Monday, November 29, 2010

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)


REALTOR® Magazine-Daily News-New Lending Guidelines Benefit Young Borrowers

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Market Recap - Week Ending November 26, 2010

During the short Thanksgiving week, turmoil in Korea had the greatest impact on mortgage rates. A wide range of economic data was released ahead of the holiday, but overall it was roughly neutral for mortgage rates, which ended the week slightly higher.

An attack by North Korea on a South Korean island caused global investors to shift funds to relatively safer assets on Tuesday. As usual, this hurt stocks and helped bonds, including mortgage-backed securities, pushing mortgage rates a little lower. The conflict did not escalate or spread, though, and investors reversed their actions on Wednesday, moving mortgage rates higher.

On Tuesday, the detailed minutes from the November 3 Fed meeting revealed a high level of disagreement between Fed officials about the new $600 billion quantitative easing program. With high unemployment and low inflation, Fed officials would like to take action. The problem is that the options available to the Fed to help boost economic growth have potentially negative consequences. According to the minutes, some Fed officials pointed out that the quantitative easing program could weaken the dollar or lead to undesirably high future inflation. In the end, 10 out of 11 Fed officials decided that the expected benefits justified the risks and was better than doing nothing, but many officials considered it a very close call. The relatively weak support within the Fed further clouds the future of the program, and the uncertainty for investors has added to already high levels of volatility in mortgage rates.

The biggest economic event next week will be the important Employment report on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for an increase of about 150K jobs in November. Before the employment data, the Chicago PMI manufacturing index will be released on Tuesday. The ISM manufacturing index and the Fed's Beige Book will come out on Wednesday. Pending Home Sales, a leading indicator for the housing market, will be released on Thursday. Factory Orders, ISM Services, Productivity, Construction Spending, and Consumer Confidence will round out the schedule.


Market Recap - Week Ending November 26, 2010

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae cuts off investors from redelivering mortgage putbacks

Fannie Mae will no longer accept back a mortgage that was repurchased by a secondary market investor, government-sponsored enterprise or private institutional investor — even if the lender cured the defect in the loan.

Major banks must repurchase a mortgage from Fannie Mae if it was not written to the GSE's guidelines and went into default. These mortgage repurchase obligations could cost banks as much as $43 billion, according to recent estimates from Standard & Poor's.

According to servicer guidance issued Monday by Fannie Mae, the GSE allows the redelivery of a mortgage loan that was repurchased by the lender so long as the bank corrected the loan to fit Fannie's underwriting standards.

But the GSE clarified in the guidance that any mortgage that was repurchased by investors or another GSE such as Freddie Mac are not eligible to be sold back to Fannie Mae.

However, a mortgage that a lender had to repurchase from another investor or GSE that was delivered in error to that investor or GSE can be sent to Fannie Mae if it meets all of its requirements.

Even though S&P said the banks are roughly one-fourth through the combined buybacks, the credit rating agency does not see a threat to capital levels.

"In all cases, we believe that the representations and warranties matter is an earnings issue and is not likely to affect our view of the banks' capital adequacy," S&P said.

by Jon Prior HousingWire November 29, 2010


Fannie Mae cuts off investors from redelivering mortgage putbacks

Sunday, November 28, 2010

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Bonds not looking so attractive

Bond investors avoided the ax and didn't wind up as the main course on anyone's Thanksgiving dinner table last week.

But a year from now, things could be different.

The bond market has been safe and secure for so long that investors could run around the farmyard and throw money at bonds with little chance of harm. Those old goats in the stock market, outside the corral, always faced the danger of getting dragged off by a wolf, but not bond investors.

At least that's been the thinking for years, as bonds benefitted from a lengthy trend of lower interest rates and mild inflation. But the protective pen that has sheltered bond investors doesn't look so secure anymore.

William Gross, managing director at California investment firm PIMCO, lately has warned of the "end of a great 30-year bull market in bonds."

Considering that Gross and his team oversee about as much bond money as anyone and have a vested interest in seeing bonds perform well, that's a caution worth heeding.

Roy Papp of L. Roy Papp & Associates, one of Arizona's more successful long-term investors, describes the situation for bonds as among the most treacherous he's seen in a career spanning five decades.

"Economic conditions around the world will improve, particularly in the U.S. and Asia," Papp said. "As that happens, prices on bonds will go down."

He now views stocks as "considerably" more attractive than bonds.

The portfolio managers at Ariel Investments in Chicago recently declared that bonds had reached "bubble territory."

In their view, three traits are characteristic of bubbles, and the bond market is showing signs of all three now.

The first is a surge of new money that inflates prices. Mutual funds that hold bonds have attracted more than $600 billion in net new cash since the start of 2009 and now are in their 23rd straight month of inflows.

