“NOTHING IN FINE PRINT IS EVER GOOD NEWS” Andy Rooney And although Traders studied every line, turns out last week’s economic data was a mixed platter…but served with a big side of inflationary concerns. Inflation is the arch-enemy of fixed income assets like Bonds, as over time, inflation naturally erodes the buying power of a fixed payment return. The rising concern over inflation caused Mortgage Bonds to break below several important technical floors last week, and home loan rates increased about .125% across the board.

Last week’s reports included Retail Sales numbers, which showed slow auto sales for August, dropping by a record 12%. Additionally, the inflation-measuring Consumer Price Index showed consumer prices rose 0.5% in August, with gasoline prices jumping by the largest amount in almost three years. No coincidence that auto sales are slowing as record prices are being paid at the gasoline pump.

YOU’VE HEARD IT BEFORE…THERE’S NO FREE LUNCH…BUT NOT ANYMORE. ALL U.S. RESIDENTS ARE NOW ENTITLED TO A FREE CREDIT REPORT, ONCE PER YEAR. AND WHETHER YOU ARE CONSIDERING THE PURCHASE OF A NEW FUEL EFFICIENT VEHICLE – OR PERHAPS EVEN A BIKE – KNOWING YOUR CREDIT HISTORY CAN SAVE YOU A BUNDLE. DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.

After last week’s beefy economic news calendar, this week thins out considerably. Tuesday will bring most of the action, with a look at the strength of the housing market, and perhaps more important to the direction of home loan rates…the next Fed Meeting. And although it may not be as exciting as checking odds on your favorite horse at the race track, there is actually an indicator that gives “odds” on how Greenspan and friends might decide to manipulate short term rates. The “Fed Futures Contracts” give such numbers, and there is currently a prediction of an 85% probability that the Fed will raise the Fed Funds Rate another .25% at this meeting. Some say that Chairman Greenspan might pause in the cycle of “measured pace” hikes to more fully evaluate the economic impact of Hurricane Katrina…but on the other side of the same coin, the Fed remains concerned about the potential inflationary impact of the high fuel costs and the expenses associated with rebuilding after Katrina. As always, the comments made by Big Al will be thoroughly analyzed and dissected. A hike is expected, so any surprises in the decision or his statement will certainly have an impact on Mortgage Bonds and home loan rates this week.

The chart below shows that Bonds are dancing right on an important floor of support. If the Fed comments and other news of the week are economically positive, it is quite possible that Bonds could be pushed beneath this floor and we could see home loan rates edge higher. If the news is more dismal or even neutral, we could see a bounce higher off of this floor, and home loan rates may edge lower.

As of September 1st, residents of all US states and territories have the right to obtain one free credit report from each of the three credit bureaus per year. Be sure to take advantage of this opportunity, as a clean credit rating has become as important as receiving a clean bill of health from your physician. From a potential employer to your insurance company – more and more people are using your credit rating as a way to judge if you are a good risk.

The only authorized site from which to obtain your free credit report is www.annualcreditreport.com.

The free credit report will only give your credit history, not your credit score. If you do want to know your number, you can pay an add-on fee, or your mortgage professional may be able to help you on this count as well.

You are entitled to receive only one free report from each bureau per year, so consider staggering the requests. For example, make a note on your calendar to order one from TransUnion in January, one from Equifax in May, and one from TRW in September. In essence, this will allow you to order three credit reports per year…and provide you the ability to monitor your credit throughout the year.

With the tremendous concern about identity theft in recent years, a further layer of protection is available…for a fee, of course, but it is quite nominal. As an example, for $100 per year, Equifax is offering unlimited credit reports, notification of any key changes in credit history, $20,000 worth of identity theft insurance, and up to $4,000 in lost wages to cover taking time off from work to clear credit matters. Trans Union offers a similar program with quarterly access to your credit reports and $25,000 in identity-theft insurance for approximately $50 per year. But if you are considering one of the above policies, first contact your homeowners insurance company…your policy just might include some identity theft insurance already.

When applying for any type of credit, your clean credit history can help save you hundreds if not thousands of dollars in interest each year. If you have additional questions about credit or performing a credit analysis, be sure to contact your mortgage professional for advice.

This week's economic calendar tapers off considerably. Most of the week’s action will take place on Tuesday, which will bring news on the housing market, as well as the Fed Meeting and Policy Statement on short term interest rates.

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 September 19 – September 23