You are Officially On the Clock

If you have been holding off buying or refinancing your home in hopes of a lower monthly payment or perhaps to leverage some of the appreciation in equity your home undoubtable gained over the last 4-5 years, might I strongly suggest you start that process today. Like, this evening. When you get home. Today, the U.S. 10-year Treasury yield shot higher, taking mortgages and various consumer loan rates with it. There are a couple key reasons for this market movement and why this one has some legs. We are going go focus on two, both of which have little to do with the Fed.

1. The Bank of Japan (BOJ) who has been fighting negative interest rates in a market desperate for a steeping yield curve surprised the markets today (July 23rd) when the Japanese' Government pressed the 10-year Japanese government bond by 5 basis points, to 0.083 percent, the highest since February. The BOJ, which meets next week, announced it would buy bonds to curb the action, and the 40-year JGB also spiked, touching 0.92 percent. All Markets are interconnected. Fixed Income even more so.

2. The fight with China over US-China deficit GDP is just heating up. To understand how and why this affects US Mortgage rates is to simply understand that China is not only one of the largest buyers of US Treasuries, but they are also one of the largest owners of US Treasuries. The US buys over $500 billion in Chinese goods annually. China only buys $130 billion from the US. Quick math shows that a trade war focused on tariffs will hurt the Chinese more. How would they respond, we suggest they do it one of two ways. First by lowering or devaluing their currency (the Yuan). This is quick and they already do this as needed. Second, they slow or worse stop buying US Treasuries. Selling their $1 trillion in US Treasuries would also force bond yields could climb. That’s problematic as Treasury holders around the world, including the U.S. government and (you and I) will see their bond prices drop. Higher yields also make it more expensive for the U.S. government to borrow through new debt issues, while companies that issue corporate debt, would have to pay higher borrowing costs.

With the first already taking flight, we strongly suggest you move date night to another evening and spend some time getting your home loan in order.

30-Year Mortgage Rate Charges Above 4 Percent

2018 has started in a similar fashion to how 2017 finished.

The average 30-year, fixed mortgage rate charged to 4.04 percent this week, up from 3.99 percent the week prior, according to Freddie Mac’s Primary Mortgage Market Survey® (PMMS®). The 15-year, fixed rate averaged 3.49 percent, up from 3.44 percent the week prior, while the five-year, Treasury-indexed hybrid adjustable rate averaged 3.46 percent, the same as the week prior.

“The U.S. weekly average for the 30-year fixed mortgage rate rose above 4 percent for the first time since last summer to 4.04 percent in this week’s survey,” says Len Kiefer, deputy chief economist at Freddie Mac. “This is the highest weekly average for the 30-year fixed rate mortgage since May of 2017. Some may be wondering if this is the last time we’ll see a three handle on the 30-year mortgage rate. Never say never, but inflation is firming, the Federal Reserve’s Beige Book indicates broad-based economic growth, and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.”

If rates continue as indicated, the home buying season may come early as potential homebuyers look to jump on the last set of historically low rates. From our perspective; all charts point to several Fed' increases in 2018 and 5% mortgage rates on the horizon.

Why Fall Is the Best Time of Year to Buy a Home

Few people know Fall is arguably the best time of year to buy a new home. The weather becomes cooler, the leaves begin to change, football season begins, and pumpkin-flavored everything is in abundant supply. But there's another great reason to love fall that might be less obvious...it's the best time of year to purchase a home.

Prices Are Typically Lower
The concept that buyers can get a better bang for their buck in the fall has been a popular notion for some time, but two recent reports validated that line of thought with data from actual home sales. According to a report by RealtyTrac, sales prices are typically 2.6% below fair market value during October — a steeper discount than any other month of the year. Another report by NerdWallet found that sales prices drop about 2.96% from summer to fall, which is roughly an $8,300 discount for the median home. It's also worth noting that while listing prices don't decrease much, sales prices do, and that's the price that counts for potential buyers.

There's Less Competition
The majority of people buy a home in spring or summer, when inventory is traditionally high. This gives families time to make their move before the school year starts, but the tradeoff is that buyers are faced with strong competition and often pay higher than asking price during that time. People who buy in fall, however, have less competition, and sellers are more motivated. This means more negotiating power for the buyer, which often results in a better deal.

There's Still Inventory
It's true that the inventory of homes for sale is at its peak during spring and summer, but when you buy in the fall, there's still a decent supply of homes left to choose from. Buying a home in the fall gives you the best of both worlds — lower prices and less competition but still enough inventory to find the home you want.

If you're serious about buying a home, doing so this fall may save you money or help you afford more than you expect. Plus, with interest rates on the rise, the longer you wait, the less buying power you may have. Click here to learn more about the impact that rising interest rates have on affordability. NMLS#1043983

The number of homes for sale is a problem; here's what to do about it!

In almost every major city in Texas there is solid demand from home buyers who struggle to find a home (any home) that meets both their housing and affordability requirements. This is especially true for first time home buyers. It’s a situation that requires both patience and creative solutions.

On the other hand, this may be an excellent time for you to explore options that may not be on your short list. Here are a few suggestions;

1.Look at a fixer-upper. That run-down house that’s been sitting on the market for months may be a diamond in the rough for a buyer with the vision to see its potential, especially if you have the time and skills to participate in renovations. Before making an offer, however, encourage your agents to assist in estimating renovation costs and identifying people in the trades to assist them. There are several different loan programs which make financing the improvements easy.

2. Buy a teardown and rebuild. If a thought of a fixer-upper doesn't excite you, perhaps a teardown, or a vacant lot, and building a new home. Fortunately, there are many ways to accomplish this without the expense of hiring an architect or a custom home builder. Learn who is supplying prefabricated and modular homes to your market—options that aren’t only economical and energy-efficient, but also increasingly popular with younger buyers.

3. Consider a duplex. While many don't love the idea of managing a property (much less a neighbor) the financial upside is hard to ignore. Improvements made to the property may be tax deductible and the additional income will never hurt.

Considering Buying or Refinancing a Home? Read This....

According to a survey conducted by J.D. Power, 27% of new homeowners ultimately came to regret their choice of lender. Twenty seven percent. The major reason for the dissatisfaction was overall poor customer experience. That's pretty vague so let's dive further. A lack of communication or unmet expectations (again back to communication) topped the "poor customer experience" sub list. Other regrets listed included pressure from the lender to choose a particular product/loan and not closing on time. Communication is a two way street. As a homeowner or potential homebuyer, you can remove some of the tension and turmoil of home loan process by carefully vetting potential lenders. Here are 5 questions to ask potential lenders before you make a commitment.