By contrast, investors on balance have pulled money out of stock funds in each of the past three years.

The second is a tendency for prices to climb into unchartered territory. With bonds, this is usually described in terms of yields, which move inversely to prices. The recent numbers portray investors as willing to accept almost nothing in return for the privilege of owning bonds. Case in point: The government sold two-year Treasuries yielding just 0.4 percent in late October.

"When judged against historical valuations, bonds are in nosebleed territory," Ariel wrote in its commentary.

The third warning sign is a pattern of risks and returns getting out of whack. As evidence, Ariel cites yields that are now so low as to provide virtually no cushion in the event inflation rises even modestly.

Ariel adds that bond-market volatility could be worsened in the next downturn by the rise of Internet trading and easy-to-exit exchange-traded funds - neither of which was around during the last bond bear market.

Somewhat-naive investors often dismiss the riskiness of bonds by noting that they can recoup their principal provided they're willing to hold to maturity, regardless of what happens to interest rates.

That's true, assuming the issuer doesn't default. But there's still an opportunity cost in the sense bondholders would be stuck with an unattractive, below-market yield in the meantime.

In other words, in a rising-rate environment, investors must pick their poison: Sell their bonds and take a loss, or accept a below-market yield until their bonds mature and proceeds can be reinvested at higher, prevailing interest rates.

The point of all this isn't to scare investors into making rash decisions but to nudge them to prepare for some unpleasant possibilities, sooner or later.

In a diversified portfolio, it's difficult to avoid bonds altogether. It's also true that certain types of bonds and bond funds, such as high-yield and foreign debt, aren't as sensitive to U.S. interest-rate changes and might hold up well if rates jump.

But these alternatives also tend to be more risky than the plain-vanilla municipal, high-grade corporate and U.S. government bonds that most income investors favor.

If you have jumped onto the bond bandwagon, it's time to consider how you might get off if the 30-year bull market is indeed nearing an end.

Or as Gross put it in a recent bond-market outlook: "Run, turkey, run."

by Russ Wiles The Arizona Republic Nov. 28, 2010 12:00 AM



Bonds not looking so attractive

Congress heading for a standoff on some key issues

WASHINGTON - Lawmakers return to the Capitol this week facing a deadline to avoid a federal government shutdown as Democrats show no signs of relenting on priority agenda items despite surging Republican opposition.

Republicans said Democrats continue to pursue their agenda as if the midterm elections, in which the GOP gained control of the House and expanded its ranks in the Senate, did not happen.

Republicans will not have their enhanced numbers until the new Congress convenes in January. But GOP opposition in the Senate will be fortified when Mark Kirk of Illinois is sworn in as expected Monday, leaving Democrats with a diminished majority.

The prospect is for a standoff on core issues in this lame-duck session, including extension of the tax cuts passed during the George W. Bush administration. Congress could remain in session until days before Christmas.

President Barack Obama expects to meet with congressional leaders from both parties on Tuesday evening to chart a path forward, particularly on the tax-cut issue.

"The president is committed to sitting down and dealing openly and honestly with Republican leaders," deputy press secretary Bill Burton said.

Republicans want to extend the tax cuts permanently for all households, including those with incomes beyond $250,000. Democrats have held firm on extending cuts only to those with incomes below that amount, saying the country cannot afford the additional $700 billion cost of tax breaks for the wealthy.

Votes are expected on both scenarios, but neither is expected to pass. Obama has hinted at a willingness to compromise.

"He's going to continue to be open and honest and hope that we can make progress on things that are important to the American people, like extending these tax cuts for the middle class," Burton said.

Even relatively popular bipartisan measures have run into opposition in the aftermath of the midterm elections.

When Congress returns Monday, the Senate is expected to vote on the long-stalled Food Safety Modernization Act, which has widespread support - but not before considering a list of Republican-led amendments. The act would increase agricultural inspections and require enhanced industry record-keeping.

Among the amendments is a largely unrelated measure to ban all earmarks - specially directed spending items lawmakers send to their home states. Ending earmarks was a GOP campaign theme, but the ban is also supported by some Democrats.

Attention will also focus this week on Obama's deficit-reduction commission, which is due to release a report Wednesday aimed at reducing the deficit and coping with rising Social Security and Medicare costs. It's unclear whether the commission can meet the Wednesday deadline and issue a final report.

By week's end, Congress needs to vote to continue funding the federal government because the existing measure expires on Friday. Congress could consider a one- or two-week extension to avoid a shutdown, as Democrats pursue a broader spending bill to keep the government funded through the end of the fiscal year in September.

Other items on a long list are vying for attention during the compressed calendar. The House is expected to vote early in the week on an annual adjustment for doctors who treat Medicare patients, and it could consider a censure of Rep. Charles B. Rangel, D-N.Y., over ethics violations.

