START WEARING WARMER PAJAMAS! And grab that extra sweater like Mom always said…average home heating costs will jump about $500 this winter. Adding the extra bucks needed to fill up the gas tank, lots of folks will have to watch their spending. All these extra costs caused by high oil prices add to inflation. Greenspan and the Fed are charged with fighting inflation, which they do by hiking short-term rates. Hiking these rates then pushes up the cost of Equity Lines and consumer loans, which in turn make it more expensive to borrow and buy. It’s a nasty cycle, and these factors have all contributed to the recent slide in Bond prices and jump in home loan rates.

But all in all, the US economy remains pretty resilient. Last Friday’s Jobs Report was not nearly as bad as feared considering the impact of Hurricanes Katrina and Rita, and the usually high impact report turned out to almost be a non-event. Overall, home loan rates were largely unchanged for the week.

MAYBE YOU’VE HEARD THE BUZZ…NEW BANKRUPTCY LAWS ARE COMING INTO EFFECT. WHAT DOES IT ALL MEAN? READ THIS WEEK’S MORTGAGE MARKET VIEW, AND LEARN WHY FILING BANKRUPTCY MIGHT BE MUCH TOUGHER THAN IT USED TO BE.

Clearly seen in the chart below, the trading of Mortgage Bonds remains on the “Down Escalator”, with the overall path of least resistance continuing lower, with home loan rates trending higher. But last Friday’s positive close gives some hope for a potential change in direction. Most of this week’s high impact news arrives on Friday, and could provide Bonds with enough juice to make a break out of the nasty trend seen of late.

The bottom line is inflation. If the reports of the week show that inflation is controlled, Bonds could get a boost higher and home loan rates could enjoy some improvement. But if the news shows that inflation is heating up further, watch for home loan rates to jump higher.

"The worst bankruptcy in the world is the person who has lost his enthusiasm." ~ H. W. Arnold

On October 17th, new laws will go into effect, making it tougher for individuals to file for bankruptcy. The new rules have been given a great deal of publicity; so many consumers are rushing to file prior to the new law taking effect. According to the American Bankruptcy Institute, the number of filings was anticipated to increase another 10% to 20% by the end of the third quarter 2005…and second quarter 2005 was the largest single filing quarter in history with 458,597 filings.

So what is changing so drastically with the new laws?

First of all, the costs associated with filing for bankruptcy will most likely increase by three to four times the current amount, purely due to the complexity of the new law. Second, the new law requires that prior to filing bankruptcy, an individual must have sought credit counseling from an approved agency, within the six months proceeding filing for bankruptcy. Third and probably most dramatic, many bankruptcies will now have to use Chapter 13 – a reorganization of debt – as opposed to the more commonly used Chapter 7 – more often a complete clear out of debt, allowing the protection of certain assets.

Chapter 13 requires that a plan be filed with the court to repay the debts associated with the bankruptcy in three to five years. But if the filer could not keep up with the set payment plan, the individual could change the bankruptcy from a Chapter 13 to a Chapter 7 and have the remaining debts cancelled. The new law may no longer allow individuals to make this switch.

The rule reads that if someone earns less than the median household income for their state, they will be allowed to file Chapter 7. But if someone earns more than the median income and can afford a $100 per month debt payment, then generally Chapter 13 will be the only option. And the IRS will be the ones determining this based on the persons income and expenses – the individual will not be allowed to make this determination.

As always, it is important to seek the advice of a legal professional on laws governing your particular area.

With a Columbus Day holiday-shortened week, the majority of this week’s economic reports will be released on Friday. In addition to the last Fed meeting minutes on Tuesday, Friday’s Retail Sales and the inflation measuring Consumer Price Index will attract the most attention. Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of October 10 – October 14