Tomorrow, the fireworks begin. Or, continue, depending on your point of view.

After a span of several weeks in which mortgage rates have steadily increased, markets are gearing up for a heavy day of data that could confirm the worst fears of investors everywhere: the U.S. economy is not slowing down.

The Fed’s May meeting minutes showed that it is concerned about inflation, too.

Despite “more favorable” readings, inflation remained “uncomfortably high” and is following neither a downward trend, nor an upward trend.

Reported today, year-over-year inflation data is running at its highest rate in 16 years.

Overall, this makes it less likely that the Fed will lower the Fed Funds Rate rate in the near future.

If you are currently floating your interest rate, get in and get locked. Because there is already an upside bias on rates, it won’t take “hot” numbers to move interest rates higher — it will only take average numbers to do it.

If you’re currently paying Private Mortgage Insurance (PMI) and have been for several years, it may be time to petition your lender to have the PMI payment removed.

Waiting for it to drop off 'automatically' may mean you will be stuck with the higher payments for at least five to ten years from your original purchase date.

PMI protects lenders from homeowners that stop making payments on homes with small amounts of equity. It’s an insurance policy that is “cashed in” if the homeowners defaults.

However, federal law allows homeowners to request the cancellation of PMI if their loan-to-value (LTV) drops below 75 or 80% based on the new or the original appraised value, depending upon your exact circumstances.

Usually, you need to have been paying on the loan for at least two years, except in cases where you have made major improvements to your home.

An example of 80% LTV is a home that is worth $100,000 on which $80,000 is owed to mortgage lenders.

If you are paying PMI and think you are eligible to have it removed, contact your mortgage lender and ask them about their procedure to remove PMI.

The lender may require that you have your home appraised (at your expense) and that may cost anywhere from $200 to $400 — but if your petition is successful, the cost of an appraisal is much less expensive than the ongoing monthly cost of PMI.

If you’re in the process of buying a home and are working without a rate lock, take notice: over the past two weeks, mortgage rates have spiked to their highest levels since November 2006.

Your actual mortgage payment will be higher than you originally anticipated.

Depending on your preferred mortgage product, rates have increased by as much as one-half of one percent.

Mortgage experts expect the surge to continue over the next 30 days, at a minimum.

If your mortgage pre-approval is dated prior to May 9, call your lender and ask him to re-run it using today’s rates and market conditions. If you don’t have a pre-approval yet, today would be a good day to get one.

The graphic at right comes from The Wall Street Journal and it illustrates something that we all intrinsically know: Sub-Prime ARMs foreclose at a faster pace than all other home loan types.

When adjustable rate mortgages reach the end of their “fixed rate” period, some homeowners are unprepared for the upward-adjusting mortgage payments and that can lead to payment shock.

It doesn’t mean that sub-prime mortgages are bad for all homeowners, however.

A little known fact: Nearly all sub-prime ARMs carry an initial fixed period of 24 months or more. This means that the sub-prime borrower has at least two years to make financial adjustments that include:

1. Paying collections, charge-offs and other delinquent accounts
2. Making timely payments on loans, credit cards, and open charge accounts
3. Reduce his monthly debt load with systematic payments to creditors

All of these actions help the homeowner ascend from sub-prime borrower status and into the realm of “prime” loans. It’s the responsibility of the loan officer to help guide the way.

A trusted loan officer will help a sub-prime borrower to develop a financial plan and will hold them accountable. Then, as the borrower’s status changes from “sub-prime” to “prime” because of better credit scores and payment history, the loan officer will remortgage the borrower out of his sub-prime loans and into a new, more favorable (fixed-rate, perhaps?) loan.

For borrowers who follow “the plan”, their sub-prime loan will never adjust –they’ll get rid of the loan before that two year period ends.

This is a terrific method for reducing sub-prime ARMs in foreclosure — improve a homeowner’s credit rating so they can leave the sub-prime world on their own accord and before their payment ever has a chance to change.