The Senate is expected to hold hearings Thursday and Friday on a Pentagon report on repealing the ban on gays serving openly in the military, with a promised vote on the floor to follow.

Senate Majority Leader Harry Reid also has promised a vote on the Dream Act, an immigration measure that would provide young people in this country illegally a path to citizenship if they attended college or joined the military.

UCLA student David Cho, a Korean immigrant who said his parents brought him to the U.S. as a child and he is undocumented, is among those pressing Congress to vote. He plans to enlist in the Air Force. "It's been one of my dreams to don that uniform and serve this country," he said.

Obama is also pushing Congress to approve a nuclear treaty with Russia, called New START, that has been embraced by NATO allies but faces opposition led by Sen. Jon Kyl, R-Ariz.

Democrats see in the weeks ahead a final opportunity to pass priority legislation before Republicans have an emboldened presence in Washington.

But a spokesman for Sen. Mitch McConnell of Kentucky, the Republican leader, said voters are not interested in the Democrats' priorities.

"It's like the election didn't happen - if you look at what their priorities are," spokesman Don Stewart said. "The American people's priorities are not the Dream Act, 'don't ask, don't tell' repeal and the START treaty. Their priorities are not getting a tax hike - and keeping spending under control."

by Lisa Mascaro Tribune Washington Bureau Nov. 28, 2010 12:00 AM




Congress heading for a standoff on some key issues

Congress heading for a standoff on some key issues

WASHINGTON - Lawmakers return to the Capitol this week facing a deadline to avoid a federal government shutdown as Democrats show no signs of relenting on priority agenda items despite surging Republican opposition.

Republicans said Democrats continue to pursue their agenda as if the midterm elections, in which the GOP gained control of the House and expanded its ranks in the Senate, did not happen.

Republicans will not have their enhanced numbers until the new Congress convenes in January. But GOP opposition in the Senate will be fortified when Mark Kirk of Illinois is sworn in as expected Monday, leaving Democrats with a diminished majority.

The prospect is for a standoff on core issues in this lame-duck session, including extension of the tax cuts passed during the George W. Bush administration. Congress could remain in session until days before Christmas.

President Barack Obama expects to meet with congressional leaders from both parties on Tuesday evening to chart a path forward, particularly on the tax-cut issue.

"The president is committed to sitting down and dealing openly and honestly with Republican leaders," deputy press secretary Bill Burton said.

Republicans want to extend the tax cuts permanently for all households, including those with incomes beyond $250,000. Democrats have held firm on extending cuts only to those with incomes below that amount, saying the country cannot afford the additional $700 billion cost of tax breaks for the wealthy.

Votes are expected on both scenarios, but neither is expected to pass. Obama has hinted at a willingness to compromise.

"He's going to continue to be open and honest and hope that we can make progress on things that are important to the American people, like extending these tax cuts for the middle class," Burton said.

Even relatively popular bipartisan measures have run into opposition in the aftermath of the midterm elections.

When Congress returns Monday, the Senate is expected to vote on the long-stalled Food Safety Modernization Act, which has widespread support - but not before considering a list of Republican-led amendments. The act would increase agricultural inspections and require enhanced industry record-keeping.

Among the amendments is a largely unrelated measure to ban all earmarks - specially directed spending items lawmakers send to their home states. Ending earmarks was a GOP campaign theme, but the ban is also supported by some Democrats.

Attention will also focus this week on Obama's deficit-reduction commission, which is due to release a report Wednesday aimed at reducing the deficit and coping with rising Social Security and Medicare costs. It's unclear whether the commission can meet the Wednesday deadline and issue a final report.

By week's end, Congress needs to vote to continue funding the federal government because the existing measure expires on Friday. Congress could consider a one- or two-week extension to avoid a shutdown, as Democrats pursue a broader spending bill to keep the government funded through the end of the fiscal year in September.

Other items on a long list are vying for attention during the compressed calendar. The House is expected to vote early in the week on an annual adjustment for doctors who treat Medicare patients, and it could consider a censure of Rep. Charles B. Rangel, D-N.Y., over ethics violations.

The Senate is expected to hold hearings Thursday and Friday on a Pentagon report on repealing the ban on gays serving openly in the military, with a promised vote on the floor to follow.

Senate Majority Leader Harry Reid also has promised a vote on the Dream Act, an immigration measure that would provide young people in this country illegally a path to citizenship if they attended college or joined the military.

UCLA student David Cho, a Korean immigrant who said his parents brought him to the U.S. as a child and he is undocumented, is among those pressing Congress to vote. He plans to enlist in the Air Force. "It's been one of my dreams to don that uniform and serve this country," he said.

Obama is also pushing Congress to approve a nuclear treaty with Russia, called New START, that has been embraced by NATO allies but faces opposition led by Sen. Jon Kyl, R-Ariz.

