Ron Brown FHA & VA Home Loan Specialist

I wanted to share some things that we all generally grumble about in a way that reflects more appropriately to the spirit of the season. I typically send something like this out every year to the many people I've had the pleasure of working with. Perhaps more importantly, I send this out as a way to remind myself that I could be far less fortunate.

I am thankful for...

... The High taxes I pay because it means that I am employed.

... The clothes that fit oh so very tight because it means that I have enough to eat.

... My shadow because it means that I am outside, and the sun is shining.

... Tall grass needing to be mowed, and gutters that need cleaning, because it means I have a home.

... Piles of dirty laundry everywhere because it means my kids are still with me

... The parking spot I find at the end of the parking lot on a rainy day because it means that I can walk.

... How tired I feel at the end of the day because it means that I have been productive.

... The many emails that clog up my inbox because it means that someone thought of me.

... Not knowing everything because it gives me the opportunity to learn.

... All the challenges that face me, because they build my strength and character.

... AND MOST IMPORTANT OF ALL;

The opportunity to work with each of you because it feels great to be part of something bigger than myself.

From my family to yours...Happy Thanksgiving!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

US Stocks are struggling to get back to even for the day, after initially giving up more than half of yesterday's gain. Mortgage Bonds are better than yesterday, but not enough to see any meaningful rate improvement.

Stocks took their cue from today's Retail Sales report that showed a 2.8% decline for October, the biggest drop in 28 years. This marks the 4^th consecutive month of declining sales volume, which has not happened since 1974. While the decrease should not come as a shock to anyone, it was more than economists were expecting, and is representative of the largest month over month decline in two decades. Deflation is a major force behind these numbers as the drop in Gas prices is responsible for nearly half of the drop in total sales with the average price for a gallon of fuel down 17% since September. The other main contributor is Auto Sales with the lowest per capita sales rate since WWII. The Auto Industry is currently lobbying Washington for some of the ever-popular Bailout money courtesy of the taxpayers. There is some positive news in today's reports, as the University of Michigan Consumer Sentiment survey was positive at 57.9 versus expectations of closer to 57 (readings above 50 are considered positive).

Mortgage Bonds took a hit as the result of yesterday's late rally by Stocks. After the Dow fell briefly below the 8,000 level, investors went bargain hunting, and most of the funds came from fixed income investments (Bonds). The market for Mortgage Backed Securities is not looking any stronger as Freddie Mac reported a 3^rd quarter loss of over $25 Billion versus a loss of $1.2 Billion one year ago (a difference of more than 20 fold). As a result, the Federal Housing Finance Agency (FHFA) has requested $13.8 Billion from the US Treasury, and is expecting to receive it by the end of the month. Mortgage Bonds are slightly better off than yesterday's finish, but are continuing to trade in a narrow range, and have failed to break through a technical ceiling of resistance near our 200 day moving average. Bonds have pushed up against this level 4 times in the last 30 trading days, and been turned back each time. Each time we fail to break through this resistance, it becomes much stronger, and harder to get past. The current trend is for a narrowing trading range that indicates a somewhat stable range for mortgage rates looking ahead. The recent news from Treasury Secretary Paulson that the Troubled Asset Relief Program (TARP) funds will not be used to purchase mortgages is not helping to restore confidence in MBS, and for rates to break lower we will likely need some form of positive news on TARP.

If you have transactions closing soon (days rather than weeks), locking would be my choice, but floating cautiously is OK for longer-term closings. There is no indication that our economy is picking up for the holidays, and this is traditionally friendly news for mortgage rates, but keep in mind we are in one of the most volatile markets on record.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

US Stocks began the day on the upside following the trend from overseas markets, but quickly fell into the red. Mortgage Bonds held early gains longer, but also turned negative before their early closing.

Stocks took their cue from overseas markets early on as the Dow jumped out to a 200 point gain before succumbing to what have become ongoing worries over the global economic outlook. The mood was enthusiastic from China's announcement of a $586 Billion internal stimulus package of their own. Beijing is planning on spending roughly 15% of their country's GDP on infrastructure upgrades in an effort to stimulate their post Olympics' economy. Closer to home, the bailout of AIG was upgraded from its initial $85 Billion price tag to more in the range of $150 Billion after the insurance giant announced quarterly losses of nearly $25 Billion. Investor's euphoria over all this government spending ground to a halt by midday as the focus shifted back to the current negative outlook, highlighted by Circuit City's filing for bankruptcy, and Deutsche Bank's downgrade of GM from Hold to Sell. GM's new target price of $0 (No that's not a misprint!) is a reflection of what has become the worst year for auto sales in the last quarter century, and is indicative of the belief that it is no longer a question of if, but when GM files for Chapter 11. Deutsche Bank does not expect them to last to the end of the year without their own government bailout, and they are said to be losing over $30 Million per day.