1. What mortgage programs do you offer? In many cases, choosing the best loan for your specific financial situation requires working with a lender who offers a wide array of loans. You don’t want to work with a lender who tries to push you into one loan simply because that’s the only option from their limited selection. Ask them if they regularly handle the type of loan you are looking for. If the type of loan you are looking for is more specific than say, a conventional fixed-rate mortgage, a little more expertise is useful — and in some cases, it might be necessary. An uncommon home loan like a United States Department of Agriculture loan, for instance, must go through an approved lender.

2. Inquire about the qualifications for the home loan you are seeking. There may be two lenders who offer the same type of loan, but their minimum requirements could differ. For instance, Department of Veterans Affairs loans require a minimum credit score of 620, but a lender might require a minimum score of 640. Comparison-shop. Don’t assume the same type of loan means the same terms.

3. Ask your lender to provide an estimate of the rates and fees expected to pay. Important note here; If you have taxes and insurance tied to your mortgage payment, an initial estimate will never guarantee your final, out-of-pocket expense. Numbers will change as things like title are received or surveys are approved or ordered. That said, it can be a solid jumping-off point for evaluating lenders. If the loan programs are the same, a helpful starting point is to compare the interest rate and total origination costs. It is important to know rates fluctuate, so try comparing lenders on the same day to get the most accurate mortgage rate comparisons. Speaking of rates....

4. Ask when you may be able to do a rate lock. As we mentioned above, mortgage rates can change multiple times a day. They can be as fluid as the stock market. Be sure to ask about the associated fees, including how much it costs to extend the lock should it expire before closing.

5. What is the time estimate for processing my home loan? This is critically important if you are selling a home or coordinating the end of a current lease with a new home purchase. Under the TRID guidelines, it's vitally important you receive your initial closing disclosure four business days before your closing date. In short, get the key dates of the appraisal and underwriting approval. Of course, it’s always a good idea to build in a small buffer if you can — and not just because loan preparation can take longer than expected. Along these lines, make sure you explain that you expect communication in a straightforward and timely manner.

First-Time Homeowners and our Existing FHA Clients

Federal Housing Administration announced they will reduce the annual premiums most borrowers will pay by a quarter of a percent. The new rates are projected to save new FHA-insured homeowners an average of $500 this year said U.S. Housing and Urban Development Secretary Julián Castro.


This announcement along with Efinity's Mortgage's pledge to get our FHA borrowers into homes for only the required 3.5% down payment makes this the time to call us and get your home loan started.



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INSURANCE | INVESTMENTS | MORTGAGE


Announcement & Source: https://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2017/HUDNo_17-003

It's SUMMER TIME!

It's SUMMER TIME! Many of our Mortgage clients are asking us about financing pools. There are a few different options for this.

For those of you buying a new home and leveraging a conventional loan, Efinity Mortgage offers the Fannie Mae Homestyle program. This allows our clients to finance the cost of improvements (pools included) into the home loan. The original appraisal is completed subject to the improvements being completed. Additional downpayments may be required depending on the final valuation.

If you are an existing homeowner and looking to add a pool to your home, there are a number of different home equity and specific pool financing options for you.

As for the type of pools, many people are not aware there are several different types available.

1) Natural pools
Natural pools are chemical-free, low-tech and affordable alternatives to conventional models. You can build a natural pool with gravel and clay instead of concrete and fiberglass. Aquatic plants keep the water clean instead of chlorine or a filtering system. Plants are also a natural purification system that introduces oxygen and good bacteria into the water. You can also include additional elements like green pool roofs and vertical gardens to increase the health of your pool.

2) Moss-filtered pools
Moss-filtered pools cut down on the need for chemicals like chlorine. Having moss in your pool also reduces water use and decreases how often you need to backwash the pool for cleaning. According to statistics from the University of Maryland, moss systems reduce chemical usage by 40 percent, water consumption by 75 percent, and save about $6,700 annually in bills.

3) Saltwater pools
Like the ocean, saltwater pools use a saline composition to keep water clean without chemicals. Saltwater pools use a mixture of chlorine and table salt to create electrolysis, which gets rid of algae and bacteria. If you want a mild saline pool, clean your chlorine cell once a year to prevent calcium buildup and add salt to the water once a month. Reducing chlorine usage helps to minimize overall chemical consumption.

4) Ozone sterilization
Installing an ozone sterilization system is another enviro-friendly method of cleaning your pool. An ozone system uses electricity to convert oxygen into bacteria-destroying ozone. These systems can reduce the need for chemicals by at least 80 percent, if not altogether. This will save on your pool maintenance costs and help keep the environment clean.

5) Efficient heating
Efficient condensing boilers can help to cut down your pool heating costs by almost 20 percent. You can use alternative heating methods like solar blankets and energy-efficient heat pumps to keep your pool warm. Enviro-friendly heating methods can lower your bills and reduce carbon dioxide emissions. Efficient heating isn’t a type of pool, but it’s a simple way to help your pool remain friendly to the environment and your wallet.

We hope you find this information helpful and feel free to reach out to us with any questions you might have.

Do You "Really" Want to Be a Landlord

This week was pretty unusual for the Efinity Mortgage staff. Seemingly out of nowhere we had several new clients come in requesting financing for investment (rental) properties. As if there was a sign on our door which read "Efinity Mortgage; The Rental King". It's not that we don't finance investment properties but to have several new transactions in a week is highly unusual as the majority (99%) of our business comes from realtors and builders seeking to assist a family in buying a primary residence. All of that said, I do want to share a story of one couple in particular who were kind enough to give me the ok to share their story.

The "Smiths" were existing homeowners and in the process of adding to their family of 5. Mrs. Smith was interested in leaving the workforce and to manage their properties. Noble concept especially since Mrs. Smith was a $200,000 wage earner! You see whether you’re going away on an extended vacation or considering downsizing into a smaller place, the popularity of websites like Airbnb has led many people to believe that there’s a lot of money in home rental. However, before putting your home on the market, it’s important to be aware of some of the factors that go into having a rental property. It may seem like extra money, but it’s the small details that can make it a more complicated process.

An Investment Property and Renting a vacation/second home have very different goals;

Is It A Short Term Solution

Many people plan on putting their home on the market for a short duration of time, but if you’re only planning on renting for 6 months or a year, it may not be as financially lucrative as you think. While tax breaks can go along with rental properties, the money you make off of this kind of investment is taxable so if you’re not in it for a slightly longer haul, you may not see the financial boost you’re looking for.

What Are You Willing To Deal With?

For those who are planning to put a home on the market, they still need some place to live, and this can mean that a certain amount needs to be made each month for the costs of having two homes even out. Before putting any serious considerations into this, ensure that you know it’s financially feasible. It’s entirely possible that you won’t have renters for certain periods of time and you could also run into problems with the renters you find, so you should sit down and put pen to paper to consider the investment potential.

Have You Considered The Maintenance?

Out of sight is often out of mind, but if you have a renter, you’re responsible for anything that goes wrong in the home. From small maintenance duties to sizeable but necessary overhauls, there are many things you’re legally obligated to do as a landlord and you’ll need to be prepared to take on these responsibilities. Since it will be the duty of the owner, in the event you don’t want to do it, you’ll have to hire a contractor who will be able to handle the work for you.

Having a house as a second property may seem like an ideal investment, but this can require you to take on the responsibilities of a landlord and you may even have to deal with problematic rental situations. If you’re searching for an additional property in the near future, contact us for more information. Everyone has different plans and goals and deserve to properly vetted.

Buying a Home and Have Questions?

Wonderful! Congrats on the decision. We have pulled together some helpful tips to get you started. These go pretty much in order, as most in the real estate industry will tell you it is important to stick with this road map to save yourself and others much anxiety.


How Much House Can You Afford?
Buying a new house is a big investment. You want to be sure that you have all the right finances before proceeding. Spend the time to do a serious audit of your finances and determine a budget. Use an Affordability Calculator to estimate how much you can afford on a house based on your income, savings, debt and assets. Any of Efinity's licensed mortgage professionals can also help with this. Check your credit score. Every year you are allowed one free copy of your credit report.


Get Preapproved For Mortgage
Now that you’ve checked your finances, it is time to see what kind of mortgages you qualify for. Many buyers make the mistake of assuming that being prequalified and preapproved for a mortgage are the same. They are NOT. At Efinity Mortgage at time of application we press deeply into your financial situation and certainly through the application process, an extensive financial background check and a current credit score report.


Find the Right Realtor
A realtor or real estate agent is another great person to have as you maneuver the home buying process. They have the in-depth knowledge on home buying and help you negotiate the purchase. This service is free for the buyer because the realtor is compensated by the seller. You can search online for a realtor at Realtor, Zillow, Trulia. Efinity Mortgage also works with a large number of realtors throughout our network.


Find a Home
You’re finally at the step you’ve been waiting for. Be sure to create a checklist of items you need and want in your future home. This will narrow down the endless choices of homes and help you focus on only the right ones. Also, make a list of your neighborhood preferences like safety, commute, type of schools, local shopping and grocery.


Get a Home Inspection
The home inspection is a step that many home buyers tend to skip over but this is a very important step once you’ve found a home you like. A home inspection checks for any damages to the home’s structure or foundation as well as any major or minor fix-ups that need to be done. Once a thorough home inspection is completed the buyer and seller will receive a report from the home inspector.


Make An Offer
Make an offer with the help of your realtor and don’t be afraid to negotiate price. This may take longer than you think but always be ready if the seller says yes.


Close the Sale
Before you close review all the costs associated with both the purchase and the expected monthly payments. No matter how much time and effort we put forth, it is still amazing to us how often clients gloss over these things. Spend the time and know what you are buying.

Learn the Facts & Myths of Reverse Mortgages

I had a lengthy conversation yesterday with one of my trusted realtors regarding Reverse Mortgages. While this is not been in Efinity Group's typical space, I was shocked at the misinformation that was understood as fact regarding this program. Similar to what we have done in the past I wanted to put something together to get the facts out there for our reading audience. Taking equity from a house is large decision for most seniors. It's not a decision that should be taken lightly. That said, a Reverse Mortgage is designed to allow seniors to improve their lives by freeing up the monthly obligations of a mortgage and whatever restrictive monthly cash flows that may present. Having access to funds to pay off credit cards, home equity loans and increasing cash flow for living expenses are a few benefits to having a reverse mortgage. Here are a list of facts and myths about reverse mortgages to help you make your decision.

Myth #1: It is the bank that owns the senior's home. Fact: When a customer has a reverse mortgage, their name will stay on the title unless a change in the title is made.

Myth #2: The bank has the right to make an elderly person leave their home. Fact: Reverse mortgages are insured and regulated by the Federal government. Any mortgage servicer has no authority to ask a senior to give up their home unless they fail to comply with the loan terms. Similar to any other mortgage, items like property taxes and homeowners insurance need to be paid and current. Texas Senior Lending wants to help customers stay in their homes as long as they can.

Myth #3: The senior’s heirs will eventually have to repay the loan if the customer passes away. Truth: A reverse mortgage is a non-recourse loan that gives the estate a year to sell the home at market value. Once the house is sold, the money from the sale will pay for the loan.

Myth #4: You will be responsible to make payments on reverse mortgage loans. Truth: Payments are due when the last living homeowner of the property permanently leaves the home.

Myth #5: Reverse mortgage proceeds are taxable and affect Social Security or Medicare. Truth: Although proceeds of a mortgage are not taxable and have no effect on your social Security or Medicare, you’re Supplemental Security Income (SSI) and Medicaid can possibly be affected. We hope some of what was provided above is beneficial.