Democrats see in the weeks ahead a final opportunity to pass priority legislation before Republicans have an emboldened presence in Washington.

But a spokesman for Sen. Mitch McConnell of Kentucky, the Republican leader, said voters are not interested in the Democrats' priorities.

"It's like the election didn't happen - if you look at what their priorities are," spokesman Don Stewart said. "The American people's priorities are not the Dream Act, 'don't ask, don't tell' repeal and the START treaty. Their priorities are not getting a tax hike - and keeping spending under control."

by Lisa Mascaro Tribune Washington Bureau Nov. 28, 2010 12:00 AM




Congress heading for a standoff on some key issues

Congress heading for a standoff on some key issues

WASHINGTON - Lawmakers return to the Capitol this week facing a deadline to avoid a federal government shutdown as Democrats show no signs of relenting on priority agenda items despite surging Republican opposition.

Republicans said Democrats continue to pursue their agenda as if the midterm elections, in which the GOP gained control of the House and expanded its ranks in the Senate, did not happen.

Republicans will not have their enhanced numbers until the new Congress convenes in January. But GOP opposition in the Senate will be fortified when Mark Kirk of Illinois is sworn in as expected Monday, leaving Democrats with a diminished majority.

The prospect is for a standoff on core issues in this lame-duck session, including extension of the tax cuts passed during the George W. Bush administration. Congress could remain in session until days before Christmas.

President Barack Obama expects to meet with congressional leaders from both parties on Tuesday evening to chart a path forward, particularly on the tax-cut issue.

"The president is committed to sitting down and dealing openly and honestly with Republican leaders," deputy press secretary Bill Burton said.

Republicans want to extend the tax cuts permanently for all households, including those with incomes beyond $250,000. Democrats have held firm on extending cuts only to those with incomes below that amount, saying the country cannot afford the additional $700 billion cost of tax breaks for the wealthy.

Votes are expected on both scenarios, but neither is expected to pass. Obama has hinted at a willingness to compromise.

"He's going to continue to be open and honest and hope that we can make progress on things that are important to the American people, like extending these tax cuts for the middle class," Burton said.

Even relatively popular bipartisan measures have run into opposition in the aftermath of the midterm elections.

When Congress returns Monday, the Senate is expected to vote on the long-stalled Food Safety Modernization Act, which has widespread support - but not before considering a list of Republican-led amendments. The act would increase agricultural inspections and require enhanced industry record-keeping.

Among the amendments is a largely unrelated measure to ban all earmarks - specially directed spending items lawmakers send to their home states. Ending earmarks was a GOP campaign theme, but the ban is also supported by some Democrats.

Attention will also focus this week on Obama's deficit-reduction commission, which is due to release a report Wednesday aimed at reducing the deficit and coping with rising Social Security and Medicare costs. It's unclear whether the commission can meet the Wednesday deadline and issue a final report.

By week's end, Congress needs to vote to continue funding the federal government because the existing measure expires on Friday. Congress could consider a one- or two-week extension to avoid a shutdown, as Democrats pursue a broader spending bill to keep the government funded through the end of the fiscal year in September.

Other items on a long list are vying for attention during the compressed calendar. The House is expected to vote early in the week on an annual adjustment for doctors who treat Medicare patients, and it could consider a censure of Rep. Charles B. Rangel, D-N.Y., over ethics violations.

The Senate is expected to hold hearings Thursday and Friday on a Pentagon report on repealing the ban on gays serving openly in the military, with a promised vote on the floor to follow.

Senate Majority Leader Harry Reid also has promised a vote on the Dream Act, an immigration measure that would provide young people in this country illegally a path to citizenship if they attended college or joined the military.

UCLA student David Cho, a Korean immigrant who said his parents brought him to the U.S. as a child and he is undocumented, is among those pressing Congress to vote. He plans to enlist in the Air Force. "It's been one of my dreams to don that uniform and serve this country," he said.

Obama is also pushing Congress to approve a nuclear treaty with Russia, called New START, that has been embraced by NATO allies but faces opposition led by Sen. Jon Kyl, R-Ariz.

Democrats see in the weeks ahead a final opportunity to pass priority legislation before Republicans have an emboldened presence in Washington.

But a spokesman for Sen. Mitch McConnell of Kentucky, the Republican leader, said voters are not interested in the Democrats' priorities.

"It's like the election didn't happen - if you look at what their priorities are," spokesman Don Stewart said. "The American people's priorities are not the Dream Act, 'don't ask, don't tell' repeal and the START treaty. Their priorities are not getting a tax hike - and keeping spending under control."

by Lisa Mascaro Tribune Washington Bureau Nov. 28, 2010 12:00 AM




Congress heading for a standoff on some key issues

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