Elizabeth Rose - Asst VP, Certified Mortgage Planning Spec - Texas

Happy New Year! Today is the first trading day of 2009 and Mortgage Bonds opened just a little bit higher this morning. Look out though, that could change.

Just a few minutes ago the ISM index was reported showing the fifth consecutive monthly decline. This index is a key manufacturing gauge.

Today, the SEC Chairman Chris Cox is expected to get back to Congress with ideas, if any, on how to address Mark to Market accounting. If Cox presents a plan that modifies the valuation in such a way that large discounts and write downs are minimized then the financial sector will be able to breathe. Think about it - the stock market would likely rally with financial stocks taking the lead.

Keep in mind, if that happens...bonds will pay the price. But it would be a price worth paying. Helping the financial instructions strengthen their balance sheets will open the door to lending again as well as help stabilize the real estate market.

A story to watch in early 2009 will be the Fed and their purchasing of Mortgage Backed Securities. They have promised to purchase large quantities and so far have barely tip toed in. When they start buying with more gusto, bonds should improve.

With the worst year for the U.S. market since 1937 behind us, may 2009 be a year of possibilities and prosperity for all.

Yesterday, mortgage rates started the day lower before sprinting higher over a brief early-afternoon span. Markets were largely unprovoked by economic data, geopolitical developments, or technical factors. However this morning it's a different story. The Bond market opened lower (worse) and tried to muster a reversal but was pushed back by tough overhead resistance. All gains from yesterday have been erased.

Consumer Confidence hit a record low as the job losses weigh heavy on consumer's minds. The confidence fell to 38 from an expectation of 45.2. The market had little reaction to this report as GMAC made headlines. Chicago Purchasing Managers Index was also released. This report provides a gauge of the manufacturing industry's growth. This report came in close to estimates, so no reaction there either.

GMAC took center stage this morning as they received a $6 billion lifeline from the Treasury. With this help from Uncle Sam, GM promises to expand financing options to lure consumers back into dealers' showrooms. This move by the Treasury is part of a larger effort to bring aid to the failing auto industry and helps GM avoid bankruptcy or a complete shut down. The stock market rose on the news as money was pulled from Bonds.

Also in the news today (another sad report)... S&P/Case-Shiller data for October show home prices continuing to fall. Prices are down 18% in the past year and dropped 2.2% in October over the prior month. However, it is important to remember that the real estate market is LOCAL. For the past twelve months, the Dallas market was down just 3% as compared to Las Vegas, down 31.7%, Detroit, down 20.4%, Atlanta, down 10.5% to illustrate a few.

But the good news...makes buying very attractive.

With interest rates hovering at historic lows for conforming loan amounts, consumer should begin to seriously consider purchasing or refinancing. For those people in an adjustable-rate mortgage, this is a really good time to make the move into a fixed rate mortgage.

Again this week, the Bond market faces another short holiday week. This creates lower trading volumes which could translate into unexpected price movements and spikes.

We are currently seeing a flight to safety as money moves into Bonds due to the tensions in the Middle East. This has helped the bond to improve some today. While we are still in very positive territory and experiencing some great low rates, we've not revisited the price high (lowest rate) set on December 17^th. As the price of Mortgage Bonds move higher (improves), mortgage rates move lower (improves).

There are no economic reports being released today. On the calendar for the week are:

Tuesday - Consumer Confidence

Wednesday - Jobless Claims and Chicago PMI

Friday - ISM Index

Rates remain very attractive. Can they go lower? Sure. Will they? Possibly. But why risk it? They are great right now.

It's hard to imagine that 2008 is just about over. What a challenging year in the market this has been. It's difficult to turn on any news channel without hearing the top story of the financial crisis.

But there is part of the story that you may not hear from reporters as many don't understand what really happened...and what may happen next. In my recent blogs, I've mentioned Mark to Market, a "little" accounting rule and how it has had a broad impact on our current financial situation.

My good friend and industry expert Barry Habib has given me permission to pass along this short video and article that were created to put an end to the confusion once and for all!

Barry Habib is Founder of the Mortgage Market Guide and Chairman of the Board for Mortgage Success Source. He frequently appears on both CNBC and Fox Business. In this video he provides a clear explanation of exactly what caused the current financial crisis - and what to be watching for in the near future.

I hope you enjoy this special insight and find it helpful in your business.

http://www.mortgagesuccesssource.com/go/markmarket/

This morning several important reports were released. In advance of the economic reports, the Mortgage Bankers Association released their weekly survey of mortgage applications.

Last week, applications jumped by 124.6% over the activity seen in the same week last year and up 48% over the previous week's activity.

Sometimes I get a laugh reading the news wires. This morning the article on mortgage applications stated that the boost in applications coincided with another drop in mortgage rates as the "government's efforts to thaw out the home-mortgage market show further signs of having the desired effect." The government hasn't really "done" anything yet, they've mostly just talked about doing something. That's what left me laughing.

According to the MBA, rates on 30-year fixed rate mortgages averaged 5.04 last week with the 15-year trailing slightly at 4.91.

In other news, the weekly Jobless claims hit a 26 year high reporting a rise of 30,000 to 586,000. This is the number of first time applications for state unemployment and the largest number since 1982.

November durable goods orders fell 1% while a decline of 3% was expected. Consumer spending fell 0.6% in November which wasn't quite as bad as analysts were expecting. Personal Income also fell in November following a slight gain in October. Keep in mind that this poor economic news is typically Bond friendly.

Some good news...the Fed's mantra has been "inflation has moderated" and it is evidenced by the Core Personal Consumption Expenditure which stands at 1.9% year over year. Jethro's bubbling crude is down another 6% to 36.63 a barrel, which makes going to the gas pumps a lot less painful.

Today's trading will be thin as we head into the holiday. Currently we are trading just above support. Any activity today will be exacerbated and could result in some big swings.

Circling back to mortgage applications and rates...if you have been sitting the sideline and thinking of a refinance, you might want to go ahead and get your application started. If you have your paperwork in order and application submitted, you are in a perfect position to lock in on a great rate. Keep in mind the best rates we have experienced in 2008 have not even lasted a full business day. With the big surge in applications if you aren't prepared in advance, you may miss out.