The View From The Golden Dome

Views on the week's events plus some of mine.

Les Berman Weekly 7-18 Yellow Brits, DC Buffoons and Black Gold

Yellow seems to be the endemic word when it comes to journalism. This is nothing really new but the Brits may have caught up with and perhaps surpassed Americans in this area. And then we have the buffoons in Washington – the President refuses to put forth his requirements for negotiating a deal on the debt ceiling, and the jokers on the other side are digging their heals into the muck.

Happy Carmageddon weekend ! I’m sure you are surviving…

I think I first was introduced to the concept of yellow journalism in my early teens. I don’t know what the occasion was, but I’m guessing that one of my parents would have commented on something, and told me that the news doesn’t sell papers but dragging people through some kind of crap does. I also learned, that during WWII, the British press was renowned for accurate reporting whereas the other Allies could only put a positive spin on the conflict, even when the bad guys were winning.

And the American newspapers took sides. If the owners wanted to spin the content one way, that’s what the editor had to tell his reporters to write. I’m not sure that there was ever a situation of fair reporting. Or real content. I moved to the USA from Canada in 1985. I was amazed at how shallow the LA Times and other papers were. No international news. And barely any news from outside of California – unless it was negative. My favorite example of yellow journalism is the hatchet jobs on political candidates. It is totally irrelevant and of zero interest to me if a candidate has dated a movie star, slept with 84 people besides their spouse, or smoked funny cigarettes when they went to high school or at any other time. What does that have to do with their ability to lead their team and govern the country. The rest of the world laughed at us during the Lewinsky affair. I really could care less if the Pres got a bj. Who cares if the Gov was boffing his maid. Did that affect his ability to govern? People in power get benefits. Every president receives those benefits; every corporate leader has access to those benefits. So what? Get over it !

I believe that someone from the French press confronted President Mitterrand in an accusatory tone about having a child out of wedlock. Mitterrand’s response – So what ! And that was the end of that story. Yet the yellow journalists in this country still examine the private and personal lives of everyone. What a waste of ink and paper! Of course, we’re so used to the crap, that people won’t buy a paper unless the headlines trumpet the negative. And now the Brits have surpassed their American counterparts with the egregious hacking into cell phones, computers etc. And what they did was grossly wrong, and likely illegal. And some do-gooder on this side of the pond, will likely wave a flag for freedom of speech and protection of the fifth estate, and create more of a cultural morass than we already have.

And a very brief comment about those buffoons in Washington –  I hope they all lose their next election. That’s all they care about. Re-elect me ! So what if I create chaos in the country, and threaten jobs, growth, and recovery. Just re-elect me. I could care less which side of the floor they are from – and some of these idiots should be cleaning the floors – get off your collective asses and get to work. One side doesn’t know how to govern without a majority, and the other idiots shoot themselves in the foot by refusing to move to the middle because their only co-operative goal is to get themselves re-elected. Period. Kick ’em all out !!

Oil – black gold – yes we still need it. Did you know that the country that supplies most oil to the US is not Saudi Arabia? The country that supplies twice as much oil per day as the Saudis to the USA is Canada, and Mexico is in a dead heat for 2nd. So what’s the big deal. Canada is attracting billions of investment dollars for the development and extraction of oil from shale. Jobs. The US has huge proven oil reserves. But no drilling is allowed. The politicians are afraid of the voters. And the voters are stupid because they are voting for higher fuel costs. Rather, a few people are inciting the minority to protest, and a vocal minority always wins. California’s refineries are maxed out. One shuts down for maintenance, and the others jack prices by 10 cents or more per gallon. Another refinery … the oil companies don’t want to spend 10 years battling the minority. The Feds could solve the problem easily – and make money. Oooops – feds make money?? That can’t happen but here is the solution. Build a refinery on government land. Allow a couple of years for the minority to picket , protest and do what they have to do, and then put together a deal so the oil companies actually pay for the refinery, plus pay royalties to the Feds on production from the government owned refinery. Prisons are built on Federal land. Why not oil refineries? oh yeah – dammit. It’s the re-election that the politicians want, not what is good for the country. How could I possibly forget that??

