Aaron Abed

Ok, so the Government once again steps in to bail out a company in the private sector. Why? No choice! AIG is so intertwined in the Global markets/economy there was no choice. AIG wasn't able to secure the financing on their own because all private financing options were given the blink of an eye to make a decision...nobody was willing to do so because of the complexity/interworkings of what they were going to invest in was WAY too complex to dig into in a few days...imagine that. So let's think about this....Fannie and Freddie 200 Billion each and 85 Billion to AIG....now I am not the smartest guy on the block..but I think that is about....ah...485 Billion that the Federal Government became the Knight in shining armor riding a big ole' white horse! So how many more failing companies will think "Oh, it's going be OK...the Fed's will save us"? So what is our ...yes "OUR" Federal deficit? Remember we are one country! Well as of this writing it is 1.77 Billion per day or $9,637,088,301,671.72 that's $31,623.52 for each one of us based on a population of 304,744,364. So what the point? When are we going to demand change and accountability from each other, the local, state and federal government and the private sector that we are bailing out every couple weeks? Listen, learn and make decisions on YOUR knowledge and understanding of what is REALLY going on...not trash ads, fancy spins ads, inaccurate newspaper articles, TV interviews, well you get my point. Dig in and understand who is running for the Presidency and what they stand for as well as what they REALY intend to do. I am not one to voice my personal choice for whom I will be voting for because this is my choice and who am I to influence your decision! I was listening to MPR this morning and the topic was "Vapor Ads"...example from the Obama camp "We need a President who is not out of touch", what is really being said, John McCain is too old, been in Washington too long and not on the same page as today's world and technology. Example from McCain's camp "Obama has made no significant mark on education, elusive with accountability, a staunch defender of the existing public school monopoly, Obama's one accomplishment while in Illinois; to teach Kindergartners' comprehensive sex education. Learning about sex before learning to read, etc" . What's true? Obama supported "age appropriate" sex-education for children as a means of teaching them what was proper or improper touching, as well as to protect them against pedophiles. Again, what is the point? Neither ad addressed a single real issue, what they did accomplish was to keep us diverted and the mainstream media diverted from talking about what really matters. Instead we all focused of the BS "Vapor Ads". We each need to dig in understand and make a decision based on the facts and not the initial information being shoved in our faces.

Wow, what started out as some random thoughts took a turn while writing this. We are all given the right to choose and Vote...this is our liberty...take advantage of it and make the choice that works for your belief system.

Thanks for reading.

Rate Lock Advisory - Tuesday Sep. 16th

TUESDAY AFTERNOON UPDATE:

Today's FOMC meeting has adjourned with an announcement of no change to key short-term interest rates. The post-meeting statement indicated that the Fed felt key rates were low enough to spur economic activity. The stock markets initially reacted negatively to the news since traders were expecting a rate cut, but then staged a rally that pushed the Dow up 141 points and the Nasdaq up 28 points.

The bond market did not fair so well. As expected, as soon as stocks started to rise, bonds suffered. The same funds that were moved into bonds and drove prices higher yesterday, now were hurting bonds as they were shifted back into stocks. The result was the bond market closing down 26/32 and a sizable increase to mortgage rates. I suspect that there is more room for bonds to fall if stocks continue to move higher. Therefore, holding the lock recommendations seem to be the prudent stance at this time.

Today's only relevant economic data was August's Consumer Price Index (CPI). It showed a decline in the overall reading of 0.1% and an increase of 0.2% in the core data reading. Both of these readings matched forecasts, therefore, they had little impact on the bond market or mortgage rates.

August's Housing Starts report is the only relevant data being posted tomorrow morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. Tomorrow's report is expected to show a drop in new housing starts from July's levels.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Tuesday's bond market has opened in positive territory again as yesterday's frantic buying has carried into this morning's trading. The stock markets are showing modest gains compared to yesterday's massive sell-off that had the Dow closing down over 500 points. The Dow is currently up 35 points while the Nasdaq has gained 6 points. The bond market is currently up 9/32, which will likely improve this morning's mortgage rates by another .250 of a discount point.

Today's only relevant economic data was August's Consumer Price Index (CPI). It showed a decline in the overall reading of 0.1% and an increase of 0.2% in the core data reading. Both of these readings matched forecasts, therefore, they have had little impact on the bond market or mortgage rates.

The biggest influence on this morning's trading is still the financial sector woes and the stock markets. There is still talk of more bank and financial company collapses that could still create widespread panic in the markets. The spotlight is currently on insurance giant AIG and its ability to continue to remain solvent. Whether or not that will be accomplished remains to be seen. However, the markets often overreact to a crisis and then correct. The stock volatility that came as a result of news from the past few days has certainly benefited bonds as investors seek safe-haven. But, I suspect that this may end in the immediate future, hence the extended lock recommendation yesterday. I am going to hold the lock recommendations for the time being as any type of correction in stocks could drive bond prices sharply lower and create a significant spike in mortgage rates.

