Fannie Mae reported a loss of nearly $19 billion in the third quarter due largely to credit-related expenses. The resulting deficit has prompted FHFA to ask Treasury for an advance of $15 billion, the second cash infusion in three months.

In the five trading days between October 29 and November 4, the Federal Reserve purchased a total of $16.00 billion agency MBS. A gradual slowdown in daily purchases is expected to continue as the Federal Reserve wanes the mortgage market off it's support. However, up to this point the steady withdrawal has yet to affect the performance of MBS coupons versus benchmarks. This is a function of a generally slow pace of new loan production. In fact this past week, the Federal Reserves participation helped "rate sheet influential" MBS coupons greatly outperform their benchmarks. Thank the Fed that mortgage rates did not rise more this past week.

Both long and short term interest rates declined during the week ended November 5 according to data released by Freddie Mac and Fannie Mae. All rates are now below an average of 5 percent.

In the week ending October 31, 2009, jobless claims fell to 512,000 from 532,000 in the previous week, which was revised higher from 530,000. Economists only expected 523,000 new claims for unemployment benefits, so this read was better than expected. This is the lowest number of jobless claims since the week ending January 3, 2009.Same story...layoffs in construction, manufacturing, agriculture, and trade industries. It is in our view that the amount of cost cutting performed by many firms combined with seasonal consumer demand influences will result in periods of temporary employment and thus volatility in labor market data. Unfortunately, as hiring rates remain near record low levels, it is expected that the rate of government insured unemployed Americans will remain high.

The Senate today voted unanimously Wednesday night to extend the $8,000 tax credit for home buyers beyond its scheduled November 30, 2009 expiration date. The credit would be available until April 30, 2010. Under the new legislation the credit will also now apply to home buyers who are buying their second or subsequent home. The credit currently applies only to first time home buyer.

In last week's release, which reported data for the week ending October 23, mortgage application activity fell 12.3% even as mortgage rates dropped from 5.07% to 5.04%. The Refinance Index, decreased 16.2% from the previous week while the seasonally adjusted Purchase Index moved lower as well, decreasing 5.2% from one week earlier. The refinance share of mortgage activity fell to 62.3% of total applications from 65.0% in the previous week. In today's release, which covers new loan applications for the week ending October 30, the MBA reported that demand for new mortgages increased 8.2% and the average 30 year fixed mortgage rates fell from 5.04% to 4.97%.

For a packed week Tuesday is pretty light, but that hasn’t stopped equity futures from dropping sharply lower. Markets in Europe are the likely culprit as Germany’s DAX is down -1.8% and shares in France and London are each 2.2% lower. Two hours before the opening bell, Dow futures are looking to open 97.00 points off at 9638, while S&P 500 futures are down 11.75 points at 1027.25.