And then the funniest story I’ve read in the last couple of weeks is about lawyers. Can you believe that law schools are actually replacing textbook courses with those that teach practical skills? What is the world coming to??

Here’s some good news – real estate in Miami is coming back! Why – because Brazilians are buying up condos, with cash, at bargain prices, and renting them out. And it was a very few years ago that Brazil’s inflation rate was 100%. It’s amazing what good governments can do to stabilize and grow an economy,

And check this out. I have a new kind of mortgage loan available.

Many borrowers have assets but their income is not sufficient to qualify for a loan.  Maybe the borrower is self-employed and their tax returns do not indicate enough income to qualify.  Or maybe the borrower is retired and no longer has enough regular income. Asset Depletion is a way for us to use a borrower’s assets to provide more income to qualify.  Asset Depletion is simply an Underwriter’s tool to apply more qualifying income by calculating a return on the borrower’s “liquidable” assets. Call me today at818.305.4695 for more information.

And yes, puns are wonderful. He said she was only a whiskey maker, but he loved her still.

Have a great week. And remember, I want to talk to you about your residential mortgage requirements – if you’re planning to buy properties, refinance, or if you have requirements for investment houses and / or commercial loans. Call me today at 818.305.4695.



Berman’s Factoids of the Week:

Healthy is merely the slowest possible rate at which one can die.

The only difference between a rut and a grave is the depth.

And health nuts are going to feel stupid someday, lying in the hospital , dying of nothing.

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Les Berman CMC
For the week of Jul 18, 2011 — Vol. 9, Issue 29
In This Issue… sym_arrow.gif
Last Week in Review: The debt ceiling debate raged on – plus a double dose of inflation news.

Forecast for the Week: Earnings season and the debt ceiling debate will continue, plus a busy middle of the week for economic reports.

View: Wondering if the potential government shutdown could impact you…or your home closing? Don’t miss these important details!

Last Week in Review sym_arrow.gif
“What we’ve got here is a failure to communicate.” That famous line from the 1967 movie Cool Hand Lukecertainly seems to apply to our leaders on Capitol Hill, as the debt ceiling debate rages on. Read on to learn how this could impact our economy, the mortgage industry, and home loan closings.

Last week, the political gridlock and confusion within Washington DC around the debt ceiling and budget deficit debate prompted credit ratings firm Moody’s to announce that it was reviewing US Debt for a possible downgrade. Even though Moody’s acknowledged that the chances are low for a default, they said the chances are no longer “minimal.” Moody’s announcement was followed by a similar announcement from credit ratings firm Standard and Poor’s, which said that a US debt default is a 50-50 chance, even if the US raises the debt ceiling. Standard and Poor’s is looking for a “credible solution” to the long-term debt problems, and in that absence, the United States’ current “AAA” credit rating could be cut.

Why is this significant? Lowering the deficit and being fiscally sound raises confidence in our debt. This would not only translate into maintaining our AAA rating, but it would reinforce the United States’ role as the reserve currency of the world or a place where investors will place their money as the ultra safe haven. This is a key factor for our continued economic recovery. To learn how a potential government shutdown could impact the mortgage industry and home loan closings, see the View article below for details. Also, call or email me if you have any questions at all. I’ll be monitoring this situation closely in the weeks ahead.

The gridlock on Capitol Hill wasn’t the only thing heating up last week. Both the core Producer Price Index (which measures inflation at the wholesale level) and the core Consumer Price Index were reported hotter than expected. Remember, inflation is the arch enemy of Bonds and home loan rates, like Kryptonite to Superman, because inflation erodes the value of the fixed return provided by a Bond, which causes home loan rates to rise. This is another area I’ll be monitoring closely in the weeks and months ahead.

The bottom line is that home loan rates still remain near some of the best levels we’ve seen this year. If you have been thinking about purchasing or refinancing a home, call me at 818.305.4695 or email me to learn more or forward this newsletter on to someone you know who may benefit.

Forecast for the Week sym_arrow.gif
A big week for earnings season is ahead (with reports from IBM, Bank of America, Goldman Sachs, Wells Fargo, Apple, Microsoft, and GE, among others) and the debt ceiling debate will certainly rage on, and both of these could impact the markets. Also, the middle of the week is chock full of economic reports. Look for:

  • A double does of housing news with Tuesday’s Housing Starts and Buildings Permits Report and Wednesday’s Existing Home Sales Report.
  • Thursday brings another weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Jobless claims fell 22,000 to 405,000 and while the decline is good news, better news will be when Jobless Claims consistently fall below the 400,000 level.
  • Thursday also brings the Philadelphia Fed Report, which is considered an important manufacturing indicator.

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.

As you can see in the chart below, Bonds and home loan rates were unable to improve above a key technical level. I’ll be watching closely to see how the news and events of the week impact rates and the markets.


Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jul 15, 2011)
Japanese Candlestick Chart
The Les Berman Weekly View… sym_arrow.gif
Government Shutdown and the Impact on Mortgages

In the wake of news stories that the US will face a government shutdown and default on its outstanding loans if a debt ceiling agreement isn’t reached, many people may be wondering what the impact would be to the mortgage industry and closings.

The last time we went through a government shutdown in 1995, it was a pain, but not a panic. If a shutdown were to occur again, mortgage expert Linda Davidson points out the following top six areas that could be impacted:

1. FHA Case Numbers: For each FHA loan, we are required to order a FHA case number. This number is generated before an appraisal can even be ordered. With a shutdown, we may not be able to order case numbers. Because of this, it is critical to let us know if there is a contract executed on any loan, so that our office can go ahead and order a case number without risking the loan being on hold during a shutdown. Note: with the new FHA guidelines, a contract must be executed before a case number can be ordered.

The ability to close FHA loans is questionable, depending if HUD keeps its website running to obtain FHA case numbers and CAIVRS. During the November 1995 shutdown, case numbers could not be obtained, but this was prior to the internet and was a manual process. The shutdown in 1995 mainly caused a delay rather than a drop in FHA loan origination. But if lenders decide to stop accepting FHA applications, it could be a problem. I think we may see delays but not a complete shutdown of the FHA.

2. 4506 IRS Transcripts: Each loan requires the verification of at least one tax return by the IRS to verify the numbers that each customer presents on their tax returns. During a shutdown, this process would be delayed as the IRS wouldn’t be at work to verify the transcripts.

3. Verifying Employment of a Government Employee: We are required to verify the employment of each customer. If the customer is a federal government employee, we would be unable to verify his or her employment during a shutdown.

4. FEMA: Homes in a Flood Zone: Homes that are determined to be in a flood zone would not be able to close as flood insurance could not be obtained.

5. USDA: During a shutdown, the USDA office would be closed because they have government underwriters that insure behind the lender. With a shutdown, we would see delays with all USDA loans.

6. VA: Like the FHA, the disruption is possible – but not absolute – during a shutdown. This would all depend on if they continued to allow their website to function. A disruption would cause delays in VA appraisals and the issuing of certificates of eligibility. If the website was closed during a shutdown, we would see delays in all VA loans.

Stay tuned for updates if necessary on this very important time period. And if you have any questions, please call 818.305.4695 or email today.
Economic Calendar for the Week of July 18-22, 2011

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 July 18 – July 22

Economic Report
Tue. July 19
Building Permits
Tue. July 19
Housing Starts
Wed. July 20
Existing Home Sales
Thu. July 21
Jobless Claims (Initial)
Thu. July 21
Philadelphia Fed Index
Thu. July 21
Index of Leading Econ Ind (LEI)
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
As your trusted advisor, I am sending you the LES BERMAN WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.