The Fiscal Cliff

Following numerous requests from our clients, we thought we would put some effort on summarizing the tax related measures which resulted from the eleventh hour Fiscal Cliff agreement. These new laws are detailed in Senate Amendment to H.R. 8 and are collectively called The American Taxpayer Relief Act of 2012. For those unfamiliar with the Fiscal Cliff, hopefully this may provide valuable background information. We now await the political brinkmanship associated with the negotiations to raise the U.S. Debt Ceiling. Two New Taxes for 2013 Two new taxes go into effect starting January 1, 2013: 1. A 3.8% Net Investment Income Tax (NIIT) applies to individuals, estates and trusts that have unearned investment income above certain threshold amounts. Net Investment Income for the purpose of calculating this tax includes interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and pass-through income from a passive business. The NIIT does not apply to municipal bond income. For an individual, the NIIT is equal to 3.8% of the lesser of two amounts: i. An individual’s net investment income or ii. The excess of the individual’s modified adjusted gross income (MAGI) over the threshold amount ($200,000 for individual taxpayers and $250,000 for married couples filing jointly). 2. A 0.9% additional Medicare Tax applies to individual’s wages and self-employment income that exceeds the threshold amount based on the individual’s filing status. Ordinary Income Tax There will be no change in Federal income tax rates for taxpayers earning less than $400,000 ($450,000 for joint filers). Individuals earning above this threshold, will now pay 39.6% on marginal income above $400,000 ($450,000 for joint filers). Capital Gains and Qualified Dividends Tax Effective January 1, 2013, the top tax rate on long term capital gains and qualified dividends reverts back to 20% on gains for taxpayers above the $400,000 ($450,000 joint) income threshold. For taxpayers below these thresholds, the 15% rate remains. This tax rate increase, along with the Medicare tax, will result in a top effective tax rate of 23.8% for long term capital gains and dividends. Similarly, short term capital gains will be taxed at ordinary rates plus the 3.8% NIIT, for an effective top rate of 43.4%. Estate, Gift and Generation Skipping Transfer Tax The credit amount remains at $5 million per individual donor and continues to be inflation-indexed from 2010 (rounded in $10,000 increments). The inflation adjusted credit was $5.12 million in 2012 and is expected to be $5.25 million in 2013. An important component of the new legislation is the reunification of the gift and estate tax credit amount. In other words, the $5.25 million credit is available for use with lifetime gifts or estate transfers at death. The top transfer tax rate on gifts exceeding the credit amount has increased from 35% to 40%. Phase Limitation on Itemized Deductions Before 2010 itemized deductions for taxpayers above a certain income level were partially phased out, thus increasing income taxes as a consequence of reduced deductions. In 2013, if a taxpayer’s Adjusted Gross Income (“AGI”) is above a threshold amount ($250,000 for individual taxpayers, $275,000 for head of households and $300,000 for joint filers), itemized deductions will be reduced by an amount equal to the lesser of 3% of the excess over the threshold or 80% of allowable deductions. Taxpayers apply 80% to the total of their itemized deductions other than the deductions for medical expenses, investment interest, casualty losses and thefts, and gambling losses. As a result of the phase-out of deduction for high income taxpayers, marginal effective tax rates are higher than marginal statutory rates for such taxpayers. Roughly speaking, the 3% reduction of a deduction against income taxed at 43.4% raises the tax rate on marginal income by 1.3 percentage points. Alternative Minimum Tax (AMT) The new bill increases the AMT exemption amounts from $33,750 to $50,500 for individual filers and from $45,000 to $78,750 for joint filers, indexed for inflation from 2013. IRAs The Pension Protection Act of 2006 allowed a taxpayer to exclude from income, distributions of up to $100,000 to a qualified tax-exempt organization (i.e., a public charity but not a supporting organization or a donor advised fund) from a traditional IRA. This provision has been extended for 2012 through December 31, 2013. The distribution must be made directly to the public charity and the IRA owner must have attained age 70½. The distribution will be counted for purposes of the required minimum distributions from an IRA but will be ignored for purposes of computing the limitations on charitable deductions in the year of the gift. Notably, the $100,000 exclusion is per taxpayer so married taxpayers (with their own IRAs) may each take advantage of the provision. Moreover, this provision contains a transition rule, which allows a distribution made in January 2013 to qualify as a 2012 distribution and allows an IRA distribution made December 2012 to qualify if subsequently paid to a qualifying charity in January 2013 (and meeting all other requirements). Roth Conversions In 2012, only the distributable amount (i.e. IRA balances or 401(k) s where the owner has either separated from employment or is over 59½) in pre-tax retirement plans could be converted to Roth accounts. The new bill allows any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable. The conversion from a pre-tax retirement plan to a Roth plan results in the recognition of taxable income on all the gains and income in the plan. Retroactive Extension of 100% Exclusion of Small Business Capital Gains Generally, non-corporate taxpayers may exclude 50% of the gain from the sale of small business stock acquired at original issue and held for more than five years. For stock acquired after February 17, 2009 but by September 27, 2010, the exclusion was increased to 75 percent. For stock acquired after September 27, 2010 and before January 1, 2011, the excluded amount was increased to 100%. The 2010 Tax Relief Act further extended the 100% exclusion through December 31, 2011. The new legislation retroactively extends the exclusion of 100% of the gain from Qualified Small Business Stock to stock acquired after September 27, 2010 and before January 1, 2014. Qualifying Small Business Stock is from a C-corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement. The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation. Other The personal exemption phase-out has been reinstated, which means that high income taxpayers will have to reduce the total of their personal exemptions by 2% for every $2,500 by which their annual gross income exceeds the threshold amount for their filing status ($250,000 for individual filers, $275,000 for head of households and $300,000 for joint filers), indexed for inflation from 2013.

What Makes a Good Agent

As many of you know, within Efinity Group there exists a full service Insurance firm, Efinity Insurance. One of the questions we are often asked is; "What makes a good insurance agent?" It's an interesting question. We pulled the following information from the Independent Insurance Agents & Brokers of America website and believe it best represents both the expectations and professionalism one should expect from his/her personal insurance agent. http://www.independentagent.com When it comes to financial security and insurance protection, most people want a long-term relationship with a trusted adviser they can turn to many years into the future. In fact, a survey by the Independent Insurance Agents & Brokers of America (IIABA) found that: Three out of four insurance consumers use an agent when purchasing personal insurance. More than half the respondents over age 55 have purchased insurance from the same agent for at least 20 years. More than 60 percent say they value the opportunity to discuss insurance with a real person. If you’re like most people, you want to develop a long-term relationship with an agent, too. So, how do you make sure the agent is professional and reputable? Here’s what to look for: 1. Independence. Independent agents represent an average of eight different companies-not just one. They can evaluate and compare the products of several insurance companies to find the right combination of coverage and value. 2. Licensing by the state. 3. Number and names of companies the agent represents. 4. Number of years the agent and agency have been in business. 5. The agent’s professional designations. For example, CPCU (Chartered Property and Casualty Underwriter) and CLU (Chartered Life Underwriter) are among the industry's most rigorous and prestigious designations. 6. Areas of specialization. Some agents and agencies have experience in specialized products, such as insurance for a farm, a classic car, or a home business. 7. Recommendations and referrals. How did you hear about the agent and the agency? Did someone you trust refer you? Ask the person for specific details about the experience. 8. Full-service capability. Is this a full-service agency for auto, home, health, and disability products? 9. Service representatives. Ask who will handle your account for routine updates and transactions. 10. Hours. Emergency numbers. Claims service. Ask if you can contact the agency after- hours for claims or other emergency needs. 11. Claims help. Ask if the agent plays a role in handling and tracking claims. Will the agent help resolve disputes that might arise with an insurance company, for example? 12. Policy review. Does the agency occasionally review and update policies to make sure your insurance is keeping pace with changes in your situation? 13. Community involvement. Does your agent participate in any local organizations, boards, volunteer activities, or other civic endeavors? 14. Industry associations. Does your agent participate in any local, state, or national trade associations? These activities often signify professionalism and a commitment to continuing education in the insurance field. We hope you found some of this information valuable.

