ADJUSTABLE RATE MORTGAGES THE FACTS, THE FIGURES, AND THE FUTURE Darren Meade Victory Mortgage Lenders

FACTS ABOUT ARM's Two Trillion Dollars Set To Convert 40% Of All Mortgages Nationwide ARM's 70% Of All Mortgages in Certain Areas (California) Home Equity Loans Average Rate 9%

FACTS ABOUT THE FED New Fed Chairman “Big” Ben Bernanke Bond Market Weakened Known As “Inflation Wimp” Will Flex Some Muscle

INFLATION – WORRY TO BONDS Inflation Erodes Value Of Payment To Investor For example: –Lend Money To Individual –Individual Pays $2,000 Per Month –Inflationary Pressure = Can’t Buy As Much Goods And Services –Increase Interest Rates On Next Loan –Inflation Up – Rates Up / Inflation Down – Rates Down

BIG BEN TO FLEX “Big” Ben Bernanke Will Flex Some Muscle First Set - Flexed Muscles 25bps (March 28) Second Set - Flexed Muscles 25bps – (May 10) Fed Funds Rate = 5% Pause To Reflect And Rest Before Next Set

WHY PAUSE? Not Too Hot, Not Too Cold, Just Right Fed Has Historically Gone Too Far Change Takes 6 Months or More To Filter Into Economy Goes Too Far – Kills Golden Goose

WHERE ARE RATES HEADED? Fed Funds Rate = 5% (May 10) Prime Rate = 8% (May 10) Translating into adjustable rate mortgages: Average HELOC =9% Loan With 6 Month LIBOR = 8% MTA COFI Inverted Yield Curve

BEST CHOICE FOR REFI If Adjustable Choose MTA Combine 1 st and 2 nd Mortgage Consider 2/1 Buy Down Above 80% - Consider PMI Option One Rate / Tax Deductible /.125 increase to rate

OVERALL OUTLOOK Annual Loan Review With Trusted Mortgage Advisor Adjustable Rate Mortgages Are Good For Some Potential Fed Fund Cutting Cycle In 2007 Fixed Rates Are Still Great – 9% in 2000