Market Insights: 1 -20 -2009

Chronic uncertainty over the impact of massive government stimulus efforts is creating an uncomfortable level of risk for investors -- strong enough to limit the ability of mortgage interest rates to move notably lower. With more than $1 trillion of borrowing by Uncle Sam in the works for this year alone – investors are looking at two different scenarios:
1. If the government stimuli work, an economic recovery may get under way relatively soon. As the engines of growth rumble back to life the demand for capital will rise – pushing interest rates higher across the board, or
2. If the massive government borrowing fails to revive the sputtering economy – how much more additional borrowing will it take and what impact will all this debt have on the sovereign creditworthiness of the United States? If Uncle Sam were to loose his AAA credit status mortgage investors are keenly aware that the cost of all credit – including mortgage credit – would rise notably higher.

Against this backdrop of worry, investors will be listening intently to president-elect Obama’s inauguration speech. If as expected, he presents a plan that contains viable measures for turning the labor market around and kick-starting the economy (think major government infrastructure spending) stocks will likely rally while mortgage interest rates will do well to trade near last Friday’s levels.

On the other hand, if market participants conclude the new president has yet to develop concrete courses of action and/or that his plans will likely encounter strong political pushback and delay from Congress -- look for stocks to move lower while mortgage interest rates remain steady to fractionally lower.


PROGRAM- Purchase 30 DAY RATE

CONFORMING 30 YEAR FIXED
80% LTV and >275,000 <= 417,000 5.0% CONFORMING 15 YEAR FIXED 80% LTV and >275,000 <= 417,000 4.75% CONFORMING 40 YEAR FIXED 80% LTV and >275,000 <=417,000 N/A CONFORMING 3-1 ARM 80% LTV and >275,000 <=417,000 4.75% CONFORMING 5-1 ARM 80% LTV and >275,000 <=417,000 4.875% CONFORMING 7-1 ARM 80% LTV and >275,000 <=417,000 5.125% VA/FHA 30 YEAR > $200,000
5.00%

CONV. JUMBO 30 YEAR FIXED
80% LTV and > 417,000
7.5%

CONV. JUMBO 5/1 ARM
6.625%

RATES AND POINTS ARE SUBJECT TO CHANGE WITHOUT NOTICE