Last month's newsletter referred to 3 Huge Announcements that were hopefully a step in the right direction... the jury is still out and much more needs to be done to shore up our economy. It will be interesting to see what changes occur after the election and if our new President will actually be able to do what he promises...

In the meantime, here are some important developments to note now and some interesting facts that might provide added insight.

Fannie Mae Temporary Loan Limits Expiring

The Temporary Loan Limits provided by Fannie Mae and Freddie Mac are expiring shortly. Many lenders have stopped accepting loans with the Temporary Limits but there are a few left that are still taking them. You have about two weeks left if you want to take advantage of this opportunity.

Fannie and Freddie have announced that new temporary limits will be available next year - but they are as much as $100,000 less than the current limits. For example, in San Francisco and other high priced areas, the current limit is $729,750. This limit is targeted for a reduction to $625,500.

Fed Cuts Rates .50% - What Does This Mean to You?

The Federal Reserve Board cut the Federal Funds Rate by an expected .50% yesterday. This means that rates on your Home Equity Lines of Credit should drop by the same amount almost immediately. You might find that your credit card interest rates drop too - but don't be surprised if they increase as this area could be the next shoe to drop.

Many of our clients have expressed concern about their lines of credit and the future of interest rates. We too are concerned. Very concerned. There is a reasonable chance that interest rates will rise dramatically in the relatively near future due to inflation and other market factors. Our advice is to contact your current home equity lender and ask about converting your equity line to a fixed rate loan. Be forewarned that you may not like what you hear as interest rates and payments could be significantly higher than you may currently be enjoying. The good news is that your rate would be fixed and you would likely be paying down the principal balance as well. Most people are not aware that home equity lines of credit have interest rate caps of around 20% or more... yikes! Personally, we are keeping an eye on this and when we see rates and/or inflation start to rise, we will be converting our equity lines to a fixed rate loans.

Interesting Facts

IT'S DIFFERENT THIS TIME - Since 9/01/08 (i.e., a period less than 2 months in duration), the S&P 500 has experienced 19 trading days that have produced at least a 3% gain or loss (i.e., the change in the index's closing value over consecutive trading days). The S&P 500 had 19 trading days producing at least a 3% gain or loss in the 6 years prior to 9/01/08. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).

IT'S A GAS! - The national average price of gasoline peaked on 7/16/08 at $4.11 a gallon. By last Friday (10/24/08), the national average price of gasoline had fallen to $2.78, a drop of $1.33 a gallon. Since every 1 cent reduction in the price of gasoline saves Americans $3.4 million a day, a drop of $1.33 a gallon equates to a $447 million daily savings for US consumers (source: AAA, Wall Street Journal, Fortune).

OUT OF WORK - In the 6 months following the 9/11/01 attacks on the USA, 1.5 million workers lost their jobs. In the last 6 months, 513,000 workers have been let go by American employers (source: Department of Labor).

GIVING IT AWAY - The annual gift exclusion rises to $13,000 in calendar year 2009, an increase of $1,000 from this year. All US citizens can make gifts of cash or other property worth up to $13,000 in 2009 to an unlimited number of people without gift tax consequences (source: IRS).

Feel free to contact us anytime!

Sincerely,

CWC Financial
888-711-5454 Toll Free / info@cwcfinancial.com / 415-454-1130 Local