Welcome to Spring - Home Buying Time!!

With Spring upon us, and new buyers out looking for houses, we thought today might be a good time to review the basics of what lenders look for as they decide to approve (or deny) mortgage applications. For at least the last two decades we have heard them called “The 4 C’s of Underwriting”- Capacity, Credit, Cash, and Collateral. Guidelines and risk tolerances change, but the core criteria do not.

CAPACITY
CAPACITY is the analysis of comparing a borrower’s income to their proposed debt. It considers the borrower’s ability to repay the mortgage. Lenders look at two calculations (we call ratios). The first is your Housing Ratio. It simply is the percentage of your proposed total mortgage payment (principal & interest, real estate taxes, homeowner’s insurance and, if applicable, flood insurance and mortgage insurance – like PMI or the FHA MIP) divided by your monthly, pre-tax income. A solid Housing Ratio (often called the front end ratio) would be 28% or less; although, at times loans are approved at a significantly higher number. That’s because your front end ratio is looked at in conjunction with your back end ratio.
The back end ratio (referred to as your Debt Ratio) starts with that mortgage payment calculation from the Housing Ratio and adds to it your recurring debts that would show up on your credit report (auto loans, student loans, minimum credit card payments, etc.) without taking into consideration some other debts (phone bills, utility bills, cable TV). A good back ratio would be 40% or less. However, loans sometimes are granted with higher debt ratios. Understand that every application is different. Income can be impacted by overtime, night differential, bonuses, job history, unreimbursed expenses, commission, as well as other factors. Similarly, how your debts are considered can vary. Consult an experienced loan officer to determine how the underwriter will calculate your numbers.

CREDIT
CREDIT is the statistical prediction of a borrower’s future payment likelihood. By reviewing the past factors (payment history, total debt compared to total available debt, the types of monies: revolving credit vs. installment debt outstanding) a credit score is assigned each borrower which reflects the anticipated repayment. The higher your score, the lower the risk to the lender which usually results in better loan terms for the borrower. Your loan officer will look to run your credit early on to see what challenges may (or may not) present themselves.

CASH
CASH is a review of your asset picture after you close. There are really two components – cash in the deal and cash in reserves. Simply put, the bigger your down payment (the more of your own money at risk) the stronger the loan application. At the same time, the more money you have in reserve after closing the less likely you are to default. Two borrowers with the same profile as far as income ratios and credit scores have different risk levels if one has $50,000 in the bank after closing and the other has $50. There is logic here. The source of your assets will be examined. Is it savings? Was it a gift? Was it a one-time settlement/lottery victory/bonus? Discuss how much money you have and its origins with your loan officer.

COLLATERAL
COLLATERAL refers to the appraisal of your home. It considers many factors – sales of comparable homes, location of the home, size of the home, condition of the home, cost to rebuild the home, and even rental income options. Understand the lender does not want to foreclose (they aren’t in the real estate business), but they do need to have something to secure the loan against, in case of default. In today’s market, appraisers tend to be conservative in their evaluations. Appraisals are really the only one of the 4 C’s that can’t be determined ahead of time in most cases.

Now, each of the 4 C’s are important, but it’s really the combination of them that is key. Strong income ratios and a large down payment with strong reserves can offset some credit issues. Similarly, long and strong credit histories help higher ratios….and good credit and income can overcome lesser down payments. Talk openly and freely with your loan officer. They are on your side, advocating for you and looking to structure your file as favorably as possible. We hope you find some value in this information as you elect to move up, move down or accross this great country of ours!

How to ensure your home isn't under-insured

For many of our clients, the following information is view similarly to going to the dentist. That said, it's mission critical that your family review the following and please get with one of our agents for a policy review.

Fact is, most homeowners have insurance. All homeowners who have a mortgage must have insurance. The question is: do you have enough insurance? Will your policy cover you if the worst happens – if your house is totally destroyed and you need to rebuild?

According to the Insurance Information Institute’s 2011 Insurance Pulse Survey, nearly half (48 percent) of all homeowners in the U.S. believe the insured value of their home is linked to its market value.

“They are two different things,” says Michael Barry, the institute’s vice president of media relations. “When it comes to buying homeowners insurance, you have to look at the insured value – what would it cost to rebuild my home in its current location with comparable construction materials if I were to have a total loss? And that number does not represent the market value.”

With home prices in the flat, it’s easy to assume that you can save money by lowering the insurance coverage. Unfortunately, it doesn’t work that way. The cost of building materials – copper, lumber, steel, concrete – have all gone up dramatically the last few years.

“It’s truly unfortunate that people don’t understand market value versus replacement cost,” says Ned, the vice president of claims for a regional insurance company. He agreed to talk to me as long as I did not use his real name.

Ned told me about a recent claim for a house that burned to the ground and the homeowner was grossly under-insured. He had coverage for up to $350,000, but the estimated construction cost came in at $500,000. Ned says this customer was “one of the rare individuals who accepted responsibility” for the situation.

The insurance company did its best to help, but the new house did not have the quality of the original. The homeowner had to downgrade the kitchen appliances. Instead of granite countertops, he went with composite. He also had to settle for a lower-quality roof; one that was guaranteed for 30 years instead of 40.

Getting the right coverage is your responsibility. We advise reviewing your insurance coverage each year with our agents. Despite our reminders and email notifications, most people don’t do this.

Angie’s List recently polled its members and found that nearly one-third of those who responded hadn’t checked their home insurance policies for two years or more.

“This is your responsibility,” says Angie Hicks, the website’s founder. “Your insurance agent doesn’t know what you’ve done to your house. They don’t know if you added a deck or bought an expensive piece of jewelry. Only you know that information.”

So put this on your calendar to make sure you’re reviewing your policy at renewal time.

At the very least, you want to know what you have. Then you can tweak the policy or comparison shop. Make sure you don’t buy too much insurance. You don’t need to insure for the value of the land your house sits on.

According to the Insurance Information Institute, there are four elements that help you decide how much coverage to get:

- The cost to rebuild the structure.

- The cost to replace the contents.

- Additional living expenses if you have to move out during repairs.

- Your liability to others who might get hurt on your property.

If you’re looking to save money raise the deductible, don’t cut back on coverage. The Insurance Information Institute says increasing the deductible from $500 to $1,000 could reduce premiums by up to 25 percent.

Remember: the amount of money the policy will pay for contents and additional living expenses is typically based on the coverage of the structure.

It’s important to have a home inventory to show the insurance company if there is a loss. The free app MyHOME Scr.APP.book (available for iPhones and Android phones) from the National Association of Insurance Commissioners lets you quickly photograph, grab bar codes and serial numbers and store them digitally. There is also free software for your computer at knowyourstuff.org, a site run by the insurance industry.

We encourage you to spend time on both. It'll be time well spent.

Securities Lending – Share Hypothecation

For the last several months, Efinity Finanical has quietly grown in the Dallas Fort Worth market. Those clients already presently working with our advisors are well aware of the weekly commentary we publish. Last week's was so good we felt it should repost here on the Efinity Report. Enjoy.

Securities Lending – Share Hypothecation
One of the main issues facing the financial world today is the difficulty investors have estimating the effect that a specific financial issue, such as a 50% haircut on Greek bonds, may have on the global or domestic financial and banking system.

So why can’t the people who run the European Central bank, the U.S. Central Banks Federal Reserve and Wall Street estimate the probability and effect of a bank going out of business? It looks like the reason some banks are classed as “too big to fail” is the fact that no one knows what will happen if they DO fail!

The reason is the financial system is based on everyone lending and making promissory contracts with each other. The system has evolved to a highly leveraged point where very little real cash or collateral exists. Looking at ‘cash in the bank’ has been replaced by credit ratings and rates as means to judge the fiscal security of a loan to a counterparty.

Unfortunately, these ratings and loan rates can change quickly; confidence is especially ephemeral these days. Take Italy, for example, whose cost of borrowing has nearly doubled in a period of weeks. This means the capital held by banks in the form of Italian bonds has shrunk by nearly 50%.

European banks are currently levered by approximately 30 to 1 – for every $1 they have in actual capital, they have $30 in borrowings. U.S. banks are current around half that level.

Shorting the System
Another reason for high volatility is the increasing ability of financial firms to profit from betting against markets - Shorting. Probably the most infamous example was Goldman Sach’s $550 million fine relating to fraud charges over the shorting of (seeking to profit from betting against) mortgage securities they had previously profited from by advising clients to buy. The fund was called Abacus.

Securities Lending
Securities Lending, a.k.a. Share Hypothecation, is a little known method for large financial firms to leverage the financial system - proponents call it the lubrication of securities markets. It certainly facilitates increased short selling activity. It is estimated that $1.9 trillion of securities are out on loan every day.

Securities Lending allows a Wall Street firm to loan shares to another firm in return for both a transaction fee and collateral to cover the loan. Although this may sound ‘normal’ among large companies, many Wall Street investor custody agreements include securities lending clauses allowing the firm to lend out shares owned by retail investors.

Yes, investment banks and the like regularly take their investors’ shares and loan them to companies looking to short the market.

For any financial relationship you have, check to see if the company participates in Securities Lending. If they do and the lender goes bankrupt, you will lose your shares!


Why Lend Securities?
Financial companies often “Lend” securities to facilitate short selling. Selling a stock “Short” means borrowing stock from a Lender for a period then selling the stock to a Buyer. At the end of the borrowing period, the Borrower has to give the stock back to the Lender.

If the price of the stock goes down during the lending period, at the end of the period the Borrower buys the stock in the market at the current reduced market price and gives it to the Lender. The Borrower therefore pockets the difference between the price they had originally sold to the Buyer at the start of the lending period and the price they had just paid for it at the end of the lending period.

If the stock rises in value during the borrowing period, the Borrower loses the difference in the original sale price and the price they have to buy it back to satisfy the loan. This practice avoids the short company for being accused of “Naked Shorting”, the practice of selling a stock short without owning the underlying stock.

Take a moment to think how frightening this concept is…in order to make a big negative bet against a company or country, all a Wall Street company has to do it find a counterparty who is willing to loan the representative securities for a nominal fee.

Even worse, the collateral to cover the trade is rarely “tangible”; it’s often other financial contracts. It is therefore very easy to see how confidence can rapidly evaporate in financial markets.

Company versus Country
One interesting result of the above is the changing risk/credit perception between many large corporations and a number of countries, chiefly those in Europe. Sovereign fixed income investments that were previously thought to be low volatility are now behaving like Tech stocks! At the same time, high yield corporate bonds are relatively stable.

Countries have been able to run whatever fiscal policy they wanted because their credit rating always allowed them to borrow and borrow at low interest rates. Companies generally had to maintain pristine balance sheets to enjoy anything like similar access to debt. Moreover, everyone assumed sovereign debtors were highly creditworthy whereas companies have to prove their creditworthiness on a quarterly basis.

Now that the confidence in the finances of many countries has disappeared, we are seeing massive swings in the prices of sovereign bonds; those securities that we all previously thought were very stable. Hedge Funds and short sellers are able to use leverage to bet against the debt of countries in the same way they contributed to the decline of Lehman Brothers.

In our opinion, large multinationals have managed their finances exceptionally well in recent years and their debt (Bonds) deserve the stability currently being shown. We have long stated that the world continues to grow in new areas and different ways. Companies and not countries seem to be doing much better at managing this change.

As we called it, Double Dip Housing has arrived

Here are latest from S&P/Case Shiller report out this morning.

• 4.2 percent decline in Q1 of 2011, 2.9 percent from one year ago.

• The 10 cities fell .6 percent in March

• Top 20 cities fell .8 percent in March

What's probably most concerning and begs to question, what happened to the home buyer tax credits which were supposed to stimulate the economy and housing market (not necessarily in that order)?

Perhaps the best news to come out of this will be evidence that mortgage rates will remain low as yields become subject to basic economic supply and demand. With new mortgage transaction counts down, there just isn't enough fixed income products out there to buy outside of corporate bonds and US Treasuries..

To further the point, the National Association of Realtors released an article the other day verifying the median income of real estate agents has fallen 22% to $34,100? Median income….half make more and half make less. Also, a mere 16% of national real estate agents made 6 figures last year. I’m sure you’re curious to what that number represents and it’s 176,556 agents.

Ok, so all this wonderful news is out there. Here's our take on how to truly jumpstart both the housing industry and this economy.

• Bring back down payment assistance. I know the GSE's (Fannie Mae and Freddie Mac) despised these buyer assisted grant programs. Here's how the vast majority of them worked: Seller of the home (at closing) would make a "charitable donation" to a Non-profit organization (say a church), the church in turn work pocket a $900 admin. fee but remit the rest of the month (at times up to $10,000) towards the buyers closing cost. True the default in loans structured in the aforementioned way had higher default levels but now that HUD has grossly increased both the initial upfront Mortgage Insurance Premium and Monthly Premium, there's got to be a pretty decent model which supports a 3-6% default and still ensure "success" in homeownership.

