The truth about Paul Revere’s midnight ride (“The red coats are coming, the red coats are coming!”) has been debated for years, thanks to the story created by Henry Wadsworth Longfellow in 1860, but one theory proposed by mortgage historians was that Mr. Revere actually rode through the streets yelling, “The rate cuts are coming, the rate cuts are coming!” Although he was a silversmith, he might have been alerting other originators about the direction of interest rates. Speaking of which, now that you’re done rolling your eyes, the Fed meets today & tomorrow and announces their target for overnight Fed Funds. The market fully expects that the outcome of the 2-day meeting will be a rate reduction – either to the overnight Fed Funds rate or possibly to the Discount Rate (as they did a few months ago). The impact on mortgage rates remains to be seen (remember that after their last cut, rates shot up).

Are we heading for a recession? According to the UCLA economic forecasting group, only twice have we had this kind of housing collapse without a recession, in 1951 and 1967, and both times the Department of Defense came to the rescue, because of the Korean and Vietnam War. UCLA’s team, however, is not predicting a recession this time, instead believing that factories and exports to pick up the slack. Factories? The only economic news due out today is Consumer Confidence. And the media is filled with talk of a slow retail Christmas, high energy prices, and a volatile stock market, so the confidence of the consumer, who makes up 2/3 of our GDP, is somewhat in doubt.

Company news? More on the First Bank withdrawal from wholesale lending: “It's with a great degree of sadness that I need to inform you that effective Wednesday, October 31st, we will begin to take steps to cease operations in Irvine and Walnut Creek.  I understand fully the impact this decision has on each of your lives and as such, there has been a great deal of thought put into it and one that I assure you has not been made lightly….” And supposedly the head of Merrill Lynch has resigned, but his resignation not accepted, but they are seeing a withdrawal of money from their funds as investors’ uncertainty increases.

Lenders seem to be seeing more locks and higher fallout. Fallout has picked up a bit, perhaps due to some recent rate improvement but also perhaps due to some borrowers “double-apping” their lenders in hopes to get approved in this tighter credit environment. With the 10-yr seemingly comfortable at this 4.40% rate, but with mortgage prices a touch worse this morning, fallout may level off.

Men are like…...

Placemats…they only show up when there's food on the table.
Mascara …they usually run at the first sign of emotion.
Bike helmets… they're good in emergencies but usually just look silly.

Government bonds …they take so long to mature.
Lava lamps …fun to look at it but not all that bright.
Bank accounts …without a lot of money they don't generate a lot of interest.
High heels …they're easy to walk on once you get the hang of it.
Miniskirts …if you're not careful they'll creep up your legs.
Handguns …keep one around long enough and your gonna want to shoot it.