Fannie, Freddie, and change of the financial outlook

Tired of paying that high interest rate? Or ready to move into a new house? Now is the time to apply for a mortgage because rates are incredibly low! If you are thinking about refinancing or moving into a new home make sure you take advantage of $250 off closing costs by coming to me for your mortgage. This is the best deal in town coming from the Best Bank in Town.



Great Afternoon!
The big (non-banking related) news in Charlotte this week is the price of gas. We saw gas jump from the mid $3s to the low to mid $4s. Some places in Union County the price rose above $5. Why is gas up so much in this area? Hurricane Ike hit Houston last weekend and slowed production of oil refineries down. We get our gasoline from a pipeline directly from Houston. The pipeline is in tact, but as timing to re-supplying the system is uncertain, gas stations raise their prices because they don't know what their new inventory will cost them. This translates into higher prices for the consumer-- but probably only temporarily.



Football season is underway and the Carolina Panthers are having a great start to their season. Sunday's game was sloppy but a win is a win. They are 2-0 now and Steve Smith is coming back this week. How 'bout those ECU PIRATES being 3-0 and being ranked #15. There are talks about going undefeated. This could be a huge season.



My mailing list is growing quickly. If you know someone that wants to be added, just let me know. Check it out in my blog at Jmassachi.blogspot.com. Start some discussion and let me know what you think. Feedback is appreciated.



Onto the show…



The Government's Newest Venture
By now I am sure that everyone has heard in some shape, form, or fashion about Fannie Mae and Freddie Mac being bailed out by the US Treasury. I don't want to get into the politics of it, just the financial effects and what it means for you and me.

Who are Fannie Mae and Freddie Mac? They are the two largest mortgage purchasers in the country. After a mortgage is originated and funded, the lender sells the note to an investment bank. The investment bank in turn creates a bond from the pool of notes and sell it as an asset to long term investors. FNM and FRE stocks have gone down over 97% off of their 52 week highs because of liquidity concerns. The Fed assisted in the buyout of Bear Stearns earlier this year now it's the treasury's turn and they have decided to put tax payer's money on the line to bail out companies that are deemed as "too large to fail." Without FNM and FRE it would be extremely difficult for anyone to get a mortgage because banks would have liquidity issues and limited funds to lend. The velocity of money would come to a halt. I will talk about velocity of money more in my next letter. It is one of my favorite discussion topics and extremely important to our economic system.

Who cares? Now that the stock holders of FNM and FRE have lost most of their money, tax payers are going to bear the burden to the tune of billions of dollars if mortgage losses continue. This is a short term fix because it will definitely stimulate home purchasing with the effect that it is having on rates, which are extremely low right now. It is not a long term solution because eventually someone has to pay for all of this. The long term plan that the Treasury has set is to fix FNM and FRE then return it to the stock holders so they can resume earning profits on our borrowed tax dollars. Theoretically, the government is earning 10% on the capital it is injecting into these entities.



That is a very brief summary of what is going on and why this is such a big deal. If anyone has more specific questions please ask me or write in the blog (Jmassachi.blogspot.com) and I will respond.



Financial Update
Yesterday was the largest stock market drop in over seven years. The DJIA lost more than 500 points, or 4%. What caused that to happen?

• Lehman Brothers, an investment house, announced that it can no longer sustain itself and has filed for bankruptcy. Basically, they could no longer pay their bills. Another victim of duration mismatch -- Funding short and lending or investing long.
  


• BofA's acquisition of Merrill Lynch. The two financial firms were in talks about five months ago but started them back up on Sunday morning and by Monday the deal was done. Merrill Lynch was bought for $50 billion or $29 per share. Why did BofA pay a premium to the last trade on Friday? Especially after Ken Lewis the CEO said a few months ago regarding investment banking "We've had all the fun we can take".. -- paraphrased. Time will tell on this purchase as well as the Countrywide deal where they bought the common stock only to save their earlier and higher priced preferred stock investment... Way to go Ken...
  


• AIG, the insurance company, is talking about filing for bankruptcy. If they cannot raise about $40 billion in capital they will have to look into some different options, none of which include being in business independently.

The Federal Reserve met today. There was word that they were going to cut the rate by 50bps but they did not. The fed funds rate is still 2%. It seems as though the fed is not worried about inflation (as much) these days because of the prices of commodities going down. Just yesterday crude oil closed at less than $100 per barrel for the first time in five months. Today it was down to as low as $91 or 38% off of its high less than two months ago. Gold recently hit $740 which is 28% off of it's high back in March.

Mortgage rates are lower right now than they have been for years, mainly as a result of the treasury's investment in FNM and FRE. If you are looking to refinance with a solid bank at a great rate and low closing costs BB&T Home Mortgage is the way to go. It was announced last week that BB&T won the JD Power award again this year. It is our second year in a row winning the award for the servicing of our mortgages. BB&T does not sell the servicing to anyone. Remember, I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.

Please forward this message to people you know, maybe they want to be added to my mailing list.



Thank you for your attention!



Your waiting-for-lower-gas-prices mortgage advisor


Jon's Mortgage Spotlight
Prequalification
Getting prequalified is the first step to purchasing a new home. Most people don't know how much house they can afford. Getting prequalified is the best way to do that so your realtor doesn't waste your time by showing you houses that you can't get. The process takes just a few minutes and can be done over the phone, in person, or by email. Ask me how!

Jon Massachi
Mortgage Advisor
Branch Banking and Trust
Office: 704-243-7590
Cell: 704-650-9568
Fax: 704-843-1863
JMassachi@BBandT.com
BBT.com/mlo/JMassachi
JMassachi.blogspot.com

The Weather and Mortgage Rates

The kids are back in school and you are wondering what to do with yourself. It could be the perfect time to downsize if your kids are off to college or move into something bigger if your kids are just starting school. If you are thinking about refinancing or moving into a new home make sure you take advantage of $250 off closing costs by coming to me for your mortgage. This is the best deal in town coming from the Best Bank in Town.

Great Afternoon!
I want to open this email by answering a question that I have been getting about my emails. At least a dozen people have asked me who my mailing list consists of. Bankers, lawyers, doctors, realtors, builders, brokers, CPAs, CFPs, college students, investors, business owners, sales people, and my Mom. If I left you out, I apologize. If you know someone that wants to be added, just let me know. There are currently about 130 people on my list but my goal is to have at least 300 by the end of the year. I started posting my emails on a blog. Check it out at Jmassachi.blogspot.com. Start some discussion and let me know what you think. Feedback is appreciated.

I trust that everyone had a great 3 day (or more) weekend doing something fun. On Saturday I went to the ECU vs. Virginia Tech football game in Charlotte. That was exciting. Next week ECU plays West Virginia so I am not going to get too arrogant about my Pirates yet. I love this time of year! Now onto the show…

The Weather and Mortgage Rates
The big news over the past few days (politics aside) is Hurricane Gustav. It was downgraded this morning to a tropical storm before it did much damage to any major US cities. The news of the downgrade is causing oil prices to tumble and the stock market to jump. Lately when we see the stock market go up we see bonds go down which affects mortgage rates.

There is a common misconception in the mortgage market. At least once a day I get asked the question: Well Jon, the Federal Reserve dropped rates to 2% so why are mortgage rates so much higher? The assumption is that I am being greedy and taking a 4% spread. Wrong.

Mortgage rates are closely tied to the 10 year treasury bond. The average life of a mortgage is 10-12 years so even a 30 year mortgage will be tied closer to the 10 year note than the 30 year note. That brings up the next question: But Jon, the 10 year bond is trading around 3.8% so why do I have to pay 6% for a mortgage? Plain and simple, unless you have a printing press in your basement (which I am not suggesting), you are a higher risk than the federal government. So not that anyone cares how the weather affects your mortgage rates, but at least now you know.

Federal Legislation
As promised in my last email, I am going to talk about the new federal legislation passed governing mortgages and the economy also known as the Housing and Economic Recovery Act of 2008 (HERA). This legislation was enacted when signed by the President on July 30th. HERA is designed to help the housing market recover from the current nationwide downturn in housing prices by focusing on higher loan limits and tougher lending practices. The Federal Housing Administration (FHA) is increasing their limits, especially for people in trouble.

The new FHA program is called Hope for Homeowners and it adds $300 billion in FHA mortgage insurance authority. Under the program, principal and interest for eligible borrowers is reduced by refinancing into FHA insured loans. Another change to the FHA guidelines are that the borrower must have at least 3.5% of the purchase price/value in it themselves. This limits down payment assistance programs and gift funds. It used to be 3% so there is a .5% increase of required money down.

One of the main points in the HERA is tax incentives. There is a $7,500 tax credit for first time homebuyers available until April 1, 2009. It is retroactive so if you bought a home after April 1, 2008 you are eligible for that tax credit. Ask your tax advisor.
Much of the legislation talks about disclosing information to borrowers. Everyone should know what they are getting before they sign on the dotted line. I did not go into much detail but attached to this email is a document from the Mortgage Bankers Association that tells you everything you want to know about HERA.

Financial Update
In other news, no banks have fallen in the past week. Could this mean we have seen a bottom in the market? It depends what you consider the bottom. I think there will be plenty more small or local banks across the country that will be taken over or will fail before we realize that the bottom has come and gone. The dollar is starting to rise, commodities are dropping, and the stock market has been on an uptrend over the past few weeks. The housing market in the Charlotte area really has not even seen a significant drop in housing values, the least in the country infact. That is good news for us.

Mortgage rates are lower right now than they have been for months. If you are looking to refinance with a solid bank at a great rate and low closing costs BB&T Home Mortgage is the way to go. We have a program for every kind of buyer whether you are a first time homebuyer or retired and looking for a vacation home. Remember, I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.

Please forward this message to people you know, maybe they want to be added to my mailing list.

Thank you for your attention!

Your non-weather-predicting mortgage advisor
Jon Massachi

Jon's Mortgage Spotlight
Prequalification
Getting prequalified is the first step to purchasing a new home. Most people don't know how much house they can afford. Getting prequalified is the best way to do that so your realtor doesn't waste your time by showing you houses that you can't get. The process takes just a few minutes and can be done over the phone, in person, or by email. Ask me how!

Jon Massachi
Mortgage Advisor
Branch Banking and Trust
Office: 704-243-7590
Cell: 704-650-9568
Fax: 704-843-1863
JMassachi@BBandT.com
BBT.com/mlo/JMassachi
JMassachi.blogspot.com

Pre-blog email #2 from 8/14/08

The end of the summer is near. It seems that everyone I talk to is either on vacation or just got back from vacation. August is the time to take that last summer vacation and get the kids ready to go back to school. In this economic cycle everyone seems to be spending less, but why get less? If you are thinking about refinancing or moving into a new home make sure you take advantage of $250 off closing costs by coming to me for your mortgage. This is the best deal in town coming from the Best Bank in Town.

Great Afternoon!

Today I am sitting here in my office looking out the window at the new Target that opened a few weeks ago. Car after car is filing in and it makes me wonder if people really are spending less like the media is trying to convince us to do. I understand that California, Florida, Michigan, and some other select markets are having major housing issues after their sudden jump in value over the past half decade but does that really change the spending habits of our local economy? Or is it just hear-say? Our market is solid, still growing, and increasing in value.

This is a great time for homebuyers to get into a home at a great rate and price. Right now rates are stable and still low. That could change rapidly. The bond market is what affects mortgage rates and certainty now is better than the unknown later. I believe that rents will go up as a result of demand which means it will be almost the same per month to rent as it is to own. Most mortgage interest is tax deductible (consult your tax advisor for specifics) so you will see that money again on April 15th which makes owning cheaper than renting after taxes.
Late last month a new bill was passed to attempt to correct our current housing cycle. One of the big changes is a $7,500 tax credit to first time homebuyers. Get prequalified now and take advantage of that before it expires. I will give more details of the bill in my next newsletter so stay tuned.

I have always been told that moderation is key. This applies to foods you eat, friends you hang out with, work habits, and life in general. Over the past decade we have seen scores of banks rise up very quickly and now we are seeing many of them fall even faster. There is not much consistency in the financial world right now with the exception of few. One of the few is BB&T. In a market that was offering pick-a-payments and reverse mortgages, BB&T made a conscience decision to remain stable and consistent and is now seeing the benefits. BB&T did not get involved in those mortgages that are now toppling many of the Fortune 500 banks.
It is times like these that consumer confidence needs a boost. I am no psychologist but it seems to me that people care about consistency and value. I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.
Please forward this message to people you know, maybe they want to be added to my mailing list.

Thank you for your attention!
Your positive-attitude mortgage advisor
Jon Massachi

Jon's Mortgage Spotlight
Balloon Mortgage
This is a great loan for buyers looking for a low rate. Balloons are usually amortized over 30 years with a short-term payoff of up to ten years. If you only plan to be in your home for a few years or if you know you are going to want to refinance soon, a balloon may be right for you. If you or a friend would like more information please contact me.

Jon Massachi
Mortgage Advisor
Branch Banking and Trust
Office: 704-243-7590
Cell: 704-650-9568
Fax: 704-843-1863
JMassachi@BBandT.com
BBT.com/mlo/JMassachi

Pre-blog email #1

Great Afternoon!

Over the past few weeks there has been news about financial institutions around the country hurting. We have heard about IndyMac opening under the FDIC yesterday causing a small "walk" on the bank, we are hearing and seeing Fannie Mae and Freddie Mac's stock tumble and talk about more government regulation in the financial and mortgage industries. Wachovia has seen its stock drop over 50% in just a few weeks and some west coast banks are losing everything.

There is one bank that remains unaffected and that is BB&T.

While mortgage lenders and banks were making risky loans looking for quick profits and high returns, their practices may not have been in the best interest of their constituents. BB&T is different. We are a bank with a history of long term stability and growth. While other banks are taking losses and cutting dividends, BB&T is reporting earnings and increasing dividends.

One of BB&T's main strengths is our mortgage lending ability. We are one of very few banks left doing construction-permanent loans, stated income loans, and 100% financing. There is still money readily available for your clients who are looking to purchase a home or refinance their existing home.

The Charlotte Metro market remains strong despite reports of housing prices falling all over the country which leaves great opportunities for buyers and for sellers. If you or your clients have any mortgage questions, specific or general, please contact me at 704-243-7590. I am more than just a mortgage lender, I am a mortgage advisor. Make it a successful week!

Jon's Mortgage Spotlight of the Month
CHIP - Community Homeownership Incentive Program
This is a great loan for homebuyers looking for a primary residence. 100% financing is available with no PMI. This is a 30 year fixed mortgage. The CHIP does not have a credit score minimum and does allow for non-traditional credit references. If you or your client would like more information please contact me.


Jon Massachi
Mortgage Advisor
Branch Banking and Trust

Office: 704-243-7590
Cell: 704-650-9568
Fax: 704-843-1863
JMassachi@BBandT.com
BBT.com/mlo/JMassachi