4 Percent Mortgage Plan, February 2009–REVISITED

8 September 2010

As goes Housing, so goes the Economy

We are not normally proponents of governmental interference in markets, but in February 2009 – during the worst moments of the recession – we advocated a 4% mortgage plan as the lowest frictional cost way to put money in the hands of households while helping the banks move ‘toxic’ assets off their balance sheets[1][2].

Our plan called for current (performing) whole loan mortgages that are being held on bank balance sheets to be refinanced and guaranteed by the government at a 4% fixed rate regardless of the LTV (Loan-to-Value) or the credit score of the borrower. Our plan would put money in the hands of households and would not cost the taxpayers any money. It would be paid for by the banks that see their whole loan investments being reinvested at lower yields. However, the banks would be able to transfer their toxic assets off their balance sheets and would most certainly consider it a fair trade-off.

The questionable quality of bank assets is one of the biggest overhangs our economy faces.  It is an issue that has been swept under the rug because of ambiguous accounting rules.  Our plan would help the banks shrink the difference between the true market value of their assets and their ‘carrying’ value.  This clarity in the financial system will significantly help the markets and investors.

Recently, several similar plans have been floated by others that call for current government backed mortgages to be refinanced at today’s rates. These plans differ from ours in that our plan calls for refinancing whole loans held by banks while other plans call for refinancing government backed MBS securities.

We feel that under the plans advocated by others, to the extent that FNMA, FHLMC and other government agencies hold these MBSs, the taxpayer would end up paying for the reduction in yield. Other holders of these mortgages are usually institutions including banks, pension funds etc. that will likely pass on the lower yields to the very same borrower class this program intends to help. So, while our plan provides relief to the borrowers, does not cost the taxpayer, and helps the banks clean up their balance sheets, other plans provide relief to the borrowers but end up costing the taxpayer and do nothing for the bank balance sheets.

One year and six months after we first introduced our plan, we still feel that it is the most efficient way to stimulate the economy. It will put money into the hands of the spenders, while simultaneously cleaning up the balance sheets of the banks. As a derivative benefit, it will likely support housing prices – one of the primary components of putting our economy back on the track to recovery.

To learn more about Rady Asset Management and the portfolios they manage please contact them directly at 877.302.RADY and visit their website at www.radyassets.com

Investors should carefully consider the investment objectives, risks, charges and expenses of the Contrarian Long/Short Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 877.302.7239. The prospectus should be read carefully before investing. The Contrarian Long/Short Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC.

Funds involve risk including possible loss of principal. ETFs are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in ETFs and may be higher than other mutual funds that invest directly in stocks and bonds. When the Fund invests in foreign securities through ADRs, the Fund could be subject to greater risks because the Fund’s performance may depend on issues other than the performance of a particular company or U.S. market sector. Stocks of midcap companies may be subject to more abrupt or erratic market movements than those of larger, more established companies or the market averages in general. The performance data quoted here represents past performance through Sept 30, 2009. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Please review the Fund’s prospectus for more detail on the expense waiver. Results shown reflect the waiver, without which the results could have been lower. A Fund's performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. For performance information current to the most recent monthend,please call toll‐free 877.302.7239. 1515‐NLD‐12/29/2009