How I see it $:  Another more contemporary Greek tragedy has played out this week and with any luck may be resolved by Monday. Early in the week the Greek financial rating was downgraded to below investment grade. The downgrade set off a series of events that will lead to severe austerity measures for Greek unions and the people at large. A bailout package of about $130 billion has been proposed which will keep Greece from defaulting on its debt. While this move will “save” Greece the unions are not too happy and promise to fight pay reductions and other elements being proposed. Further, in a Greek poll taken late this week two thirds of those responding said it was likely there would be civil unrest. You may want to keep an eye on further developments in Greece. Finally, how about those wacky guys from Goldman Sachs in their appearance before our beloved elected officials? While I cannot place all of the blame for our recent financial crisis entirely on them they certainly played a role and for them too not acknowledge it is amazing. Wonder if their tune will change when they get in front of a court and respond to the SEC charges? If you have any comments or thoughts please e-mail me at burt@gosfm.com.  Finally, if you would like to view any of the articles I have written please go to http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.

Interest Rates

A month after the Fed stops buying MBS most observers expected rates to show some signs of moving up. Guess what? So far there has been little impact on rates as they have continued around the 5.00% range. How long this will last is anyone’s guess.

When	Rate
This Week	5.06
Month Ago	5.08
Year Ago	4.78
2 Years ago	6.06

 Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm

Mortgage Industry

·         Fannie Mae announced Tuesday the extension of its incentive program to purchase its existing inventory through the Home Path program. The program will now expire on June 30, 2010. See http://www.homepath.com for program details.

·         FHA loans that are 90 days or more delinquent dropped to 8.8% in March down from 9.2% in February. FHA now holds over six million mortgages with loan balances exceeding $800 Billion (FHA).

·         If you have a 30 day late on your credit report your score can go down between 10 and 110 points, a 90 day late 70 to 135, a foreclosure, short sale or deed-in-lieu 130-240 and bankruptcy 130-240. These are of course educated guesses and each consumer’s situation may cause the reduction in score to be different (TBWS).

·         An Arizona law professor argues that in Arizona (like most non-recourse states) lenders are charging all Arizona borrowers an additional $800 per $100,000 borrowed for the option to default on a purchase money loan without any recourse. There is no discussion on how the $800 was determined (Brent T. White, Law Professor, University of Arizona published in Arizona Republic on April 25, 2010).

Good News

·         First quarter 2010 GDP grew at 3.2% less than fourth quarter 2009 which was 5.6% forecast was for 3.4% increase but still a solid number (Commerce Department).

·         Consumer spending which accounts for about 70% of GDP grew 3.6% in the first quarter of 2010 compared to 1.6% in fourth quarter 2009 (Commerce Department).

·         Consumer confidence increased in April to 57.9 up from 52.3 in March the highest level since September 2008 when Lehman Brothers collapsed (Conference Board).

·         Home prices increased by .3% in February from the same month in 2009 the first increase in more than three years. However, it is expected that for February 2010 thru February 2011prices will decline by 3.4% (First American CoreLogic).

Statistics of Interest/Concern

·         Consumer sentiment fell to 72.2 in April from 73.6 in March (Reuters Thomson/University of Michigan).

·         U.S. home prices fell in February by .9% from previous month BUT were up year over year by .6% the first increase in more than three years (S& P Case-Shiller).

·         Phoenix had the seventh most foreclosures in the first quarter of 2010 with one for every 38 homes. Las Vegas was first at one out of 28 homes (Realty Trac).

Foreclosure Headlines

·         The Las Vegas metro area has the worst foreclosure rate in the nation at one in 28 homes while Phoenix metro is seventh at one in 38 (Realty Trac).

·         Strategic defaults on home loans were at 12% in February up from an estimated 4% in mid 2007. The Treasury Department is expected to announce changes to HAMP (Loan mod program) by September to help homeowners who owe more than 115% of the home’s value reduce principal (Bloomberg).

·         There could be another 1.6 million distressed sales in 2010 or about 30% of total sales and the same numbers are expected for 2011. The shadow inventory (homes at 90 days or more delinquent) is estimated at 4.6 million homes some of which will modify or work out the loan with their lender and some will be strategic defaults (Barclays Bank).

·         Apparently the State of Arizona has decided how it is going to spend the $125 million from Washington. $90 million will be used to reduce loan balances on 3,000 “deeply underwater” mortgage’s, $12 million will subsidize unemployed borrowers mortgages, $7.5 million will buyout second mortgages and $10 million will be for counseling (WSJ). Some of you math wizards out there may have noticed the total is not $125 but $119.5 million. More government accounting?

Jobs Update

·         Initial weekly jobless claims were down 11,000 to 456,000 (Department of Labor).

·         Four week moving average for weekly jobless claims increased 1500 to 462,500 (Department of Labor).

·         Continuing jobless claims declined 18,000 to 4.65 million (Department of Labor).

·         Since December 2007 Congress has extended the length of unemployment benefits three times. Apparently neither party has any interest in extending them further thus the maximum length to receive benefits will remain at 99 weeks. In the coming months about one million people will see their benefits end. This fiscal year we will spend $200 Billion for unemployment benefits or about six times what it was before the recession began (Bloomberg).

·         44% of jobless people have been unemployed at least six months or more (Bureau of Labor statistics).

·         At least 3.4 million people have been out of work at least one year (Pew Fiscal Analysis Initiative).

Key Indicators

Indicator	4/23/10	4/30/10	Change
Dow	11,204	11,009	-195
10 year yield	3.82%	3.66%	-.16%
Crude oil	85.11	86.18	+1.07
Dollar (vs Euro)	1.3369	1.3296	-.0073
Gold	1156.0	1179.4	+23.4

Source: www.cnbc.com/markets/commodities