Inside Lending Newsletter -For the week of January 9, 2012 – Vol. 10, Issue 2

>> Market Update  QUOTE OF THE WEEK..."Opportunities are disguised by hard work, so most people don't recognize them."--Ann Landers INFO THAT HITS US WHERE WE LIVE...The latest opportunity in real estate came December 28, when the Federal Housing Administration extended the waiver of its "anti-flipping" rule through the end of 2012. This lets homebuyers, who need FHA-insured financing, purchase homes that were bought by the seller in the last 90 days. And it gives investors looking to rehab and flip properties an expanded market, including first-time homebuyers and others without large down payments, who need FHA-backed loans. The Mortgage Bankers Association (MBA) reported that during 2011, near-record-low mortgage rates drove more homeowners to seek refinancing, moving that MBA index up more than 60%. But demand for purchase loans fell versus 2010, although that year's activity was boosted by the homebuyer tax credit incentives. BUSINESS TIP OF THE WEEK...It's great to get organized at the start of a new year. The key is to begin. Focus on just one project. Then break it down into smaller parts and accomplish one thing each day, or week, until done! >> Review of Last Week UP START...For investors, 2012 began in the right direction as stocks ended the first week of the year UP. But this result was due mainly to an upsurge on Tuesday that was big enough to offset tepid performances the next three days, when traders got jittery over Europe. Spain was in the spotlight again, with new player Hungary now adding to the financial uncertainty. The net result was a weaker Euro, falling about 0.6% to a new 16-month low of $1.27. Time to take that European vacation. Encouragement came with manufacturing growing in December at its fastest pace in six months. Weekly initial jobless claims dropped again, to 372,000. The December employment report was an upside surprise, with 200,000 new nonfarm jobs showing up and the unemployment rate inching down to 8.5%. But a few observers were concerned there's probably some seasonality in those numbers. ISM Services, which tracks the sector responsible for over 80% of U.S. jobs, came in a little lower than expected, although still in growth territory. For the week, the Dow ended UP 1.2%, at 12360; the S&P 500 closed UP 1.6%, to 1278; and the Nasdaq gained 2.7%, to 2674. The bond market elicited mixed results for the week, with Treasuries trending lower, but continuing Euro worries supported prices elsewhere. The FNMA 3.5% bond we watch ended the week UP .78, at $103.05. Average fixed mortgage rates across the U.S. started the new year at or near record lows as tracked by Freddie Mac's weekly survey. DID YOU KNOW?..."Home on the Range" is one of the most famous songs with "home" in its title. It was written by Dr. Brewster Higley in 1876 and is the official state song of Kansas. >> This Week’s Forecast FED OPINIONS, HOLIDAY SHOPPING, EXPORTS AND CONSUMER FEELINGS... Wednesday, the Fed's Beige Book reveals views on the economy from Federal Reserve Districts around the country. Thursday will gauge the consumer's enthusiasm for holiday shopping, as measured by December Retail Sales, forecast to be up. The week ends with the November Trade Balance, expected to grow (not so good) and Michigan Consumer Sentiment, also predicted to increase (good). >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of Jan 9 – Jan 13  Date Time (ET) Release For Consensus Prior Impact W Jan 11 10:30 Crude Inventories 1/7 NA 2.209M Moderate W Jan 11 14:00 Fed's Beige Book Jan NA NA Moderate Th Jan 12 08:30 Initial Unemployment Claims 1/7 375K 372K Moderate Th Jan 12 08:30 Continuing Unemployment Claims 12/31 3.588M 3.595M Moderate Th Jan 12 08:30 Retail Sales Dec 0.4% 0.2% HIGH Th Jan 12 08:30 Retail Sales ex-auto Dec 0.4% 0.2% HIGH Th Jan 12 10:00 Business Inventories Nov 0.5% 0.8% Moderate F Jan 13 08:30 Trade Balance Nov -$44.3B -$43.5B Moderate F Jan 13 09:55 Univ. of Michigan Consumer Sentiment Jan 71.0 69.9 Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months...Economists believe the Fed Funds Rate will stay at super low levels for awhile. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Jan 25 0%–0.25% Mar 13 0%–0.25% Apr 25 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jan 25      <1% Mar 13      <1% Apr 25      <1%

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