure Index, the Federal Reserve's most favored gauge of inflation. Expectations are for Core Inflation to be reported at 2.2%, inching closer to the Fed's target of 2% or lower. Not to be outdone, Friday is launch-day for the potentially explosive monthly Jobs Report with the latest data on new job formation, hourly earnings, and the unemployment rate. Estimates for new job creations are presently around 100,000.

If either of these reports are out of line - showing more inflation than expected or markedly more jobs than expected - this could cause Bond prices and home loan rates to suffer. And on the flip side - if the reports show low inflation or fewer job creations than anticipated, this could help Bond prices and home loan rates improve.

Mortgage Bonds are now trading within a few whiskers of a very important technical floor of support at the 200-day Moving Average. Why is this floor so important? The chart below shows that Bonds have traded above this floor for eight months - and the last time Bonds traded beneath this level, the 200-day MA became a tough overhead ceiling of resistance, putting a lid on Bond prices or home loan rates improving for one and half years. So...if the news of this week forces the Bond beneath this 200-day MA floor of support, it may mean higher home loan rates for a while.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Apr 27, 2007)

The Mortgage Market View...

A TALE OF TWO PARENTS...

In today's world, a college education is more important than ever. Many of the jobs that do not require a college degree have been outsourced to workers in other countries, or replaced by a computer or machine. And according to Fed Chairman Ben Bernanke, the income disparity between college grads and non-grads is growing every year. In 1979, college grads earned 38% more than those with only a high school diploma - but today, college grads earn 75% more than those without degrees.

But let's face it, college is expensive, and becoming more so every day, inflating at around 5% per year historically. If anything, the cost will continue to rise as the upcoming high school graduating classes are expected to be the largest in history. The demand for four-year colleges will likely increase and with the number of seats in the classrooms still the same, expansion of space will probably not be an option for colleges and universities, but bumping the price tag certainly will be. And the type of college your child attends can have a big effect on the cost too - for just one year of tuition, room and board, an average private college runs just over $30,000, a public out of state college around $19,000, and even a public in state college is close to $13,000.

So as a parent who wants your child to have the chance to attend college - what can you do? Plan early. Let's look at a tale of two parents to illustrate how important it is to get started right away.

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it - their kids would be off to college. Taylor's parents are prepared, having recently sat down with a mortgage professional and learning that to completely fund Taylor's four year education at the local college would cost either $300 per month in savings - or by being able to tap into the equity in their home, only $133 per month after tax. "What a relief to know it's all taken care of!" they commented to Max's parents. But Max's parents replied, "Hey, what's the rush? Look, the kids are only knee-high right now...we'll worry about this later."

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max's parents just learned that for him to attend the very same college as Taylor, it will now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor's parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow - but it's twice as much per month as Taylor's parents, who planned ahead and started earlier.

The moral to this story? If you want to save for a college education for your child, start the investment early. And encourage your children to invest and save too, with a portion of funds from their allowance or a side job like mowing the neighbors' lawn or babysitting. They will see how the value of their savings grows over time, and most importantly, will help instill the importance and value of a college education to your child. And as the college years approach, explore scholarships, financial aid, or federal direct aid, which is money that does not have to be repaid. When your child is young - you just don't know if they will be a star athlete or straight A student - so always better to plan ahead, and if scholarship money does become available, what a wonderful problem to have more than enough money in savings, due to your good planning.

Let me know how I can help - if you want to discuss options and strategies on saving for your child's college education, contact me and we'll get started right away!

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of April 30 - May 04

Last Week in Review

"ANYTHING THAT BEGINS WITH 'I DON'T KNOW HOW TO TELL YOU THIS' IS NEVER GOOD NEWS" Ruth Gordon But after a trend of gradually worsening over the past month, Bond prices and home loan rates finally got the good news they'd been waiting for...that pesky inflation rate finally appears to be moving lower. Early last week, the Consumer Price Index (CPI) showed core consumer price inflation as better than anticipated, falling to a year-over-year 2.5% rate, down from 2.7% reported last month. While lower prices on goods and services are certainly good news for all of us, the consumers; it was especially welcome for inflation-hating Bonds and home loan rates. Following the news, home loan rates improved by .125%, and appeared destined to improve even more.

But this wasn't to be - what happened? Bond prices were feeling the love, home loan rates were improving - but right in the middle of the party, Bonds ran dead into a tough ceiling of technical resistance, stopping them cold and turning them back, causing them to lose some of the nice ground they'd made in the first part of the week. The path of least resistance ahead appears to be that Bond prices and home loan rates may worsen before they get better...but it all depends on the flavor of the news ahead.

FOR MOST AMERICANS, TAX SEASON IS OVER...BUT MORE PEOPLE THAN EVER ARE HEARING THEIR CPA SAY, "I DON'T KNOW HOW TO TELL YOU THIS...BUT YOU'RE GOING TO HAVE TO PAY ALTERNATIVE MINIMUM TAX THIS YEAR". NOT GOOD NEWS. WHAT'S THE STORY? THIS WEEK'S MORTGAGE MARKET VIEW EXPLAINS.

Forecast for the Week

The week's economic calendar contains mostly mid-level reports, but will provide an always-interesting look at the housing market, with Existing Home Sales on Tuesday and New Home Sales on Wednesday.

Unless any of the news and releases this week prove to be surprises, Bond prices and home loan rates are likely to respond to technical factors. The chart below shows how Bond prices made a strong move higher this week, helping home loan rates improve - but now appear to be trapped beneath a tough layer of overhead resistance. What does this mean? That it will take some very "Bond-friendly" news to help Bonds muster up the strength to mount a successful attack against that ceiling of resistance, and help home loan rates improve.

Bottom line: If the news this week tends to be economically weak or negative, or otherwise helps reduce the fears of inflation - Bonds would make another run at the ceiling. But if the news is economically positive - or even moderate - Bonds will likely follow the path of least resistance they are on presently, moving lower and causing home loan rates to rise.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Apr 20, 2007)

The Mortgage Market View...

Remember the old tag line from the show "Lifestyles of the Rich and Famous", as Robin Leach wished us all "champagne wishes and caviar dreams"? And sure enough, these days more and more people have the trappings of the rich. But is it the new home, maybe a shiny BMW, or more vacations? No. It's getting hit by the AMT or Alternative Minimum Tax, originally designed to hit only the ultra-wealthy. Not really the "you have arrived" feeling you had hoped for.

The nasty AMT isn't just for the wealthy anymore, as it is trapping an alarming amount o