• Housing is only so important to an already service oriented country like the US. Manufacturing MUST return. Leadership in Washington DC must bring back significant incentives to "defend" this countries manufacturing arm.

• Flat tax. If this county remains (as we suspect it will) a service oriented country, we must tax it accordingly whereby those leveraging the most services or consuming the most goods, in turn pay more.

Simple, now where do we petition these simple requests?

Someone else seems to "get it"

Rising food, gas prices lift U.S. consumer inflation

http://www.msnbc.msn.com/id/42605692/ns/business-eye_on_the_economy/
By CHRISTOPHER S. RUGABER
WASHINGTON— Americans are paying more for food and gas, a trend that could slow economic growth in the months ahead.

The Consumer Price Index rose 0.5 percent in March, the Labor Department said Friday. That
matched February's increase, the largest since the recession ended in June 2009. In the past 12 months, the index has increased 2.7 percent, the biggest rise since December 2009.

Excluding the volatile food and gas categories, the so-called core index rose 0.1 percent and it is up only 1.2 percent in the past year.

Consumers are spending more, but the steep rise in food and gas prices could limit their
ability to purchase discretionary goods and services. Consumer spending makes up 70
percent of economic activity.

Rising inflation has caused many analysts to reduce their estimates for economic growth in
the January-March quarter from roughly 3 percent or higher to as low as 1.5 percent.

Gasoline jumped 5.6 percent last month and has risen nearly 28 percent in the past year.
Consumers paid an average price of $3.81 a gallon nationwide on Friday according to the
travel group AAA.

Food prices rose 0.8 percent last month, the largest increase in almost three years. Prices
for fruits and vegetables, dairy products, chicken and beef all increased. Coffee costs
rose 3.5 percent.

Separately, the Federal Reserve said U.S. factories produced more consumer goods,
business equipment and raw materials in March, boosting manufacturing activity for the
ninth straight month. Overall industrial production increased 0.8 percent.

Factory production, the largest single segment of industrial production, increased 0.7 percent advertisementadvertisement Rising food, gas prices lift U.S. consumer inflation
Trend could slow economic growth in the months ahead, new report suggests last month. Manufacturing has been a key driver of economic growth since the recession ended. That continued last month, even with supply chain disruptions stemming from the
crisis in Japan.

Manufacturers, food processors and other producers are facing higher costs for oil,
grains and other commodities. But only some of those increases are reaching the consumer.
Many retailers are reluctant to pass on the higher prices for fear of losing price-
conscious customers.

Vegetable bandits strike as food prices soar

Consumers have seen wages and salaries stagnate in the past year, limiting their ability
to pay more for many goods. According to a separate government report Friday, average
hourly earnings for all employees, adjusted for inflation, dropped 1 percent in the past 12
months.

Stagnant wages are a big reason that most Federal Reserve policymakers say the spike in
gas and food will have only a modest and temporary impact on inflation.

"Nothing here to change the Fed's view that the surge in commodity prices can be ignored as
long as it doesn't lead to second-round effects in wages and core inflation," said Paul
Ashworth, chief U.S. economist at Capital Economics.

Who can you trust?

Here's a question I would like to pose for the loyal Efinity audience.

Is the economic environment in this country really improving or are we all being fed a stream of special interest commentary which want us to think things are getting better?

I have two separate examples for your collective review which point to the latter. I for one have a HUGE problem with this. It's important to note that I include our government included as one of the special interest groups.
Example #1
As reported by the Wall Street Journal, Federal Reserve Chairman Ben Bernanke Monday downplayed inflation fears which led some of colleagues to recently warn tighter monetary policy may be needed to keep prices in check. Bernanke said the rise in global commodity prices is likely to be temporary and shouldn't translate into a broader inflation problem. However, the Fed chief was quick to add that if his prediction is wrong and inflation begins to mark strong gains, the central bank would respond. "I think the increase in inflation will be transitory," Bernanke said when asked to further explain.
This has been a consistent them from the Fed Chairman for the past 18 months. In no way shape or form believe my limited view trumps the access to data the Fed Chairman has, however I do believe that statistics can be shown in many ways to shape many opinions. And if left-unchecked can fog the real issue which is that inflation is here, it will affect the economic recovery of this country and there is a strategic advantage for the Fed to not fully publicize the real issue.

Allow me to explain further (if you don't care to read through this, you can skip to my summary). First, one has to understand how the Bureau of Labor Statistics determines the Consumer Price Index (CPI). The CPI is a measure of the average change in prices over time of goods and services purchased by households. The Bureau of Labor Statistics publishes CPIs for two population groups: (1) the CPI for Urban Wage Earners and Clerical Workers (CPI-W), which covers households of wage earners and clerical workers that comprise approximately 32 percent of the total population and (2) the CPI for all Urban Consumers (CPI-U) and the Chained CPI for All Urban Consumers (C-CPI-U), which cover approximately 87 percent of the total population and include in addition to wage earners and clerical worker households, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force. The CPIs are based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors' and dentists' services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 87 urban areas across the country from about 4,000 housing units and approximately 26,000 retail establishments-department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments. All taxes directly associated with the purchase and use of items are included in the index. Prices of fuels and a few other items are obtained every month in all 87 locations. Prices of most other commodities and services are collected every month in the three largest geographic areas and every other month in other areas. Prices of most goods and services are obtained by personal visits or telephone calls of the Bureau's trained representatives.

In calculating the index, price changes for the various items in each location are averaged together with weights, which represent their importance in the spending of the appropriate population group. Local
data are then combined to obtain a U.S. city average. For the CPI-U and CPI-W separate indexes are also published by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for 27 local areas. Area indexes do not measure differences in the level of prices among cities; they only measure the average change in prices for each area since the base period. For the C-CPI-U data are issued only at the national level. It is important to note that the CPI-U and CPI-W are considered final when released, but the C-CPI-U is issued in preliminary form and subject to two annual revisions.

The index measures price change from a designed reference date. For the CPI-U and the CPI-W the reference base is 1982-84 equals 100. The reference base for the C-CPI-U is December 1999 equals 100. An increase of 16.5 percent from the reference base, for example, is shown as 116.500. This change can also be expressed in dollars as follows: the price of a base period market basket of goods and services in the CPI has risen from $10 in 1982-84 to $11.65.

Now that you have a better understanding, here's the most recent summary dates March 17th (see http://bls.gov/news.release/cpi.nr0.htm)
I'd like to point you to a few items once you've read through this list.

