mtg rate update fri 10-23, homeowners ins pointers

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

Homeowner's Insurance: Put the Right Policy In Place In order to obtain a home loan, a borrower is usually required to have a homeowner's insurance policy in place. Experts agree that the most important question homeowners should ask when shopping for a plan is the A.M. Best rating of each company. New companies pop up all the time, and homeowners need to be informed about what a company can offer in terms of protection against potential risk. Consumers should also become familiar with the liability portion of their policy. ACV (Actual Cash Value) policies pay claims based upon the depreciated value of the item or items lost. However, replacement cost policies will pay the full cost required to actually replace the items. To ensure that the right amount of insurance is purchased, homeowners should obtain an appraisal every five years or so. If additions are made or remodeling takes place, homeowners will need to revisit and possibly upgrade their plan as well. Experts say there are several important mistakes homeowners should be especially careful to avoid. The first is being dishonest on an application. This is absolute grounds to reject any claim. Secondly, if the property contains a detached structure - such as a guest house, a barn, a workshop, or a garage - be sure to include each one on the insurance policy. Finally, do not over-insure. Homeowners can save a little money by insuring only those items and structures that need to be replaced.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Friday, 23rd October, 2009:

Term Conforming APR Payment per $1,000 Jumbo APR Payment per $1,000 Conv 30 Yr 360 5.00% 5.131% $5.37 % 0.000% $0.00 Conv 15 Yr 360 4.375% 4.501% $4.99 % 0.000% $0.00 Conv 5/1 Arm 180 3.75% 3.969% $7.27 % 0.000% $0.00 FHA/VA 30 Yr 360 5.125% 5.257% $5.44 % 0.000% $0.00 FHA 3/1 Arm 360 3.875% 3.998% $4.70 % 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.--

National Average Long-Term Mortgage Rate Rises to 5 Percent

McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.00 percent for the week ending October 22, 2009, up from last week when it averaged 4.92 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.

The 15-year FRM this week averaged 4.43 percen, up from last week when it averaged 4.37 percent. A year ago at this time, the 15-year FRM averaged 5.72 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.40 percent this week, up from last week when it averaged 4.38 percent. A year ago, the 5-year ARM averaged 6.06 percent.

"Following bond yields, long-term mortgages rates edged up slightly this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Although rates for 5/1 ARMs and traditional 1-year ARMs are around half a percentage point below 30-year fixed mortgages, consumers appear to be seeking the stability of fixed-rate mortgages. According to the Mortgage Bankers Association, ARMs averaged only about 6 percent of the number of mortgage applications in September and October thus far.

"The housing market is still trying to recover in the second half of the year. The Federal Reserve reported in its October 21st regional economic review that housing market conditions improved in recent weeks, primarily from a pickup in sales of low-to medium-priced houses. However, residential construction activity was reported to remain weak in most areas. New construction of single family homes rebounded in September, rising at a 3.9 percent annual rate, but did not erase all of the declines set in August, based on figures released by the Department of Commerce. Moreover, homebuilder confidence, as measured by the National Association of Homebuilder's Housing Market Index, fell slightly in October and marked the first decline since January of this year."

From Think Big, Work Small 

Not a good start this morning; the 10 yr note at 8:30 -16/32 at 3.48% and at key support levels (3.50%). Mortgage prices at 8:30 -8/32 (-.25 bp); the DJIA futures +19. As we have repeatedly noted in the last couple of weeks, the rate markets are soft and slightly bearish frm a technical perspective, trading below key averages (on price) and above key averages on the yield charts. Not a seriously bearish environment yet but if 3.50% cracks the tone of the rate markets will become more serious and likely drive mortgage rates. So far however, every attempt by traders to breach 3.50% has failed; that level now has increased importance as a technical support. At 9:00 the 10 -14/32 3.47% +5 BP, mtgs -7/32 (-.21 bp) and the DJIA +28. At 9:30 the DJIA opened +15, 10 yr note -16/32 and mortgage prices -7/32 (.21 bp).  

Ben Bernanke spoke this morning on financial reform; said the Fed is thinking about increased taxes on large unwieldy banks or an increase of capital reserves. Some increasing talk floating around that the government wants to shrink the large banks to eliminate the "too big to fail" issue that allowed the big ones to carry on with massive leverage and little concern about the what ifs; it was no secret that behind any fails those biggies would be propped up to keep the financial system from crashing. In the past two years we have experienced the fallacy of too big to fail; tax payers are, and will pay a price that most yet have no idea the amount and what implications it will have for the US over the next few years.

Atta Boy Ben; the Fed chairman called for a "credible process" for imposing losses on the shareholders and creditors, saying "any resolution costs incurred by the government should be paid through an assessment on the financial industry and not borne by the taxpayers." Putting the burden on shareholders will get bank executives attention like nothing else. Problem is however, Congress and the administration will give the banks a pass on this one before setting new rules for the future.

The long term significance of the financial crisis caused by big banks, Wall Street firms, and rating agencies has yet to be fully appreciated. The US government is rapidly usurping power and control; big brother isn't just a phrase anymore. Health care, bank regulations, consumer protection, gun control---all new government involvements in our personal lives; the financial system mess has led to a huge increase in government. Congress and the administration are convinced US citizens need the government to take complete care of them from womb to the tomb. Can't fully experience it yet but it won't be long before we do, big brother is getting bigger by the day as a result of banks ineptness and Wall Street greed. All you need to think about is what Congress is attempting to do to the mortgage broker.

At 10:00, the only data today; Sept existing home sales expected to be up 4.7%, jumped 9.4%. August sales were revised slightly lower to -2.9% frm -2.7%. The median sales price $174,900.00, -8.5% yr/yr. 7.8 months supply, inventory levels fell 7.5% the lowest inventories since March of 2007.

Dick Lepre, San Francisco

Friday October 23, 2009