What investors really would like to see is a major new aid program for the European countries with debt problems. The issue remains, though, that someone must pay for the aid, and the countries providing the funds understandably want to be reassured that the countries receiving the aid will demonstrate greater budgetary discipline. Investors expect that if European leaders eventually reach an enforceable agreement, then the European Central Bank (ECB) or another institution will provide additional aid. It appears that the European debt issue will continue to be a major influence on US financial markets for quite a while.

Global actions taken this week increased optimism that the European debt situation will improve. On Wednesday, major central banks around the world announced a joint program to lower the borrowing costs for banks. This will increase liquidity and decrease the risk of failures. China also lowered rates for the first time in three years. It appears that central bankers in Europe and China are becoming more willing to risk higher future inflation to spur economic growth. In addition, comments from the head of the European Central Bank (ECB) and from the leader of Germany suggested that if euro zone governments reach agreement on a “new fiscal compact” to better control their budgets, then the ECB may provide more aid.

Capping off a week of generally stronger than expected economic data, Friday’s Employment report also exceeded expectations in nearly every area. Against a consensus forecast of 130K, the economy added 120K jobs in November, but revisions to prior months added an additional 72K jobs. The big surprise came from the Unemployment Rate. Expected to remain unchanged at 9.0%, the Unemployment Rate dropped sharply to 8.6%, the lowest level since March 2009. The news was not quite as impressive as the headline number might suggest, though, as a good portion of the decline resulted from a decrease in the labor force participation rate, meaning that many people stopped looking for work.

The economic data released this week was positive for the economy, with stronger than expected economic growth and lower than expected inflation. Retail Sales, Industrial Production, Housing Starts, and Jobless Claims all exceeded their consensus forecasts. Meanwhile, Core CPI inflation was a modest 2.1% higher than one year ago. For mortgage rates, the tame inflation data was positive, while the relatively strong growth data was negative.

Investors continued to closely monitor the debt troubles in Europe. While Italy’s bond yields remained below the highs reached last week, bond yields in France and Spain climbed to new highs. Investors are concerned that nearly every euro zone country except Germany is at risk of seeing a sharp rise in yields, which will make it even more difficult to meet their debt obligations. Weaker euro zone countries are increasingly looking to Germany for additional aid, but the Germans are reluctant to bear the cost. The level of aid provided by Germany, most likely through the European Central Bank (ECB), will heavily influence the ability of the other countries to resolve their debt problems.

 Now that the tax credit has come and gone, the government is looking to keep the housing market afloat with some different funding. It comes in the form of a bond which will “give” 5% towards down payment or closing costs. The total grant is $25million and it is for all of Arizona except Maricopa or Pima counties. The 5% grant will be “gifted” and not repaid unless the house is sold or refinanced within 5 years.. The interest rate for the loan is 4.99%, the minimum credit score is 660 and the minimum amount of cash the borrower is required to bring to the deal is $1000.There is a recapture tax if three criteria are met – these are ,- the house sells for a profit, the income of the borrowers increases more than 5% per year  and if the home is sold within 9 years. The borrower will need to be a first time home buyer and attend an online education class.

Currently the waiting period for purchasing a home after a foreclosure is 5 years. As of October 1^st 2010 the waiting period will be extended to 7 years.

Summary of Waiting Period Requirements

Bankruptcy Chapter 7 or 11 = 4 years

Bankruptcy Chapter 13   = 2 years from discharge date

Multiple Bankruptcy Filings = 5years if more than one filing in the last 7 years.

The Requirements for :-

Deed in Lieu of Foreclosure}

Preforeclosure Sale}

Short Sale}

  are dependant on the loan to value

- with a maximum loan to value of 80% after 2 years.

- a maximum loan to value of 90% after 4 years and

- is back to “normal” after 7 years.