Halfway done with August already? I know that autumn is near since the clothing in the center aisle of Costco indicates that shorts and t-shirts have given way to slacks and sweaters. It also means the end of summer vacations for many people – who have children - in the mortgage and mortgage securities business, with a possible increase in volumes in the marketplace. They are coming back to a Monday with very little going on or perhaps if school doesn’t begin this week they are still away. There is no economic news to move rates, and oil prices have slid back down around $113/barrel since the storm approaching Florida appears to be exactly that: a storm and not a hurricane that could disrupt oil pipelines. Gold prices are also dropping, going below $800 an ounce for the first time since December.

Friday we had some economic news, with the Michigan Consumer Sentiment Index rising to 61.7 in August from 61.2 in July, the first back-to-back gain in almost two years. This was attributed to lower energy costs – if I had just spent $85 to fill up my gas tank instead of $100, I would have a better sentiment also! Europe's biggest economies (Germany, France and Italy) all contracted in the second quarter, and Japan announced that its gross domestic product also shrank in the April-June period. For economic news this week, tomorrow we’ll have the July Producer Price Index and Housing Starts numbers, and on Thursday Jobless Claims, the Philadelphia Fed Survey and Leading Economic Indicators. There is no news Wednesday or Friday. The yield on the 10-yr stands at 3.85% and mortgage prices are roughly unchanged from Friday afternoon.

Fannie and Freddie employees woke up to a story in Barrons saying, “It may be curtains soon for the managements and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac. It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses.”

Where do you think housing prices are going? If you are thinking that they may slide further, you’d be in the majority. Unfortunately, of course, home prices can create wealth or destroy it, and impact the financial institutions who lend to the housing market. If home prices fall more, the natural reaction among lenders and borrowers will be to slow lending and slow spending, right? Economists and mortgage bankers can debate this for days and days, and wring their hands in angst. But generally speaking, if economic growth is below average, Treasury rates should remain low, as should inflation. Now, if we can only get mortgage rates to follow!

After living in the remote wilderness of Kentucky all his life, an old hillbilly decided it was time to visit the big city.
In one of the stores he picks up a mirror and looks in it. Not ever having seen one before, he remarked at the image staring back at him, “How about that! Here's a picture of my daddy.”
He bought the mirror thinking it was a picture of his daddy, but on the way home he remembered his wife didn't like his father, so he hung it in the barn, and every morning before leaving for the fields, he would go there and look at it.
His wife began to get suspicious of these many trips to the barn – was he seeing someone?
One day after her husband left, she searched the barn and found the mirror. As she looked into the glass, she fumed, “So that's the ugly tramp he's runnin' around with!”

Rob