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
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