Fannie Mae and Freddie Mac suspend foreclosures through Jan 9th

http://www.bloomberg.com/apps/news?pid=20601087&sid=aF7wDyLQ9xx0&refer=worldwide
In other news, mortgage bond prices rose last week pushing mortgage interest rates lower. Trading remained choppy with small improvements the first portion of the week. The majority of the releases showed continued economic weakness. Oil fell below $50 a barrel Thursday, jobless claims escalated, stocks generally fell, and deflation talk increased.
St Louis Federal Reserve President Bullard indicated deflation was only a very remote risk with core inflation currently over two percent. Deflation is generally defined as a contraction in the volume of available money or credit that results in general price declines. In inflationary periods, fixed payments buy less each year. In deflationary periods, fixed payments are worth more every year. The purchasing power of $100 in one year increases the following year in a deflationary environment. When investors think deflation is coming, they typically buy Treasuries, which we have seen recently. Other bonds such as corporate or mortgage bonds however do not usually have the same demand. Deflation makes debt payments more difficult each year. Treasuries are backed by the US government, which can print more money when needed. Companies and homeowners don’t have that luxury. In severe deflationary times bankruptcies generally increase. This casts doubt over the performance of corporate and mortgage bonds. This is one reason Treasury rates have fallen significantly while mortgage rates have not been as fortunate.

FHA loan limits will be changing January 1st, 2009. Every county in Arizona except Coconino (new limit $333,500) will be reduced to $271,050. This will change with new FHA case #'s issued after Jan 1st, 2009. Get your buyers off the fence to take advantage of these limits before it's too late. Lastly, FHA down payment requirements will be increasing from 3% to 3.5% with the new changes!

Please give me a call if you have any financial questions or if you need a second opinion on a loan scenario.

Have a great weekend,

Jon