Seasonally adjusted changes from preceding month
Un-adjusted 12-mos.
Aug. Sep. Oct. Nov. Dec. Jan. Feb. ended
2010 2010 2010 2010 2010 2011 2011 Feb. 2011

All items.................. .2 .2 .2 .1 .4 .4 .5 2.1
Food...................... .1 .3 .1 .2 .1 .5 .6 2.3
Food at home............. .0 .4 .1 .2 .2 .7 .8 2.8
Food away from home (1).. .3 .3 .1 .1 .1 .2 .2 1.6
Energy.................... 1.6 1.1 2.5 .1 4.0 2.1 3.4 11.0
Energy commodities....... 2.6 2.2 4.4 .7 6.4 4.0 4.8 19.3
Gasoline (all types) .... 2.9 2.2 4.5 .7 6.7 3.5 4.7 19.2
Fuel oil (1)............ .9 .8 4.7 4.2 4.9 6.8 5.8 27.1
Energy services.......... .4 -.4 .0 -.8 .6 -.6 1.1 .2
Electricity............. .1 -.1 .2 .6 .3 -.5 .4 2.2
Utility (piped) gas
service.............. 1.4 -1.4 -.6 -5.3 1.7 -1.2 3.4 -5.9
All items less food and
energy................. .1 .0 .0 .1 .1 .2 .2 1.1
Commodities less food and
energy commodities.... .1 -.2 -.2 .0 -.1 .2 .2 .0
New vehicles............ .2 .1 -.1 -.2 -.1 -.1 1.0 .9
Used cars and trucks.... .9 -.4 -.6 .1 -.1 -.3 .1 1.9
Apparel................. .0 -.5 -.2 .1 .1 1.0 -.9 -.4
Medical care commodities
(1).................. .2 .3 .1 .2 .1 .5 .7 2.7
Services less energy
services.............. .0 .1 .1 .2 .1 .1 .2 1.5
Shelter................. .0 .0 .1 .1 .1 .1 .1 .8
Transportation services .0 .3 .3 .4 .2 .6 .5 3.5
Medical care services... .2 .7 .2 .2 .3 -.1 .4 3.0


Our SummaryWhile statically speaking, the adjusted 12 month index reflected a 2.1% increase (before seasonal adjustments), unless you're radically different than most people I know and don't spend equally on a whole range it items (including evidently a whole lot of apparel) this report summarized simply does not accurately reflect the present sign of the times. Which is; food, energy and gasoline are MAJOR drivers for people's spending. Car sales are down. Home sales are down. So if we were to focus on the net spending habits of people and clients (we deal with); here's the summary of inflation as it affects them:
• Food - 2.3 increase
• Food at home - 2.8% increase
• Energy - 11% increase
• Gasoline (all types) - 19.2% increase
Interesting that all of these figures are materially higher than the 2.1% reported CPI. The takeaway here is simply that disposable income is being reduced. As a country moving away from manufacturing and more towards consumer services, disposable income is imperative to a healthy and strong recover. Same goes for jobs. Perhaps this is a prime reason channels like CNBC dedicate some much talk of crude oil prices.

Example #2 forthcoming in the next Efinity Report post.

Mortgage rates steady

The average rate on the 30-year fixed mortgage changed little this week.

Freddie Mac said Thursday the average rate rose to 4.81 percent this week from 4.80 percent the previous week. It hit a 40-year low of 4.17 percent in November.

The average rate on the 15-year loan slipped to 4.08 percent from 4.09 percent. It reached 3.57 percent in November, the lowest level on records starting in 1991.

Rates have been little changed this year after spiking more than half a percentage point in the last two months of 2010. Investors sold off Treasury bonds during that time, driving yields lower. Mortgage rates tend to track the yield on the 10-year Treasury note.

High foreclosures, job worries and expectations that home prices will fall further have kept many potential homebuyers on the sidelines. Historically low mortgage rates haven’t been enough to jumpstart the housing market.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on a five-year adjustable-rate mortgage fell to 3.69 percent from 3.70 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

The average rate on one-year adjustable-rate home loans was unchanged at 3.26 percent.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year and 15-year loan in Freddie Mac’s survey was 0.8 point. The average fee for the five-year ARM was 0.7 point, and the fee for the 1-year ARM was 0.6 point. - JANNA HERRON | THE ASSOCIATED PRESS

In short, get your cheap money now as the inflation monster is coming.

Our 2011 Outlook (no 3-D glasses required)

Over the last 90 days I have been keeping a watchful eye on our equity markets, general economic news and perhaps more important, the US consumer sentiment. There have been encouraging signs that the economy may have finally stopped sliding into the abyss and by all accounts moving forward under the new financial paradigm. I’d like to refer to this as the “New Normal”. Unemployment has held steady, the Christmas shopping season appears to have beat expectations, the stock market has had a fantastic run over the last 180 days. GM complete its bankruptcy process and most of the largest banks have repaid the TARP money lent to them. Hey, JP Morgan Chase recorded outstanding record profits for Q4.
All of that said, before we take that collective sigh’ and pat ourselves and our fearless leaders in Washington on their backs for a job well done, I’d like to turn some our attention to a news story which was recorded by 60 Minutes in which the title Day of Reckoning and where wall street brain trust Meredith Whitney whose focus of this story was to paint a fairly bleak picture of the individual State balance sheet(s) and the windfall of potential risks. While the news story (seen here http://www.cbsnews.com/video/watch/?id=7166293n ) did have in my humble opinion a few misleading conversation points, it is true that the bulk of the attention has been paid to the national financial deficit problem, not our individual state issues (see Illinois) where these problems have been getting progressively worse over the last 10 years. The issue I am most concerned with as it directly relates to not only to Efinity’s core businesses, but our countries general way of life; the seemingly non-issue of inflation. There has been a growing undertow of consumer inflation in several areas and while gas prices tend to get the most headline coverage, if you compare just the last 6 months of the everyday costs of meat, bread, milk, corn, you’ll begin to see changes which on the onset don’t appear much (.10c to .30c) however these have been in a fairly stable gas price environment. With the highly anticipated summer gas price increase in the 20-30% range (as found in the futures market), we could see a dramatic change in the ability for many American’s to operate their daily lives as they have been. For our older members of society, it’s even worse as not only did many of them have significant capital stripping take place from 2007-2009 but there is a HUGE gap in anticipated appreciation and available returns of investment in savings and market rates. Add the growing concerns in the municipal bond markets and you’ll find the options are even more limited. So, in short order 2011 will be more of the same. A country with potential but with serious legacy problems it needs to deal with, which will come at a cost to all of us and an impediment to GDP.