The FOMC meeting will adjourn at 2:15 PM today. The recent financial and bank news has some analysts now thinking that the Fed may lower key short-term interest rates at this meeting. I don't believe that to be the case and that the Fed will leave rates unchanged. However, I would no t be surprised to see the post-meeting statement address the recent events. Depending on what is said or addressed in the statement, we may see another round of volatility in stocks and bonds during afternoon trading today.

Look for an update to this report shortly after the markets have an opportunity to react to the FOMC meeting's results.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Monday's bond market has opened up sharply following a steep sell-off in stocks during early trading. The stock markets are reacting to news that Lehman Brothers filed for bankruptcy and other related financial sector news. This has pushed the Dow lower by 250 points and the Nasdaq down 33 points. The bond market is currently up 48/32, which should improve this morning's mortgage rates by approximately .500 of a discount point.

The news the Lehman was unable to find buyers for its businesses and filed for bankruptcy protection has significantly raised concerns that the financial sector of the market is nowhere near stabilizing and has many fearing that more collapses may be coming in the near future. There are concerns about other banks and financial services companies on the verge of collapse that could create turmoil in international markets also. The benefactor to this news and concern is the bond market as investors seek safe-haven from the volatili ty. Whether this spike in bond prices will hold is unknown at this time, but what is a safe bet is that more news like this weekend's reports could make mortgage-related bonds much more attractive to investors and may lead to a downward trend in mortgage rates.

Also contributing to this morning's bond gains was a much larger decline in industrial production than analysts had expected. This morning's release of August's Industrial Production report revealed a 1.1% decline in factory output. This was much weaker than analysts' forecasts of a 0.3% decline and indicates that the manufacturing sector was weaker than thought in August. This is good news for bonds and mortgage rates because slowing economic activity eases inflation concerns.

Tomorrow morning brings us the release of August's Consumer Price Index (CPI). This is one of the most important reports we see each and every month. It is considered to be a key indicator of inflation at the consumer le vel of the economy. There are two readings in the report- the overall index and the core data reading. Current forecasts are calling for 0.1% decline in the overall reading and a 0.2% rise in the core data reading. A larger increase in the core data would likely lead to higher mortgage rates tomorrow, while a smaller increase would be good news.

The FOMC meeting will adjourn at 2:15 PM tomorrow. There is little debate about a possible change to key short-term interest rates at this meeting. The overwhelming consensus is that there will be no change to rates at this meeting. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find the Fed's expected next move. The wild card is how the markets react to the statement. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates tomorrow afternoon and Wednesday morning.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Product Spotlight (Special White Paper Edition)Volume 14

By Mark Teteris, Chairman and CEO - Lakeland Mortgage Corporation

WHO is involved?

FNMA and FHLMC are government sponsored enterprises (GSE) chartered by congress to provide an expanded market for home mortgages. Both are stock companies and are publicly traded on the NYSE. Their primary function is to purchase mortgage loans and repackage the obligations into securities (notes and bonds), which are guaranteed by the GSE, and then sell the resulting bonds to the public, including large institutional investors worldwide. There are approximately $5 trillion of these securities outstanding today. Providing this large liquid market allows mortgage originators such as banks and mortgage banking companies to replenish their capital and provide more new home mortgages to home buyers and to homeowners seeking to refinance existing mortgages to tap into equity and/or take advantage of lower interest rates.

WHY is this happening?

Investors have been willing to purchase these guaranteed mortgage bonds with yields (interest rates) only slightly above the rates available by purchasing U.S. Treasury notes and bonds. This difference in rate is called a risk premium. Because the U.S. congress authorized the creation of the GSE, investors have long believed that the GSE guarantee of the securities they issued was also backed by an implicit guarantee supported by the full faith and credit of the U.S. Treasury. However this U.S. guarantee never officially existed. Meanwhile, other issuers of mortgage securities, often containing sub-prime and other exotic mortgages, began to experience rapidly rising defaults as the white-hot housing market began to cool. As investor confidence in these securities began to falter, investors in the GSE-issued securities felt safe as they clung to their belief in the implicit guarantee. When the credit and housing downturn became more severe however, investors began to lose confidence in the existence of the implicit guarantee and demanded an ever higher risk premium for mortgage backed securities. This is why mortgage rates have remained stubbornly high above 6 percent even as the Federal Reserve lowered its benchmark interest rates.