United Home Mortgage Center & David Chambless MARKET UPDATE

Tough times in the housing and credit market sectors were brought to the forefront again this morning when Freddie Mac reported second quarter earnings losses that were over three times higher than analyst expectations. Freddie lost $1.63/share vs. a consensus forecast of a loss of $0.53/share due to rising losses from bad loans and slashed its dividend by 80%. To combat rising foreclosures, Freddie increased reserves by $2.5 billion but analysts are now saying Freddie's financial woes will get worse during the third quarter and far greater reserves will be required to offset future losses. In another sign that credit problems are persisting, investment bank Morgan Stanley announced they are freezing HELOCs for thousands of their clients who have declining home values. Morgan Stanley, the nation's second largest investment bank, said they will review the status of their HELOCs on a monthly basis. The Federal reserve left the Federal Funds Rate unchanged yesterday at 2% after having cut rates from 5.25% back in September. The Fed said that labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Inflation is also a major concern to Fed members as earlier increases in the prices of energy and some other commodities have elevated inflation expectations. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain