Tom Sammon Mortgage

Rates as of 1/28/12

2:30pm update: Mortgage security rates closed slightly lower and are touching on previous lows. Stocks closed down .2%. There is a good amount of data next week led by the January manufacturing and employment reports.

7:40am report: Mortgage security rates are slightly lower near the all time lows. Stocks are down .2% still near 6 month highs. The Q4 GFP was 2.8% (annual growth rate) up from the Q3 1.8% but below the 3.2% expected. Countering this somewhat is that Consumer Sentiment was better than expected and the best since 5/11l. Mortgage ratesremain near the bottom end of the narrow range rates have been in for the last four months. (more rate outlook and background below) __________________________

30 day lock RATES with NO PPAY PENALTIES ,  NO POINTS on rates quoted unless otherwise noted.    Lower rates available with points.

Fixed Rates

NO POINTS

Product Conforming Jumbo

30 year
3.625%

4.625%

15 year 3.125%
4.25%

20 year
3.5%
4.625%

SUPER CONFORMING            30yrfixed 3.75% no pts., 3.625% .75pts

5/1 ARM 2.75%with no pts

Conforming above $417k to $729,750 in most counties

Adjustable Rate Mortgages (ARMs)

No points

Product Conforming Jumbo

monthly  ARMs no neg amort. fully indexed

n/a

n/a

3/1
2.5%
3.625%

5/1
2.5%
3.75%

7/1 2.875% 4.5%

10/1 3.75%
5%

(all rates subject to rate adds for less than excellent FICO scores, higher LTVs, loan amount adjustments and for Cash out)____________________

RATE OUTLOOK (cont.)

Mortgage rates came down sharply beginning in 11/08 as the Fed acted for the first time in history to directly lower mortgage rates by buying mortgage securities. On 12/17 and 3/18/09 rates plunged following Fed announcements of programs to buy more mortgage securities with the intent of lowering mortgage rates. Rates spiked .75% in late May and early June. But rates improved in mid 6/09 as doubts arose as to how strong the recovery would be. Mortgage rates stayed in a relatively narrow .25% range during the summer but improved in the fall to get back near the spring lows in early Oct. and in late Nov. hit new lows before moving up a bit in 12/09. On 3/24/10 rates spiked as the Fed ended their mortgage security purchase program. When the Euro debt crisis flaired in the spring rates began a steady downtrend lasting until early November 2010. Interest Rates rose 1% from early Nov to mid Dec 2010 which is among the sharper rises in recent history. In January 2011 rates ranged from 20% recovery of that spike to the best of 40% recovered, but then rates trended up in February breaking through the mid December highs on 2/8 to get to the highest rates since April 2010. Rates improved through mid March, rose until early April and then trended down to August breaking through the previous all time lows of early 11/2010. Rates hit further new lows in 9/11, There continues to be great uncertainty over the outlook for the economy and rates will swing up and down as expectations change. If you can save significantly at current rates they should not be passed up. Timing the very bottom or top of any market is nearly impossible. If you do not have a good fixed rate it makes sense for almost everyone to get one at these historical low rates. When the economy improves it could be many years before we see rates this low again especially because the actions to cure the crisis will almost certainly result in an inflation problem when the economy starts to grow again. With all the uncertainty it makes sense to have your rate locked in for as long as possible.

Long term interest rates, including mortgages, are controlled by daily trading in the bond market. The bond market actions most often preceed the Fed as the market participants are able to analyze the same data that the Fed sees. The law of supply and demand say increased borrowing from the gov't bailout of the financial system (as well as the huge budget deficit) will have an upward pressure on rates at some point when the economy recovers. We can expect that long term rates will rise before the Fed starts to raise the short term rates.

INTERMEDIATE TERM AND SHORT TERM RATES: Short term rates are driven largely by the Fed's actions. Intermediate term rates (3-7 yrs.) are in between and are more influenced by the Fed's handling of short term interest rates than the long term fixed mortgages are. Jumbo intermediate term loans are about .5% below the jumbo fixed rates because of some lenders willingness to hold the intermediate term loans in their portfolios.

The Prime Rate has been 3.25% since the 12/16/08 Fed rate cut, so prime tied HELOCs are very cheap money after having spiked to over 8% four years ago. Lender cutbacks have tightened the availability of this money significantly so it much harder to get a new HELOC and older HELOCs have had limits cut as property values drop.

The Fed cut short term interest rates by 5% from 9/07 to 12/08 when the Fed Fund rate was lowered to essentially 0%. This left the Fed using other innovative programs to further stimulate the economy. The next Fed meeting is 11/1&2/11. The Fed is not expected to begin raising rates until the recovery is well established which probably will not be until late 2013.

Inflation has picked up this year with the CPI showing consumer prices rising 3.6% in the last 12 mos. and the core rate being 1.2%. Annual core inflation (without energy and food) remains within the Fed's target of 1.0%-2.0% The Fed opinion is that inflation will moderate over the remainder of 2011 but The Fed & gov't moves to fight off another recession will be inflationary in the long run.

Borrowers with adjustable mortgages tied to Treasury & LIBOR indices and lines of credit tied to prime will continue to be helped by the low short term interest rates but beginning in 2013 will be exposed to the possibility of sharply higher rates.

Call for information on additional products. Rates are subject to change. Call to confirm current rates.