And now for Lou Barnes

Mid-July is normally the center of the Silly Season news-drought, in which media give front-page treatment to “Man Bites Dog.”

This year, that dog is plumb-near bit to death.

Newsies this week over-read Perfesser Bernanke’s testimony and Fed minutes, finding all sorts of hints that were not there. The Fed is “open to stimulus if necessary,” but so it is, always. At this moment, the Fed is confused, sticking to “better in second half,” its members divided (scattered), and both CPI and PPI core inflation popped to .3% in June. The Fed Chairman must be prepared to fill hours of air time with no content, and the Perfesser rose to the occasion.

The economic data are just above stall speed. The NFIB small-business survey in June was the same as May, at recession threshold, and June retail sales had no gain.

The Treasury borrowed a wad of long-term money for the first time in six months without Fed QE buys, and had no trouble — perhaps in largest part because Europe’s slow suicide is proceeding. A European bank-on-bank run is spreading, the cost of Euribor loans jumping from 0.6% to 1.47% in one week (post-Lehman: 4%). Banks are the circulatory system for any economy, and shutdown is the cardinal symptom of Bad Stuff. Today’s results of Eurozone bank stress-tests are the blackest of black comedy.

The European economy is far more vulnerable to its banks than we are. The top five banks in France have assets (loans, sovereign bonds…) equal to 3.25 times French GDP, Germany about the same; in Belgium, double; Italy 1.4 times; and Banco Santander by itself is 1.14 times the size of Spain’s GDP. In the US, the top five banks are barely 60% of GDP (source: NYT today). Too big to fail? Too big to save.

Here at home… oh, my. This debt-limit lockup is so yesterday. The entire leadership of China wakes every day to work on competing. Our leadership spends all day in an argument 50 years old: Democrats enacting underestimated future social spending not supported by revenue, Republicans fighting every step of the way, even the spending to which their own constituents feel entitled, plus their military adventures.

Our economy grew fast enough to support continuous growth in revenue all through Reagan-Bush ‘41-Clinton, also supported by the inspired 1986 tax reform; and in combination with Bush ‘41-Clinton spending restraint we did what we are supposed to do: we ran an immense budget surplus in good times. All through those years, and Dubya, debt-limit brinkmanship was silly theater with certain outcome.

The best of that burlesque: in the fall of 1995, Newt Gingrich thought the country would back his plan to balance the budget via shutdown shock therapy. Bill Clinton exposed him (permanently) as Captain Underpants.

Until this week, I thought Mr. Obama could do the same to Eric Cantor, the essence of amoral ambition standing in skivvies. Obama still thinks so. Not so. Not now. In the 16 years post-Newt, these words have been spoken at too many kitchen tables: “Whatever we do, whatever happens to us, we are not going to borrow any more.”

And in those 16 years, the “haves” in this country have had it with the Democrats’ limitless grasping to fund their promises. The top 1% of income earners pay 27% of all Federal revenue, more than ever. The top 20% (inclusive) pay 70%. No sensible person opposes sufficient revenue, but not to be wasted, and not if the demand is open-ended.

Since last November, Democrats in denial, there may be enough votes in the House to enforce a stay-put debt limit. We will not default on Treasury obligations. Federal revenue runs $200 billion per month. Interest costs barely $25 billion, and we can roll over all existing debt within limit. The remainder will just about cover one month’s Social Security, Medicare, Medicaid, and Defense. Maybe air traffic controllers and the FBI, maybe not. If the limit stays put, in another couple of weeks we’re going to find out what we’ve been getting for the $130 billion we’re borrowing each month.

Today, the University of Michigan released the lowest reading for consumer confidence since March 2009, to 63.8 in July from June’s 71.5. Can’t imagine why.

by: Lou Barnes




July 17, 2011 - Posted by | Uncategorized

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