Ron Brown FHA & VA Home Loan Specialist

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

US Stocks are down today with the Dow of by as much as 5% as investors deal with poor earnings, and fears of global recession . Mortgage Bonds are holding on to slight gains as they push against technical pricing resistance.

The Dow is back down to the 8,600 range as investors look to sell in a Market with few buyers. There are no economic reports to give the Market any direction today so investors must focus on corporate earning which have been as gloomy as predicted. Not all the news was bad, McDonald's ( a Dow component) reported an increase in profits of 11% for the 3rd quarter, but in today's negative climate even their stock price is down approximately 2%. Boeing led the poor profit reports posting a 37% decline in quarterly earnings with much of the blame going to the almost 7 week old machinist strike. Perhaps of more importance than the 3rd quarter earnings has been the prevalence of downgraded future expectations in light of the fact that most economists predicted we would see improvement by the end of the year 6 to 9 months ago. Despite signs of improvement to the Credit Markets, and private sector lending, worries that we have yet to see the worst in relation to credit losses remain.

Mortgage Bonds enjoyed an initial positive move as capital moved out of equities, and into the safety of Bonds. However, that flow of capital has focused more on Government Bonds as the day went on, and the result has been an increase in the spread between MBS, and Treasuries. The Dollar has climbed to a 5 year high versus the Euro on the belief that the Bank of England, & European Central Bank will take action, and cut rates in order to stimulate short term growth. This stronger Dollar has contributed to a lowering of the price of Oil even with increased expectation of a production cut next month by OPEC. The closest thing to a relevant economic report was today's release of Crude Oil inventories which showed demand still on the decrease.

Once again, rates have improved over the last several days to the point that locking is good advice for short term closings, but if you have several more weeks until closing, I am recommending to cautiously float.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

After a day of only positive numbers, US Stocks are back to the roller coaster we have come to expect with the Dow down by over 200 points, as well as being in positive territory throughout the day. Mortgage Bonds have not been nearly as volatile, and have traded within a plus or minus 10bp range most of the day.

Stocks have faced heavy pressure through out the day as the focus has shifted from headline news to actual earnings reports, and corporate outlooks. The biggest loser in today's Market has been the Technology Sector. Both Sun Microsystems, and Texas Instruments, failed to live up to earnings expectations while projecting a gloomy forecast of future business. Away from the headlines, there is much concern over Lehman's final settlement of their Collateral Debt Swaps (CDS) that were given a worse than hoped for valuation earlier this month. If the total losses from the unwinding of positions in this arena are not as bad as the worst predictions, many believe the Dow will regain the 10,000 mark in short order. Until those losses are brought to light investors are continuing tread lightly.

Mortgage Bonds ended the day up sharply yesterday, and more importantly narrowed the spread against Treasuries significantly yesterday. Most of this was a change in investor confidence towards the Mortgage Backed Securities (MBS) Market which was the result of PIMCO shifting focus. PIMCO, the world's largest Bond fund, has been moving out of Treasuries, and into MBS all year, and is now approaching an 80% stake. Bonds got a bit of a two for one out of this by finishing above their 200 day average as well. If they can finish the day above that for a second consecutive day of trading, it should become a strong floor of support signaling a stabilizing of current rates looking forward.

I am recommending to float cautiously to see if Bonds stay above their 200 day average. Earnings season is well under way, and there have been no surprises leading anyone to believe the 4th quarter will be positive for Stocks, so the trend should be for better rates ahead.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

US Stocks are on a strong rally, responding well to the prospect of another government stimulus package. Mortgage Bonds are also much better, as they push to finish above their 200 day average.

Stocks continued their winning ways to start the week, as the Dow is enjoying the first day in a long time where its Stocks never ventured into negative territory. In testimony today, Chairman Bernanke endorsed a 2nd Stimulus, stating "a fiscal package by the Congress at this juncture seems appropriate." This seems as much an admission that Central Bank monetary policy alone is not enough to fix the economy as it is an actual endorsement of a 2nd Stimulus Bill. He went on to encourage congressional support of tax credits, as well as further guarantees, and possibly even direct lending measures. Stocks were up on the spending endorsement with 29 of the 30 Dow components posting gains by the afternoon. GM continues to battle back from their lowest stock price of the past 50+ years despite a variety of differing reports on the prospect of a merger with Chrysler. Crude Oil prices were also up over 2% for the day as expectations of a production cut by OPEC gain acceptance. OPEC has made public that they would prefer a "stable" price for Oil between $70, and $90 per barrel.

Mortgage Bonds have enjoyed one of their best days in over a month as they, like Stocks, experienced an almost entirely positive gaining day. After recently falling to their worst levels of the year, Bonds gained back over a full point last week (equal to a reduction in mortgage rates of roughly 0.375%), and gained another 75bp today. There was some economic news in the form of the Index of Leading Economic Indicators which posted the first positive numbers since April, although August results were revised downward versus expectations of a possible gain. This index is designed to forecast economic activity 6 to 9 months in the future, and it is hoped that this substantiates a turning point. The US Dollar posted gains against most major currencies as the index results, along with the potential stimulus, seems to have increased investor appetite for US assets. There are still real fears over the possibility of global recession after China reported their rate of growth declined for a 5th straight quarter, but consensus at this time seems to be that the worst of the credit crisis may be in the past. Further evidence comes from another day of easing in rates for short term loans between banks as the LIBOR (London Inter Bank Offered Rate) is almost 10% lower than it was Friday.

While I am still floating for now, you should be able to lock in rates that are at, or at least near, the best we've seen in a month on any transactions closing soon.

Make it a great day!

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington