What is happening in the Credit markets this week? It is a fairly busy calendar in this holiday shortened week with more than just economic data that has the potential to move markets this week.  Here is the calendar:

• Monday: Market was closed
• Tuesday February 17: Obama will sign the Economic stimulus legislation in Denver CO. So far the market is happy today on this news. The Bill is a $787 Billion (every time I type the word "billion" I hear Dr Evil's voice.... is it just me?)
• Wednesday February 18: President Obama Expected to announce a plan to reduce home foreclosures. This is probably the "biggie of the week". Analysts anticipate the plan will create a standardized approach to determine if a borrower is truly in trouble, and a way to structure new terms to limit losses.
• Wednesday: January housing starts and building permits, anticipate -3.6% and -3.1%. This is not likely to be a surprise, and analysts don't feel the bottom in housing is here yet... probably still months away. Not likely to move the market.
• Wednesday: January Industrial Production and Capacity Utilization; Expected -1.5% and 72.5. A large decline in manufacturing is expected to continue.  Not likely to be an surprises here
• Thursday February 19: initial Jobless claims, expected down 3,000. Not likely to raise any eyebrows here. February's non Farm pay roll report will be more important, and is due out in 2 weeks
• Thursday: January PPI expected +0.2% and a core of +0.1%. The forecast is a big improvement over last month. The increase is more due to energy, and only a small increase at the core level. At these levels it will not move the market. But as with any inflation report, it is the deviation from the forecast that has potential to move markets.... Just not the way the markets have been working lately.
• Friday February 20: January CPI, expected +0.3% and a core of -0.2%. Gas up = a high number, but with out the volatile food and energy component, inflation is non existent at the consumer level, based on the core forecast. Once again: priced in already and not likely to move things.

As I mentioned above, the biggie this week will be tomorrows Foreclosure plan as laid out by the Obama Administration. Rumor is that the plan will help with two items: First it will give a legal way to rewrite loan terms, and second will give a method for quickly determining who qualifies for federal help. The "help" piece is the bumpiest road, both publicly and politically. Investors are expecting a plan that will allow for the government to make matching payments to cover a borrowers monthly payment. At issue here is the funding. Currently there is $50 billion Dollars (Admit it, you are thinking Dr. Evil here now too, aren't you?) allotted for this... the problem is that existing defaulted loans are currently behind $8.8Billion in payments. At that rate the 50 billion will not last that long.

Here is the sticky part of the plan that is still unknown: If a mortgage investor are asked to amend the original terms, AND are expected to take the biggest hit for the losses if the loan goes bad... they will NOT be happy and will run away from mortgage backed securities which will cause rates to go up, possibly in an ugly fashion.

That being said, It is always safer to lock a rate than to float. This weeks news will most likely lead to steady rates... So far we have maintained a very happy market today with out the typical swings we have been accustomed to over the past few weeks.  If it stays this way we may see some improvement by weeks end with the big unknown being Wednesday's news.

I hope this has been a useful tool for you.

Have a great week!

Rob

Robert Rauf

www.RobertRaufHomeLoans.com   or my blog: http://activerain.com/blogs/rrauf

(732)223-1630 x102

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