Need a loan with competitive rates and quality service?

With an Impound account we offer better rates. With 60% Loan to Value we offer better rates. Both scenarios require that you have a 720 credit score. Your good credit and high equity earns you the best rate. Call now and see how much you can save. (866) 660-0957

Interest rates have been all over the board the for the past several months. The undercurrents in this economy make it impossible to predict the direction of interest rates from day to day. As the credit markets have tightened up it has pushed rates higher for many of you. If you need a new mortgage and you find a rate with a payment that works for you, our advice to you is to submit your application and be ready to lock it.

Today's Market: The Dow Jones Industrial Average briefly returned to positive territory after plunging nearly 700 points in the first minutes of trading Friday. In what remained extremely volatile trading. At this writing the dow is lower by 424 points. Overall, Mortgage Bonds aren’t fairing much better than Stocks. Bonds are already down heavily this morning.

The Bond market closes at 2 pm Eastern Time today and will be closed Monday in observance of Columbus Day.

Friday's bond market has opened down sharply again despite an extremely volatile morning in stocks. The stock markets initially opened with huge losses then recovered, but are now sliding again. The Dow is currently down 350 points after falling 700 points right after the morning bell. The Nasdaq is currently down 56 points, which is well off earlier lows and highs. The bond market is now down 29/32 despite the stock weakness. This will likely push this morning's mortgage rates higher by another .375 of a discount point.

This sounds like a broken record, but it still is the situation that we are seeing. Last night's major sell-off in the international markets has carried into this morning's trading. The markets still seem to be lost and unable to gain any solid traction and I am surprised that bonds are still taking a hit with the major stock indexes in a free-for-all downward spiral. But, until we see some stabilization, it is nearly impossible to mak e an educated guess of which direction the markets and mortgage rates will move.

August's Goods and Services Trade Balance was released this morning, revealing a $59.1 billion trade deficit. This nearly pegged forecasts, so as expected has had no impact on this morning's trading or mortgage rates.

Next week brings us the release of several important economic reports for the markets to digest. I would like to say this is good news for bonds as investors will have factual data to rely on and to influence trading. But, with the past two week's volatility and little data being posted this week, I am a little scared to think of what could happen to the markets if we get much weaker or stronger than expected results. I would like to think that weak data will be favorable for bonds, but with stocks and bonds moving in the same direction currently, that news may not turn into lower mortgage rates. We will see.

The fun starts in the middle of the week, but the latter days of the week bring us some very important data. There are two key inflation readings, retails sales data and the Fed Beige Book amongst others. Look for more details on next week's events in Sunday's weekly preview.

_____________________________________________________

 Have a wondeful weekend.
_____________________________________________________

FHA Will Take on Subprime Loans Shunned by Lenders (Update1)By Bob Ivry,

Congress gets involved again! Will they ever learn? They broke Freddie and Fannie years ago, that is part of the reason for the  current housing and credit mess. Looks like FHA is next. (Maxine Gress)

Oct. 6 (Bloomberg) -- The Federal Housing Administration has grown so large that by the end of the year it will guarantee mortgages for three in 10 U.S. borrowers, many of whom have bad credit or loans that required no verification of income.

Congress wants FHA to do more. The Hope for Homeowners program, unveiled Oct. 1, authorizes the agency, part of the cabinet-level Department of Housing and Urban Development, to guarantee up to $300 billion of 30-year, fixed rate home loans for struggling borrowers over the next three years. The Congressional Budget Office estimates that 400,000 households will get FHA-insured loans and about one-third of those will fall behind again on their new loans.

Hope for Homeowners is one way the U.S. government is trying to prevent further losses in the worst housing decline since the Great Depression of the 1930s. The rewritten mortgages may not be enough to stem rising defaults, said David Olson, a 40-year veteran of the U.S. mortgage industry.

``FHA has completely replaced subprime and Alt-A,'' said Olson, former director of market research at Freddie Mac, the second-biggest mortgage buyer, who now runs Wholesale Access Mortgage Research & Consulting Inc. in Columbia, Maryland. ``I hope it's not setting them up for another crackup. There have been so many crackups.''

Subprime mortgages are given to people with bad or limited credit histories. Alt-A home loans typically require little or no documentation of a borrower's income.

More Delinquencies

FHA will be able to recover about 60 percent of the mortgage amounts from the estimated 133,000 defaults under the program, the Congressional Budget Office said.

Borrowers with subprime mortgages were more than 90 days late with their monthly payments at seven times the rate of prime homeowners in the second quarter, according to the Washington-based Mortgage Bankers Association.

As demand for mortgage-backed securities dried up, subprime lending plummeted to $4 billion in the second quarter, compared with $56 billion in the same period a year earlier, according to trade publication Inside Mortgage Finance. Issuance of subprime mortgages peaked at $625 billion in 2005, the newsletter said.

In a legal settlement with 11 states, Countrywide Financial Corp., the home mortgage lender bought by Bank of America Corp., will provide $8.4 billion in distressed borrower relief, including interest rate and loan principal reductions, to settle consumer fraud complaints. The measure is expected to affect about 400,000 homeowners, according to Attorneys General Lisa Madigan of Illinois and Edmund G. ``Jerry'' Brown of California.

