Interest rates for fixed-rate mortgages fell slightly this week on news of weaker industrial production in April and consumer sentiment falling in May to its lowest level since June 1980. ARM rates rose slightly on market forecasts that the Federal Reserve (Fed) may not pursue any more rate cuts over the near term. For instance, the federal funds futures market suggests virtually no change in monetary policy over the next few months. Additionally, the Fed viewed the last rate cut to be a "close call," according to the minutes of its April 29-30th policy Committee meeting,

Housing woes still plague the economy. Although housing starts unexpectedly rose in April, all of the gains were in multifamily properties. New construction on one-unit homes fell to 692,000 homes (annualized), which was the least since January 1991 and almost 62 percent below the peak set in November 2005. In addition, homebuilder confidence matched an all-time record low in May.

Residential loans held by commercial banks that were thirty days or more delinquent rose 68 basis points to 3.68 percent between December 31, 2007 and March 31, 2008, and were at the highest share since the series began in 1991, according to the Fed. Moreover, residential charge-offs nearly doubled over the same time period to 0.82 percent. Financial institutions, in general, already had approximately $379 billion in asset writedowns and credit losses since the beginning of 2007, based on estimates provided by Bloomberg©.