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Is the Fed Going
To Cut Interest Rates?
The Fed’s number
one mission is to fight inflation. Many so-called experts look to grab headlines
by calling for the Fed to lower rates in an effort to bolster housing, stocks,
employment; sub-prime...you fill in the blank. But they were proved incorrect
again, as Chairman Ben Bernanke underscored yesterday that "core inflation
remains uncomfortably high" and also suggested that despite recent signs of
slower economic growth, the Fed isn’t inclined to lower interest rates anytime
soon.
The media is already trying to downplay Bernanke's testimony, spin the story,
and suggest that the Fed may cut rates to help the sub-prime mortgage sector.
This isn't going to happen. It’s MY job as YOUR MORTGAGE PLANNER to get the real
word out...the Fed will not cut rates, even at the expense of an economic
recession, as long as core inflation remains above the their target zone of 2%
on the Core Personal Consumption Expenditure Index (PCE). And we won't have to
wait very long to get the latest read on PCE, as it is due out tomorrow at
8:30am ET.
Its MY job to keep watching rates and industry trends for you so YOU don’t have
to.
Let me know if you have any questions about what’s going on with RATES or the
SUB-PRIME situation.
News Flash -
Conforming Loan Limits 12/17/2006
The Office of Federal Housing Enterprise Oversight (OFHEO),
which is the agency that supervises Fannie Mae and Freddie Mac, announced today
that the maximum 2007 conforming loan limit for single family mortgages
purchased by Fannie Mae & Freddie Mac in the Continental U.S. will remain at the
2006 level of $417,000 for one unit properties. 2-Units: $533,850. 3-Units:
$645,300. 4-Units: $801,950.
MORTGAGE INSURANCE
Now tax deductible!
Congress approved
a bill Saturday, Dec. 9, to make mortgage insurance premiums tax deductible.
Mortgage
insurance premiums will be 100% deductible for households whose adjusted
gross income is $100,000 or less.
The bill,
awaiting a final signature, is effective for the 2007 tax year on
loans closed on or after January 1, 2007.
Financing
with PMI simplifies the mortgage process for your borrowers, increases their
buying power, broadens their cash-flow options and allows for tapping into
equity and refinancing more easily. Now that it's tax deductible, you have one
more good reason to make PMI an option for them.
FAQs
Why is PMI
insurance now tax-deductible?
Congress recently passed legislation that allows mortgage insurance premiums to
be tax-deductible on loans originated for transactions beginning Jan. 1, 2007.
Who is eligible
for the PMI deduction?
Borrowers with household adjusted gross income of $100,000 or less purchasing a
home in 2007 will able to deduct the full cost of the mortgage insurance they
pay during the 2007 tax year.
How does the PMI
tax deduction work?
Just as your interest payments on your mortgage are tax-deductible, reducing
your overall taxable income, you will now be able to deduct the mortgage
insurance portion of your payment as well.
What is the
lender’s responsibility?
To provide the borrowers with a year-end statement reflecting total mortgage
insurance premium paid.
How much of
the PMI premium can be deducted?
Borrowers with household adjusted gross income of $100,000 or less will able to
deduct the full cost of the mortgage insurance they pay during the 2007 tax
year.
WHY IS THIS
IMPORTANT TO YOU??
This is important
to know as a consumer because it now brings high LTV (loan to value) financing
back to a competitive position compared to doing “piggy-back” mortgages.
In the last couple years I’ve compared purchase loans over 80% WITH MI to doing
80/10, 80/15 or 80/20 combination mortgages and more times than not it was a
lower payment to YOU to go with the PIGGY-BACK combo. With the tax
deductibility of the interest and NOT the monthly MI payment it added to the
decisions to go with the piggy-backs. Now it’ll be closer to OR better to
consider MI on purchase loans.
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