With a slew of economic news raising hope during the past couple of months, Federal Reserve Chairman, Ben Bernanke, boldly claimed that the “recession is very likely over.” After an enduring time lapse, both stocks and bonds rallied in tandem with the Dow Jones Industrial Average (DJIA) inching closer to the magical 10,000 level, while the 10-year Treasury rate continued its downward descent to 3.40 percent. On the banking front, some bankers will be carefully observing the developments that will come out of Friday’s G-20 summit in Pittsburgh, particularly since leaders representing 20 countries have kept up the intense pressure for a deal to curb bankers’ pay and bonuses since the group’s last meeting in Europe…

With the signs of economic recovery becoming more evident by the day, some market participants have begun to wonder whether the FOMC might begin to withdraw market support in the coming months, either by winding down its remaining asset purchase programs more quickly, or perhaps moving to exceptionally low federal fund rate levels.. With growing evidence of progress toward stability in the financial and housing markets, the outlook for Fed policy now hinges more on traditional criteria: how strong will the incipient recovery be, and what does it mean for inflation? However, many experts believe that there is no need to make decisions on the agency debt or MBS purchase programs until at least the November meeting, since these programs are currently scheduled to run through the remainder of the year. This week’s statement should feature more upbeat language about the growth outlook. Meanwhile, the FOMC is expected to leave the fund rate target at 0.25 percent when it concludes its two- day meeting on Wednesday. Many expect that the jobless recovery pattern of the 1991-1992 and 2001- 2003 periods may be repeated with slow growth in 2010. This may prompt reticence on the FOMC’s part to raise the funds rate target from its near-zero current setting until such time confidence is restored and the unemployment rate reaches its cyclical peak.

Some economist feel that inflation is not a significant threat in the short term despite the highly expansionary fiscal and monetary policies in place, as these policies have been implemented to combat a large and growing gap between actual and potential output. Under any reasonable economic scenario, the aggregate U.S. output gap will be huge. The gap is currently about 8 percent of GDP and could potentially grow to as much as 10 percent, thus requiring years of above-trend growth to eliminate. Foreign investors are ramping up their purchase of Treasuries, betting that inflation will remain subdued. Investors outside of the U.S. bought 43.1 percent of the $1.41 trillion of notes and bonds sold by the Treasury Department this year, compared with 27.1 percent of the $527 billion issued at this point in time in 2008.

After a successful run for “cash for clunkers,” the US and other developed nations are aggressively pursuing the policy of “cash from bunkers.” Thousands of Americans must decide by September 23rd whether to disclose accounts to the IRS and possibly face back-taxes, fines and penalties, or keep their assets undeclared and risk criminal prosecution. The IRS reportedly has given tax evaders more time to disclose accounts i.e. until October 15th. Following a crackdown by the U.S. authorities, the Italian government launched its own investigation into as many as 170,000 “rich” residents suspected of sheltering billions of euros from taxes, largely through Swiss banking operations. Those taking advantage of the amnesty have until April 2010 to declare their foreign accounts and pay a one-time 5 percent penalty on the total. The estimated money hidden behind those safe “Swiss bunkers” may exceed trillions of dollars. Who knows, if all the “rich” countries could have gotten back part of these hidden moneys, we might have avoided all the taxpayer-sponsored bailouts and stimulus packages.

The week’s economic calendar includes the FOMC meeting on Tuesday and Wednesday and the G-20 meeting on Thursday. The market is more likely to be focused on any potential Fed discussion of an exit strategy from the liquidity measures that have been implemented over the last year. Economic reports of interest include Thursday’s Existing Home Sales and Friday’s Durable Goods Orders and New home sales. Meanwhile, enjoy the week ahead.

ABBA First Mortgage, Inc. is pleased to announce that we now offer Veterans Administration Home Loans or VA loans.

The VA loan was designed to offer long-term financing to American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.

Some of the benefits of a VA loan include:

• 100% financing without private mortgage insurance.
• VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae / conforming loans.
• VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
• VA allows the seller to pay all of the veteran’s closing costs as long as the costs do not exceed 4% of the sales price of the home.
• The maximum VA loan amount with no down payment is $417,000 and can be as high as $625,500 in certain high cost areas.

We are thrilled to be able to bring our level unparalleled customer service to the brave men and women that have so selflessly served our country.  If you would like to take advantage of this program, please apply online right here on our website- be sure to complete the Full Online Application. Once we receive your application, one of our experienced loan officers will contact you to review the application and discuss the next steps.

Please feel free to contact us if you have any questions. Thank you for the opportunity to EARN your business and your trust- we do not take it for granted!

ABBA First Mortgage, Inc. will be closed on Monday, September 7th in observance of Labor Day. We will resume normal business hours on Tuesday, September 8th. We look forward to serving all of your mortgage needs… enjoy the holiday weekend!