Fannie Mae

As lenders such as Countrywide fueled the housing boom, from 2002 to 2006, by issuing more subprime loans, FHA's market share fell to 2.7 percent, according to Inside Mortgage Finance. FHA required a 3 percent down payment and 1.5 percent annual mortgage insurance premiums. Many subprime lenders did not.

``Half the people who got subprime loans should have gotten FHA, and the other half shouldn't have gotten a loan at all,'' said Dennis Lykins of Allied Home Mortgage Capital Corp., an FHA lender in St. Joseph, Missouri.

Now only Washington-based Fannie Mae, the biggest U.S. mortgage finance company that was nationalized last month, is involved in a higher percentage of U.S. mortgages.

FHA's growth mirrors the explosion in mortgage lending during the housing boom, with the same dangers, said Henry Savage, president of PMC Mortgage Corp. in Alexandria, Virginia, which offers FHA loans.

Bailout

``If you lend money, even though the rates are good, better than subprime rates, to people with a history of not paying their bills on time or not at all, you're going to have a higher default rate,'' Savage said.

Home prices in 20 U.S. cities fell 16.3 percent in July from a year earlier, the fastest pace on record, according to the S&P/Case-Shiller Home Price Index.

``Does it make sense to make 3 percent down payment mortgages in this climate?'' said Guy Cecala, publisher of Bethesda, Maryland-based Inside Mortgage Finance, who argues that homeowners who bought houses in most parts of the country three months ago with 3 percent down would already owe more than their houses are worth.

``Will there need to be an FHA bailout two or three years from now?'' Cecala said.

Skeptical

FHA Commissioner Brian Montgomery was among the skeptics when Congress considered the Housing and Economic Recovery Act, which includes Hope for Homeowners. In prepared remarks to a National Press Club luncheon in Washington on June 9, he said the legislation could weaken the agency and endanger the housing market.

Expanding the FHA's portfolio to include ``problematic, high-risk loans'' could turn the agency into ``a less stable, less solvent, more bureaucratic entity,'' Montgomery said.

The FHA ``is not designed to become the federal lender of last resort,'' he said.

HUD spokesman Stephen O'Halloran said Montgomery was unavailable for comment for this story.

On July 8, Montgomery said at a conference in Arlington, Virginia, hosted by the Federal Deposit Insurance Corp., that some members of Congress want to turn FHA into a ``mega-mortgage agency, in effect federalizing the mortgage market.''

``Some want to dump bad loans on us, many that never should have been made in the first place,'' Montgomery said.

Sharon Price, director of policy at the National Housing Conference, a group that advocates for affordable housing, said Montgomery is well-respected and has tried to make the program work since the legislation was signed by President George W. Bush on July 30.

``He didn't come with a lot of housing background but he seems to be a good partner from what we see,'' Price said. ``It's gotten to be a more complicated job than it was a few months ago.''

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.

Last Updated: October 6, 2008 11:19 EDT

The Market's Crisis.

In an unprecedented series of actions from the U.S. Treasury Department, the U.S. Federal Reserve and the U.S. Securities and Exchange Commission over the last 24 hours, the administration has announced plans to purchase illiquid assets from financial institutions. It also promised to buy up Fannie Mae and Freddie Mac Debt, it will launch an initiative to lend to banks for the purchase of commercial paper, created a fund geared at insuring money market mutual funds and banned short selling on 799 financial stocks.

After a meeting with Congressional leaders, and Fed Chairman Ben Bernanke on Thursday night, Treasury Secretary Henry Paulson said he is working on legislation that would allow the removal of illiquid assets from the balance sheets of financial institutions. The Treasury Secretary pledged to continue working closely with Congress on a proposal, but warned that that systemic risks in markets need to be dealt with.

The U.S. Securities and Exchange Commission enforced a temporary ban Friday on the short selling of 799 financial stocks in an effort to calm investor fear and markets in general. The ban is in place until 11:59 p.m. EDT on Oct. 2, and can be extended 10 days or beyond if deemed necessary. The move follows similar actions in the UK late Thursday evening. Meanwhile, Australia said it plans to institute a similar rule on Monday.
Hours later, in an effort to continue bolstering investor confidence, the U.S. Treasury announced on Friday that it is launching an Exchange Stabilization Fund worth up to $50 billion geared at insuring money market mutual fund holding assets. The insurance program triggers when the net asset value for a money market mutual fund falls under $1.

Following the announcement a Treasury official told reporters that the action is geared to providing the same confidence that the FDIC does in ensuring bank deposits.

The money market is a critical part of the financial system, said the spokesperson.

In an announcement made on Friday, the U.S. Federal Reserve announced its intentions to purchase federal agency discount notes from primary dealers and launch an initiative allowing banks to borrow money for the purchase of asset-backed commercial paper. The bank loan includes a non-recourse lending at the primary credit rate for the purchase of "high-quality" ABCP. Under the provision, the Fed will be able to purchase debt from Fannie Mae and Freddie Mac. .

Mortgage News Daily.

By Erik Kevin Franco
CEP News Ltd. 2008