Lending Update from WR Starkey

Market Comment - Week of October 26th, 2008

Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading remained extremely volatile. Most of the improvements in mortgage interest rates came the beginning of the week as stocks struggled amid continued global economic uncertainty and oil prices continued to fall. Unfortunately a lot of the gains were wiped out Thursday and Friday as fear continued to grip the financial markets and many investors pushed funds into Treasuries or returned to cash positions on the sidelines. For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.The Fed announcement Wednesday will be the most important event this week. The gross domestic product and employment cost index data will also be very important. Expect extreme market volatility again this week.

Here are the Economic Factors this week:
New Home Sales
10/27/08
Consensus Estimate: Down 0.4%

Analysis: Important. An indication of economic strength and credit demand. A decrease may lead to lower rates.

Consumer Confidence
10/28/08

Consesus Estimate: 54.0

Analysis: Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Durable Goods Orders
10/29/08

Consensus Estimate: Down 0.5%
Analysis: Important. An indication of the demand for "big ticket" items. A larger than expected decrease may lead to lower rates.

Fed Meeting Adjourns
10/29/08
Consensus Estimate: 50 basis point rate cut

Analysis: Very Important. Most expect the Fed to cut rates. Volatility is likely to surround this meeting.

Q3 Advance GDP
10/30/08

Consensus Estimate: Down 0.1%

Analysis: Very important. The aggregate measure of US economic production. A decrease may lead to lower rates.

Q3 Employment Cost Index
10/31/08
Consensus Estimate: Up 0.7%
Analysis: Very important. A measure of wage inflation. Weakness may lead to lower rates.

Personal Income and Outlays
10/31/08

Consensis Estimate: Income up 0.1%, Outlays down 0.1%
Analysis: Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates.

U of Michigan Consumer Sentiment
10/31/08
Consensus Estimate: 67.0
Analysis: Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Gross Domestic Product
The Gross Domestic Product (GDP) is one of the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners. GDP is the sum total of goods and services produced by the United States. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth. The advance third quarter gross domestic product data this week has the potential to move mortgage interest rates. A cautious approach is necessary to protect against market volatility.

CURRENT INTEREST RATES

Conventional 30 Year Fixed Rate 6. 125 %
FHA/VA 30 Year Fixed Rate 6. 500 %
FHA 3/1 ARM 6. 125 %