Insurance giant AIG was given a loan from the federal government to prevent them from filing bankruptcy. This appears to be an action that the government had to take as a failure with AIG would have had far reaching affects on the global economy.

The only relevant economic news was the release of housing starts which came in over 6% lower then expectations. This shows not as many new homes are being built. With less new homes being built, this might help the glut of homes that are on the market.

We have had a bumpy road the last 2 days and today appears to be the same. Investors are digesting the AIG news and they appear to be unsure of what to do. The stock market is down, mbs bond market is down, and appears investors are placing their money on the sidelines. There is just a ton of uncertainty.

If your loan is closing soon, locking makes a ton of sense. Longer term closings are a tougher call. You can lock today and remove all risk of a higher rate down the road, but it has been our opinion that rates are trending downwards. You need to decide your risk tolerance with floating your rate. We do have a solid floor of support that should keep rates from retracing, but if we do break that floor, rates could move higher rather quickly. When we speak of floor of support or ceiling of resistance, basically what we mean is look at the room that you are in. You can move rather easily up and down, you can touch the floor and jump up an touch the ceiling. What if you want to go beneath the floor? That will require much more work just like if you want to break through the ceiling. MBS, stocks and other traded items have these supports and ceilings that keep them in a trading range. We are currently right at a very solid floor of support with a lot of room for improvement to the topside. As always, stay tuned to our blog and we will update if we should fall through the floor of support that is underneath us.