Mary Taylor Sales Manager/Sr. Loan Officer Golf Savings Bank Phone: (503) 701-2269 Fax: 1-888-287-1675 metaylor@golfsavingsbank.com

Pros and Cons of a Bi-Weekly Mortgage Program When a borrower enters into a contract to make bi-weekly payments on their mortgage, the amortization schedule is accelerated. For example, with a 30-year amortization schedule, the borrower makes 12 payments per year. In a bi-weekly arrangement, the borrower makes 26 'half' payments, which allows the loan to be paid off in 22.8 years instead of 30 years. It's the same as making 13 monthly payments. This ultimately saves the borrower thousands of dollars in interest rate fees. However, bear in mind that bi-weekly programs usually have some type of setup, transaction, and maintenance fees associated with them. A custodian manages the bi-weekly payments in a trust account (and also makes a profit on the interest accrued there). Because the lender really doesn't accept partial payments, this middle man is still making monthly payments to the lender on some type of pre-payment schedule. It is important for the consumer to know that the same results can be achieved without hiring an outside company to do this. As long as your loan program carries no pre-payment penalty, pre-payments can be made on a monthly or annual basis to shorten the loan term to save money on interest or remove PMI charges on loans that have less than a 20% down payment. The borrower simply needs to indicate the extra payment is being made toward the principal balance, and have the discipline to make these extra payments as scheduled.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Friday, 9th October, 2009:

Term Conforming APR Payment per $1,000 Jumbo APR Payment per $1,000 Conv 30 Yr 360 4.875% 5.005% $5.29 % 0.000% $0.00 Conv 15 Yr 360 4.25% 4.375% $4.92 % 0.000% $0.00 Conv 5/1 Arm 180 3.75% 3.969% $7.27 % 0.000% $0.00 FHA/VA 30 Yr 360 5.00% 5.131% $5.37 % 0.000% $0.00 FHA 3/1 Arm 360 4.00% 4.124% $4.77 % 0.000% $0.00

*Rates are subject to change due to market fluctuations and borrower's eligibility.

All loans subject to credit approval and property appraisal. Programs, rates, and terms subject to change without notice. For ARM loans, rate may increase after settlement. Prequalification is not a commitment to lend, a condition of loan approval, or an application for credit. Pre-approvals will result in a loan decision subject to conditions. Consult a tax advisor regarding the deductibility of interest.--

                  McLean, VA - Freddie Mac 

Today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.87 percent for the week ending October 8, 2009, down from last week when it averaged 4.94 percent. Last year at this time, the 30-year FRM averaged 5.94 percent. The last time the 30-year FRM was lower was the week ending May 21, 2009, when it averaged 4.82 percent.

The 15-year FRM this week averaged 4.33 percent  down from last week when it averaged 4.36 percent. A year ago at this time, the 15-year FRM averaged 5.63 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.35 percent this week down from last week when it averaged 4.42 percent. A year ago, the 5-year ARM averaged 5.90 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in 2005.

"Long-term mortgage rates eased further this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Interest rates for 30-year fixed-rate loans were the lowest since mid-May; 15-year FRMs were at a record low since data were first collected in 1991 and 5-year ARMs also hit an all-time record starting in 2005. Compared to a year ago, consumers could shave almost $134 off their monthly mortgage payments on a 30-year fixed-rate loan for $200,000 by refinancing.

"Such low rates are spurring mortgage demand. Mortgage applications surged to a 19-week high over the week ending on October 2nd, according to the Mortgage Bankers Association. Moreover, applications for home purchases were at the strongest pace since the beginning of this year."

Think Big, Work Small

August trade deficit was slightly better than expected, -$30.71B against estimates of -$33B; no reaction to it as usual. The world knows the US runs trade deficits, importing a lot more than exporting. There are no more data feeds the rest of the day. Today is all about Fedspeak; Fed officials are speaking everywhere today. Lockhart of ATL (8:30) vice-chair Kohn (12:00) and St. Louis's Bullard (2:00). 

Last night Bernanke reiterated again that he will be ready to remove stimulus when "the economy has improved sufficiently".  "My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period," he spoke at a Board of Governors conference in Washington last evening. "At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road." "Looking at the amount of excess capacity in the economy, looking at the low rate of inflation, we believe that conditions will warrant policy accommodation for an extended period," he said. As the outlook for an economic recovery remains on the present path markets will hang on every word from Fedsters and other central bankers about when the accommodative party will end. Not likely however, at least for the next six months. Yesterday the Bank of England and the European Central Bank left their rates unchanged. Earlier this week Australia raised its base rate by 25 BPs, the first G-20 country to do so. 

Most economists surveyed by Bloomberg are rather pessimistic on the outlook for increased consumer spending in Q4; with unemployment exceeding 10% next year consumers are likely to refrain from the pace of spending in the past quarter. According to the survey of 50+ economists consumer purchases will increase just 1.0% this quarter after increasing 2.4% in Q3. Household spending will grow at a 1.5% pace in the first three months of 2010, and 1.8% in the second quarter, the survey showed.  Obama is considering, and likely will do it, extending the first time homebuyers credit, extending unemployment insurance past the current 27 weeks (if that occurs continuing unemployment claims will increase again after recent declines). Obama is also likely to increase job growth by increasing spending on transportation projects. Still a huge cluster however; it is uncertainty about where we are in the recovery that will keep the ball in the air. More spending will add more pressure on the declining dollar as the US runs up deficits that until two years ago were literally unimaginable. 

The US, world's largest economy, contracted 3.8% in the year ended in June, the worst economic slump since the 1930s.  

Normally when a market holiday occurs on Monday the bond and mortgage markets close the previous Friday at 2:00; today not the case, markets will not close early. Not a big deal except for traders looking for an early exit.