Ron Brown FHA & VA Home Loan Specialist

US Stocks are trading mostly sideways, but are leaning to the downside despite a positive read on the Manufacturing sector. Mortgage Bonds are following suit, but have managed to stay above resistance, and even post slight improvements.

Stocks are mostly to the negative on perceived overall weakness in the global economy regardless of better than forecast manufacturing numbers. The Commerce Department reported factory orders increased 1.3% in July versus forecasts of 0.8%. The report showed business' increased their capital spending even though consumer's are spending less. The Financial Sector got hit by Lehman Brothers once again, as Ospraie Mgmt. (which Lehman owns 20% of) decided to shut down its perennial flagship commodity hedge fund. On the positive side, Fannie Mae shares are up after a successful auction of $1 Billion in securities, and Oil Prices are still below their 200 day average for a 2nd day. The general perception appears to be one of weaker global economic activity, and demand.

Mortgage Bonds are responding well as they had little, or no reaction to the increased manufacturing activity. The Fed released their Beige Book today detailing what most of us already know: lending standards are continuing to tighten, real estate is still slowing although some areas are seeing a decline of inventory, and inflation is putting pressure on prices, but wages are lagging behind. The absence of wage based inflation will allow the Fed to continue to hold rates steady, waiting for the decreased demand to reign in inflation. The Dollar continues to gain strength against other world currencies, which in turn is helping to pressure commodities lower. Recently, the Dollar has reached a two and a half year high against the British Pound, and is currently at its best level of the year versus the Euro.

Mortgage Bonds are now faced with strong resistance in the form of their 200 day moving average, and have moved well above key levels of support. I recommend locking in today's rates for any transactions that are closing soon, but if you have until the end of the month, floating is a good option.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks came out of the gate strong after the holiday weekend, celebrating the lack of impact Hurricane Gustav had on Oil production, and cheering a possible Capital influx to Lehman Brothers. Mortgage Bonds fell in early trading, but have regained momentum, and are currently above their 100 day average.

Stocks focused on the positive possibilities for the economy with Oil prices dropping as Gustav dissipated. The Gulf's Oil production facilities were mostly spared as the Hurricane never lived up to forecasts, and the result is Oil prices falling below their 200 day pricing average for the first time in well over a year. Further good news came from reports confirming that Korean Development Bank was indeed negotiating with Lehman to buy part of the embattled firm. The Dow was up nearly 250 points in the first hours of trading, but has given all of those gains back this afternoon. Part of the turnaround comes from this morning's Institute for Supply Management Index which dropped to 49.9, below expectations of 50%, and the lowest reading since May. With last week's revision of GDP upward to 3.3%, these numbers lend credence to those predicting further tightening of the economy in the remainder of the year.

Mortgage Bonds originally reacted to the fast start by Stocks, as capital flowed out of Bonds into equity markets. However the ISM report showed exports are no longer holding up the manufacturing sector as the Dollar gains strength. The strengthening Dollar is now being interpreted as a significant factor in the decline of commodities pricing, and is making Bonds more attractive. Lately, both Stocks, and Bonds have primarily reacted to Oil, but eventually (perhaps now?) the Markets will have to turn their attention back to fundamentals such as the credit situation, Fed policy, and inflation. These more long term characteristics point to a bullish Bond Market. Mortgage Bonds are currently trading at their best levels of the day, and are above their nearest pricing resistance, their 100 day average.

I am recommending to float cautiously while we wait to see if the 100 day moving average can be turned from resistance to support. However, some lenders have already re-priced for the better from this morning, so if you are closing in the next few days you should be able to take advantage of some of the best rates in nearly two months.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks are down across the board on mixed economic news, and persistent inflationary trend. Mortgage Bonds have given back much of yesterday's gains, but are still trading at their 100 day average.

Stocks took their cue from the Personal Consumption & Expenditure (PCE) measure of inflation which came in with its highest year over year reading in well over 17 years this morning. The Fed's favored core reading from this report (which excludes Food & Energy) rose was in line with expectations, but still brought the year over year number to 2.4% versus the FOMC target of 1% to 2%. While Personal Income's fell much more than expectations, Personal Spending still increased by the forecast amount of 0.2% which was much less than last month's 0.6%. The July reading was still being distorted by government stimulus checks, and as a result 2nd quarter GDP is being discounted while we wait for a more representative 3rd quarter that is projected as Zero or negative growth.

Mortgage Bonds actually broke through their 100 day average yesterday, but quickly fell back below on the morning's inflation data. The Chicago Purchasing Manager's Index came in much better than expectations of 50.0 when it reported at a whopping 57.9. Consumer Sentiment was also strong with a reading of 63 versus expectations of 62. Neither of these typically has a high impact on Markets, but the combination of these along with the above inflation, and Oil pushing higher on weather concerns has put Bonds under a lot of pressure. On top of this, the technical indicators show Bonds to be in an "overbought" state, as well as getting near their 200 day moving average, which offers an extreme level of pricing resistance.

Hopefully, any short term closings were locked yesterday, but if you floated, the damage to rates is not significant, in part due to low volume trading ahead of the Holiday weekend. For those looking to close in a matter of days rather than weeks, I still recommend locking, but if you are looking further out, floating cautiously is still OK.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks got a huge boost today on revised GDP numbers, and the Dow is now up nearly 200 points. Mortgage Bondshave held fairly steady most of the morning, despite this economically friendly news, but are facing pressure as capital flows toward Stocks.

Stocks are up across the board as the government raised the preliminary 2nd quarter GDP reading from 1.9% to 3.3%, well above Market expectations of 2.7%. Equities Markets got an additional boost this morning when Initial Jobless Claims showed a decline of 10,000 from last week, and the 4 week average fell by 6,000. Continuing claims numbers rose, and the 4 week average for those is now at its highest mark in almost 5 years, but the market is focusing on the positive for now. Initial Claims represent job losses, while continuing claims show the level of difficulty in finding replacement jobs. The troubled Financial Sector also got good news as Bond Insurer MBIA was able to attract new investment totaling $184 Billionfrom FGIC, while Fannie Mae announced they were replacing their CFO, as well as their Chief Business, and Risk Officers. Shares of Fannie are up 40% on the week, and Freddie has gained over 80% in value since setting record lows.

Mortgage Bonds have been surprisingly resilient in the face of all this positive news for Stocks. While the GDP numbers are fueling the Stock rally, there is still significant doubt about the overall economy, and good reason to discount the increase. The data is considered skewed due to the impact of the government stimulus checks, and because the relatively low Dollar spiked exports, not to mention the fact that most analysts still predict zero, or even negative growth over the final 2 quarters this year. Later today the Treasury is auctioning $22 Billion in 5 year notes, and the results could impact Bonds as results for yesterday's auction of 2 year notes was mediocre. The good news for Bonds is that the Dollar seems to have turned stronger, and Oil & Gold prices are down after surging considerably higher in early trading.

With Stocks rallying today, and Mortgage Bonds pressing up against strong pricing resistance in the form of their 100, and 200 day moving averages, I am recommending to lock on any transactions that are closing over the next couple of weeks. Today's headlines are nothing like what would be needed for Bonds to break through pricing resistance, and support is not close by.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks are posting solid gains with the Dow up over 100 points on the strength of a much better than expected Durable Goods report. Mortgage Bonds are also positive for the day, which is an abnormal reaction to the positive Durable Goods numbers.

Stocks are taking a positive cue from today's surprise increase of Durable Goods orders. Orders were up 1.3% versus expectations of 0.2% on strong demand for Transportation Equipment. While the actual details of the report don't support the level of optimism, the Market appears willing to move positive on an "it could be worse" philosophy. For the first time in recent memory, Stocks are not reacting to increasing Oil prices, and are instead ignoring the increase as a short term blip caused by Hurricane/Tropical Storm Gustav. Fannie, and Freddie are sharing in this good fortune as both stocks are positive for the week despite the "tug-of-war" debate over their fate regarding a government bailout. Both mortgage giants held successful auctions of their short term debts this week. Stocks are also getting a bit of a bump from Europe as Germany's version of the CPI came back showing a month to month inflation decline, and created similar expectations for the US.

Mortgage Bonds would typically take a dive after being hit by a Durable Goods report that was higher than expectations, especially in light of increasing Oil prices. Today is a different story, as Bonds have moved higher to challenge overhead pricing resistance at their 100 day average. Atlanta Fed President Dennis Lockhart helped out with his speech at Georgia State University today, stating he sees inflation falling over the rest of this year having peaked in July. He added that the Central Bank needs more time for their policies to take effect, but also said he expects home prices could fall another 10% to 15%. The FDIC announced that insured banks reported income 2nd quarter this year fell over 86% from the same quarter 2007, and was the lowest earnings since 1991. The FDIC now must come up with a plan to not only deal with a growing number of ailing banks, but also a plan to increase bank reserves which will likely require an increased cost for banks to support the Deposit Insurance Fund.

Today's gains by Mortgage Bonds are slight, and won't improve rates much if at all, but is a welcome surprise in light of the day's economic news. Part of the reason Markets are not responding much to the day's new is because of low volume, but low volume days have a way of turning into over exaggerated swings, so with some of the best rates in the past 6 weeks now on the table, locking is not a bad move. Again, the long term trend is positive, but with strong pricing resistance above, and an upcoming holiday weekend, floating is risky in the short term.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000