Update from James Williamson-

Relief Program Boosts Confidence
This has been quite the historic week in the financial markets. One major investment bank declared bankruptcy, another sold itself, and the world's largest insurance company needed a government bailout. Central banks around the world had to inject hundreds of billions of dollars into the banking system to calm the markets.
The government's primary response to the market turmoil was a broad relief program. The program includes major elements intended to stabilize credit markets and restore confidence. Directly affecting the mortgage market, a government entity will be established to acquire underperforming mortgage assets, manage the assets, and sell them in an orderly fashion. This will remove troubled assets from financial institutions and replace them with fresh capital, which will then be available for future lending opportunities. In addition, the Treasury doubled the amount of mortgage securities that it will buy in the open market for its own holdings. Fannie Mae and Freddie Mac will be allowed to increase their mortgage portfolios, as well. One result of these actions should be increased liquidity for future investment in mortgage assets.
A Fed meeting is usually the most significant event in a week, but last week it took a back seat to the other news. While many investors expected a rate cut on Tuesday to relieve credit markets, the Fed held the fed funds rate unchanged at 2.0% in a unanimous vote. According to its statement, the Fed expects inflation to moderate later this year, but they are concerned about the upside risks. The Fed also noted slower economic growth, partly due to tight credit, weakness in the housing market, and a slowdown in exports.
In other news last week:
Some good news as the August Consumer Price Index (CPI) showed a small decline from July
The government also announced that it will provide guarantees for the $2 trillion in assets in money market mutual funds
And, oil prices fell as low as $90 per barrel, down 40% from the high, before ending at $100 per barrel. Unfortunately, the prices are rising this week.
Update on Down Payment Assistance
Last week the House Financial Services Committee adopted H.R. 6694, which is designed to reauthorize and reform down payment assistance programs that the Housing Bill banned in July. A last-ditch effort to head off the Oct. 1 ban on the use of seller-funded down-payment assistance with FHA-backed loans is picking up steam as a compromise bill that would mend rather than end the practice of down payment assistance. HR 6694 would allow qualified borrowers with credit scores of 680 or above to use seller-funded down-payment assistance on FHA-backed loans. Borrowers with scores between 620-680 will be subject to risk-based pricing and higher insurance premium fees. We should find out this week if Congress and the President will also approve of this legislation. Rate Update With all of the volatility in the financial markets last week, mortgage rates remain very low but are as much as .5% higher than last Monday. Needless to say, expect more volatility in the days ahead.