This week is extremely busy in terms of economic data scheduled for release and will likely be another active week for mortgage rates. The number of releases is actually irrelevant due to the importance of the some of the reports. There are eight economic releases scheduled for the week in addition to the first Federal Open Market Committee (FOMC) meeting of t he year. All of the releases scheduled are considered to be of moderate or high importance, meaning we should see quite a bit of movement in mortgage rates this week.

The first report comes Tuesday morning with the release of January’s Consumer Confidence Index (CCI). This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 109.5 would be ideal for the bond market and mortgage rates.

The next piece of data is one of the most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Wed nesday morning. This data is so important because it is considered to be the best measure of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter’s activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to show an increase of 3.0%. A weaker reading would be great news for the bond market and should lead to a sizable decline in mortgage pricing.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release Wednesday morning. While this is an important report for the bond market, it may not affect mortgage rates as much as usual due to the importance of the day’s other events. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage in flation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 1.0%. A lower than expected reading would be favorable to bonds and mortgage rates.

Also Wednesday is the first of this year’s eight FOMC meetings. It will begin Tuesday and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rates. As usual, traders will be looking for any indication of the Fed’s next move (or lack of one). This could bring a great deal of volatility in the markets Wednesday afternoon and lead to significant changes to mortgage rates.

Thursday morning brings us the release of two pieces of relevant data. January’s Personal Income and Outlays is the first, giving us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.5% while spending is expected to rise 0.7%. Larger increases would be go od news for the stock markets and could hurt bond prices, driving mortgage rates higher early Thursday. Smaller than expected increases should help push mortgage rates slightly lower, assuming the second report of the day doesn’t give us a negative surprise.

The Institute of Supply Management (ISM) will release their manufacturing index at 10:00 AM ET Thursday. This index tracks manufacturer sentiment by rating surveyed trade executives’ opinions of business conditions. It is often the first economic data released each month and is one of this week’s very important reports. Current forecasts are calling for a reading in the neighborhood of 51.5. The lower the reading, the better the news for the bond market and mortgage rates.

There are three reports scheduled for release Friday. The first is by far the most important of the three. The Labor Department will post January’s Employment data early Friday morning, giving us the U.S. unemployment rate and the number of jobs added or lost during the month, among other related statistics. Analysts are expecting to see the unemployment rate remain at 4.5% and approximately 150,000 new jobs. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. It would probably create a bond market rally, leading to lower mortgage rates Friday.

The last two reports of the week are the revised reading to the University of Michigan’s Index of Consumer Sentiment and December’s Factory Orders data. The Michigan Index measures consumer confidence, which is thought to indicate consumer willingness to spend. The Factory Orders data tracks new orders for both durable and non-durable goods. I don’t see either of these reports having much of an impact on the markets or mortgage rates due to the importance of the employment figures.

Overall, look for Wednesday or Friday to be the biggest days for mortgage rates. Wednesday’s GDP and Friday’s Employment report are the most important pieces of data, but we may see quite a bit of movement in rates Tuesday or Thursday also. If we see weaker than expected results from the most important reports, we should see rates close the week much lower than last Friday’s closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher again this week. This is of course, assuming that the Fed meeting doesn’t reveal any surprises.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

a la mode

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Posted by MAX

Bank of America and Countrywide Financial have held discussions about an alliance that would create the biggest mortgage lending group in the US, people close to the matter said.

The talks are said to be at an early stage and may not lead to a deal. But if they proceed, the negotiations could lead to a joint venture between the two companies, under which BofA would use its big branch network to help sell home mortgages originated by Countrywide. Countrywide would have the support of BofA’s far bigger balance sheet to fund its lending.

The talks could also lead to an acquisition of Countrywide by BofA, which is eager to expand its mortgage lending business to match its breadth in credit cards. Such an acquisition would probably cost BofA, the second-biggest US bank, about $30bn (£15bn), analysts said.

The talks indicate that BofA continues to focus on expansion in the US in spite of recent reports that it might be interested in buying UK bank Barclays. Ken Lewis, chief executive, has said a major foreign acquisition would be difficult for BofA to execute.

BofA said it did not comment on market rumour. Countrywide did not respond to a request for comment.

Countrywide shares soared 11 per cent after FT.com disclosed a possible alliance. They closed up 4.2 per cent at $42.00. BofA shares fell slightly to $52.04.

Banking analysts said a deal could make sense for both sides. BofA would dramatically expand its ability to serve consumers, while Countrywide would get the financial muscle to withstand the current slowdown in the mortgage business.

"This would cement Bank of America’s lead as the dominant retail bank in the US," said Gerard Cassidy, banking analyst at RBC Capital Markets. He added that even if BofA were to buy Countrywide outright it could avoid violating the US law forbidding banks from having more than 10 per cent of consumer deposits following an acquisition.

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