Mortgage Bonds struggled to maintain last week's gains as they ran into technical pricing resistance, as well as the initial flow of capital toward Stocks. After hitting a high point last Wednesday, Mortgage Bonds have fallen back below their 200 day average, which has traditionally been a key level of resistance. Thursday & Friday saw mainly mortgage friendly economic reports, but Mortgage Bonds fell lower, driving rates up slightly. Although the key lending rate between banks (LIBOR) has continued to drop, indicating a thawing in credit markets, investor's continue to shy away from MBS as they wait to learn more about how the government is going to spend the $Billions earmarked for the Troubled Asset Relief Program (TARP). Back in September, when the government took over Fannie, and Freddie, Bonds became ever so popular, but that reception has cooled despite efforts to instill confidence in the Mortgage Bond industry. The government has set new volume records with each new massive issue of Treasury Notes needed to fund this bailout, but there has been little detail of where the money is going exactly. The Bond Market has been much more dependent on headline news about TARP than economic news of late, and until further news is announced it is unlikely that Mortgage Bonds will get past the overhead technical resistance.

The bond Market is closed Tuesday for Veterans Day, so rates should not change until Wednesday. Thursday we get the latest Jobless Claims, and Friday is Consumer Sentiment, and Retail Sales data. I am floating to see if Stocks give us reason to hope we break through overhead resistance before then.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

US Stocks are trading in a fairly narrow range, given the recent history of wild swings, and the Dow is trying to find a way to post a positive in the face of a dismal reading from the ISM Index. Mortgage Bonds are up slightly as they continue to trade sideways.

Stocks are taking the news of the nation's worst reported output in 26 years pretty well in stride as the Dow has spent the majority of the day in positive territory. The Institute of Supply Management (ISM) Index which tracks purchasing managers across most of the country's manufacturing sectors fell to 38.9% after September's 43.5%, and Augusts' 49.9%. Readings below 50% indicate a contraction of industry. The 11% drop in 2 months is the largest since May of 1980, and shows the economy is clearly in recession. The blame is being placed on final demand from consumers, as spending has declined at the fastest rate in 28 years. Later this week the Federal reserve will report on Consumer Credit for September. In August, consumer's lowered their credit card balances for the first time since 1998, and economists are expecting an even larger decrease this time around. Citibank released a report today showing they took losses of $1.4 Billion in credit card write offs for the 3rd quarter, and last week American Express announced they would be laying off 7,000 workers. Current predictions are for nearly $100 Billion in credit card write offs for the banking industry in 2009, almost double the Federal Reserve's estimate.

Mortgage Bonds are positive from Friday's finish, but still trading in a basically sideways trend over the past week after severe losses in October. Bonds were helped by the negative ISM report, and are also getting some benefit from today's announcement by JP Morgan Chase that they are taking matters into their own hands in helping 400,000 homeowners avoid foreclosure. Many have questioned when the government's bailout would find its way to main street, and help the "little guy" more directly. JP Morgan Chase inherited many Option ARM, and negative amortization loans this year through their acquisition of Bear Stearns, and WAMU. Today they announced they will introduce alternative financing options, and hire more personnel to offer loan modifications to such borrowers. This is the first major player to take actual steps showing they believe mortgage bonds are indeed attractive, and there is hope that they will soon be joined by Bank of America, and Wells Fargo. There are indications that the Credit Freeze is lessening as the London InterBank Offered Rate (LIBOR - the rate bank's charge each other for $) has declined for the 16th straight business day, and is now back under 3%.

Rates are continuing to show instability, and suffer from overall market volatility in today's chaotic environment. My recommendation is to float very cautiously, but if you can lock a rate that works, don't hesitate, it may well be gone by the end of the day.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

US Stocks are back to the "normal" volatility roller coaster, and the Dow has been up more than 200, down more than 200, and is now mounting a late day rally back to positive. Mortgage Bonds have traded to the negative today, but are still priced above the important 200 day average.

Stocks went the first part of the day mostly positive, but the focus turned negative toward the afternoon with declining stocks outnumbering gainer's by 5 to 1. The negative view came into focus with this morning's release of the Labor Department's Jobless Claims which increased by more than expected. 478,000 people filed first time claims, pushing the 4 week average to its highest in over 5 years. Goldman Sachs is reported to be cutting roughly 10% of their workforce (approximately 3,200 employees) in the wake of the ongoing credit crunch. Estimates are that the Securities Industry alone has now lost over 125,000 jobs this year. Alan Greenspan testified before Congress today that he was "in a state of shocked disbelief" regarding the failure of financial institutions to self regulate. OPEC has changed their meeting date from Nov. 18th to this Friday in order to come up with a plan on how to deal with Oil prices having dropped more than 50% in roughly 3 months. Expectations are for a production cut, but they must be cautious not to feed into another price increase significant enough to further decrease demand.

Mortgage Bonds started the day flat from yesterday's finishing gains, and would typically gain from the poor jobless claims, but have spent most of the day in the negative. Early on, the flight to quality out of Stocks saw Treasury Notes as the main beneficiary. For most of the day, we saw Treasuries gaining with Mortgage Bonds flat to negative seeming to indicate investors were still leery of the Mortgage Market. However, that disconnect has lessened as we move into afternoon trading. The US Dollar continues to remain strong in contrast to most currencies, and both the Dollar & Yen appear to be holding up well as defensive currencies in a slowing global economy. Investors appear to prefer US Debt in the face of falling Stocks despite the Treasury continuing to issue debt at record pace. The Credit freeze is apparently continuing to thaw with the LIBOR (bank's internal lending rate) falling once again.

Hopefully, any transactions closing soon have already locked. For those that are still weeks from closing, floating is my recommendation. We may see a bit of a setback in rates from day to day, but with the negative economic outlook, the trend is for rates to improve.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington