The People Have Spoken

Senator Barack Obama? . . . . . OR . . . . . Senator John McCain?

Survey Says: President-elect Barack Obama.

That was the choice that the electorate took up yesterday. There are some who are happy this morning and some who are not. We must all remember that we are Americans FIRST, party affiliates second. For me, I stood in line, cast my vote and brought my kids to introduce them to the process of electing the leaders of our nation. I will keep my vote to myself. No matter who the victor was to be going into last night, I will tell you that my only concern and hope would be that the victor would have the ability to bring about better times ahead for all Americans. Now I genuinely hope that we, as a nation, can rise to the challenges ahead of us and look to the greater good within us all.

I think it's pretty safe to say that we are all imperfect and only correct in our beliefs, actions and motivations some of the time. And so, it can be suggested that one of the truest measures of a person is how graciously they accept defeat or victory - essentially all that lies in front of them. The greatest people I have ever looked up to were gracious in their approach to life. Neither allowing themselves to get too high, or too low, over the setting of the moment. Always looking to achieve what can only be described as "more" the next day. I know that is what I strive for.

In my work as a financial coach and mortgage banker, I have the opportunity to "get into it" with many different ideas and people. We ultimately come to find that most people want the same thing - some level of certainty, security and opportunity in their lives. We work on the money part of that. I don't go deep on the political end of the discussion because I don't want to know their business. And, frankly, my position is just that - mine.

As we approach the new era ahead of us - no matter if "your guy" won or lost last night - ask yourself, "Am I gracious about the outcome? Am I going to PERSONALLY do what I can to advance what I think is important for our nation? Will I legitimately do so in a fair and just way with regard to my fellow citizens? Will I (at least) entertain the ideas of those different than me? Will I remain open to new thought? Will I embrace change - the only true constant in life?" Only then, after considering these questions, can you really take your position with confidence each day.

So, now the election is over. There is much work to do for our country, our economy, our men & women bravely serving in uniform, our friends around the world. It's time to stop bitching and start doing. So, let's roll up our collective sleeves and have at it.

It's good to be an American today (and every day!).

VOTE

Today is the day. No matter who you're voting for. No matter what your issues are. No matter the issues on your state, county, city or town ballot. You had better vote. YOUR voice could be the one that tips the decision in the direction that YOU want it to go. Or, if you make a choice not to vote....YOUR voice will be the one that is not heard. We have a right, a duty, and a privilege to vote in the United States. Do not squander it. VOTE!!!

Strange Days Indeed....Most Peculiar, Mama! (John Lennon)

Wow, we are in a wicked, wild and weird time!!!!!!

We're in a very strange time, folks. It's almost comical to hear what we're hearing on the radio, in the papers and on the TV. Seriously. Something to think about - The Fed is attempting to be savvy and creative in its ways to help the financial system get back on track. However, there is simply no one who can draw upon past experience to find answers here. We are in uncharted territory due to the complexity of the financial instruments that are unravelling. Not trying to scare anyone - just telling the truth (what an idea?!)

This situation is historic...and we are living through it. It is almost comical to hear the utter stupidity that comes out of the mouths of some of the politicians who are paraded in front of the cameras...I can't help but think that we actually elected these people. There is a lot of panic out there. People are very worried about their life savings. Is money in the bank safe? How about if it is in a life insurance policy? How about in bonds? Unfortunately the answer is no, no, no.

Yesterday, the panic reached a level that caused such a demand on US Treasury instruments, that the total return of some short-term paper went negative. That's right...the premium paid was higher than the return provided by the yield. So keeping your cash under the mattress is better than an investment in some Treasuries, and apparently safer than the financial market!!!

Suddenly, guess what may become the most attractive way to protect your money? Think about it...you can touch it, get a tax break, live in it too. Yes, Real Estate is starting to look pretty good, especially since it has become more reasonably priced.

The Fed has come to the rescue lately, but all these "bailouts" and programs to help faltering companies is hard to sustain. They can't save everybody because money will run out. As mentioned previously, the Fed has been very creative. But eventually, the money and creativity could run out. And the Fed may need to actually print money - this would be highly inflationary....very bad stuff. Let's hope it doesn't get to this, as that would be very bad for rates...which, of course, I (and so should you) care deeply about. We sure are living in interesting times!!!


In this morning's economic news, weekly Initial Jobless Claims increased by 10,000 to 455,000 claims, meeting expectations, as workers were displaced by Hurricane Gustav in Louisiana. The four week moving average of continuing claims rose by 29,750 to 3.46 million to remain near a five year high. All in all, this report suggests continued weakness in the labor market.

In a bid to ease the credit crunch and restore a sense of calm in the financial markets, the Federal Reserve authorized a $180 billion expansion of its swap lines with other world central banks. The funds, which will be provided by the Federal Reserve, can be injected into money markets through overnight and term loans. Stocks are liking this news so far and this is pressuring Bonds.

Leading Economic Indicators were reported at -0.5%, in line with expectations. Philadelphia Fed Index was up 3.8, far better than expectations of -10. Stocks strengthened momentarily on the surprisingly good Philly Fed number.

Mortgage Bond prices are trading sideways in a volatile 100bp range, with overhead resistance at $101.47 and support below at $100.50. Most clients can continue to float, but VERY carefully during these wild times.

I will keep you posted!

Rich Hayden
Mortgage Banker
703.926.4646 - p

Fed Day Taking Second Place to AIG Worries

Jeez-Louise! What a ride we're having!!!! Last week it was Fannie & Freddie. Yesterday it was Merrill & Lehman. Today...it could be AIG. These are watershed changes of seismic proportion. Really, really amazing stuff. In the turmoil, though, there is opportunity. From 2 weeks ago through today, we've seen certain loan programs provide an interest rate drop of nearly 1 full percentage point. That is HUGE for people looking to buy a house or refinance their current home. That change hasn't been without incident, though. It's been a very volatile ride down in the bond markets and it continues to be today (read on).

So, what's going on today? Well, today it's supposed to be Fed Day...but that isn't the big story at the moment. Right now, all eyes are on insurance giant AIG, which is in very serious trouble. The company is in desperate need of around $75 Billion and it has until today to shore up this capital, otherwise it could face bankruptcy. This story is far reaching as AIG is a worldwide company, with $1 Trillion in assets and operating in 130 countries. Think about this - AIG provides insurance in all facets of life, from car to life insurance - and should AIG go bankrupt, claims around the world would not get paid - that is scary to imagine. We will all see what happens in the next several hours as this story develops.

At 2:15pm ET, the Fed will release its interest rate decision and policy statement. Up until the last few days, there wasn't much of a chance for a Fed Cut - but as of this morning, the Fed Funds Futures are saying there is a 100% chance of a .25% cut and a 50% chance of a .50% cut. This is really amazing. We won't know for sure what will happen until later today - but with mounting issues in the financial sector, the Fed may just cut in an attempt to restore a sense of calm in the global financial markets. Should the Fed cut, Mortgage Bonds probably won't like this action because of its inflationary effects. Mortgage Bonds have already traded in a fairly wide 35bps range. The volatility in the market continues.

The headline Consumer Price Index for August was reported at -0.1%, meeting expectations and representing the first monthly decline since October 2006. When stripping out volatile food and energy, the Core CPI rose 0.2%, also meeting expectations. The Overall CPI year over year increased 5.4% and the Core CPI year over year rose 2.5%. With the report meeting expectations, the Fed may be feeling better about inflationary threats and this could help them justify a rate cut later this afternoon....again, probably not good for mortgage rates.

I really hope the Fed doesn't cut, as they did when they panicked in January. We are just starting to see signs of inflation moderating, oil prices receding and the US Dollar strengthening. A Fed Cut would likely disrupt those nice trends. Should the Fed not cut - Mortgage Bonds may likely move another leg higher, but should they cut - we could see prices give up some of their recent gains. I do expect mortgage bond prices to move higher in the longer-term, but a Fed Cut today could provide a speed bump and possible retracement in prices.

KEEP MY NUMBER HANDY FOR ALL OF YOUR HOME MORTGAGE PLANNING NEEDS:

703.926.4646

Rich

Lehman Fails, Merrill Sold, Fannie & Freddie Rescued - How Can This Be Good?

The headlines certainly portend a very dicey time for the world economic system. However, at a very personal level, these watershed events can be good (in the end) for you and me - the average consumer. How, do you ask, can seismic disruptions to the world financial market benefit you?

Let's take a look at the bigger picture. You and I live our daily lives in what we can call "The Real Economy." That is to say, we spend the money in our wallets to buy tangible "stuff" every day like food, clothes, gas, etc. We operate our finances in a pretty simple way, too. It's basic, spend less than you make so that your have more than you need at the end of each day. Otherwise, you go into debt. Either you can service (pay for) that debt, or you can not. If you can not, you go bankrupt. It's really that simple. Large financial institutions operate in more of an economy of the ether (air). In that they buy and sell futures, derrivatives, futures on bets on what the federal reserve will do, long term bonds, short term bonds, corporate bonds, government bonds, municipal bonds, school bonds, etc., etc., etc. Some of these things are real what I would call "real" like stocks, real estate and bonds. Other instruments, though, are more "in the ether" and where this all comes unwound. Instruments like derrivatives, futures and the like are bets on what things "should" do - and by their nature - contain much more risk. Now, I'm watering this down a LOT - so, those of you reading who will take issue, your objection is duely noted.

All that said, we will see more banks and brokerages fail. As taxpayers, we will feel some pain from this as the US Government will (and already has) participated in the mop-up that ensues watershed events such as these. The bankruptcy filing by Lehman Brothers comes in at a whopping $613,000,000,000.00 (BILLION with a B). That dwarfs the previous filing of Worldcom in 2002, Enron in 2001 and Drexel Burnham Lambert in 1986. How can this be good? When these events unwind, the initial period is often akin to a REALLY bad case of the flu. You feel sick to your stomach, there's no end in sight, you can't sleep...there's just nothing that good about it. When the dust settles, there are fewer players in the game. The rules have typically been reset in such a way that new controls are in place to keep some of the bad things from happening again in the future. And, some unexpected good things will happen. For instance, mortgage rates will come down as a result of this as investors - both individual and institutional - seek the relative security of long-term bond investments vs. riskier hybrid and stock investments.

Along with that, the fall of one or two more big players in the financial services sector will be good for the larger economy in time. Sometimes you can have too much of a good thing. Too many players doing the same thing in the same space with the same money leads to a house of cards being built up....which has to fall. Today, we see the fall of two giants in the form of Merrill Lynch and Lehman Brothers. Stay tuned, it's just going to get more interesting from here. As Neil Peart says..."Adventures Suck When You're Going Through Them!"

We will look back at these times as an adventure - perhaps not an enjoyable one - but, an adventure none-the-less. Look for rates to move lower this week...which could actually spur positive activity for the housing market....which, is good for the broader US Market....see, a silver lining!

GOOD FOR YOU = The Impact of US Gov't TEMPORARY Takeover of Fannie Mae & Freddie Mac

Well, we sure have had an interesting 48 hours in the Hayden house! As you may have heard or read by now, the U.S. Government took temporary control of Fannie Mae and Freddie Mac yesterday (Sunday). This is the most dramatic step by the US Government to stabilize the US Economy since President Roosevelt established the Federal Housing Administration (FHA) and Fannie Mae during the Great Depression.

There are a multitude of points and conjecture that are certain to be gotten "wrong" about this in the media AND on the campaign trail this fall. Don't be sucked into the incorrect information. The inner workings of both of these firms are incredibly complex and - frankly - designed to lessen risk rather than increase it...no matter what you may read out there. So, don't be fooled by a 1500 word article that tries to explain 70 years of product development and the intertwined nature of investors, secondary markets, retail origination, etc., etc., etc. There are bound to be some things left out .

The basic premise that has been laid out before us is simple. By placing the companies into a temporary conservatorship (meaning, they will be run by the US Government through the end of 2009) the US Government has also placed the full strength of the US Treasury behind the companies so that financial markets can continue to function smoothly and without disruption. Doing so makes the investment community view the investment in mortgage bonds MUCH more favorably - driving down interest rates and making loans more available and affordable. It's that simple.

Already this morning in early market activity, we are seeing the likelihood of interest rates on a 30 year conventional/conforming loan DROPPING 0.25% to 0.375%. That would put a 30 year fixed in the high-5's for the first time since early this year - and only the second time in the last 3 years. This is a BIG DEAL. A GAME CHANGER, if you will.

I encourage you to share this POSITIVE news with everyone you know who is a homeowner, or prospective homeowner. I also ask that you let them know that I am very interested in talking with them to learn if I can help them to finance (or refinance) their home loan in a consultative, professional and thoughtful way.

For those of you who are my past clients, I will be contacting each and everyone of you individually in the coming days to share the potential positive impact this can make for your family.

My warmest regards,

Rich


Rich Hayden
Mortgage Banker, HomeFirst Mortgage Corp
207 South Alfred Street, Alexandria, VA 22314
703.926.4646 (m) 703.832.6467 (f)
Email: rahaydenjr@yahoo.com
Go To: My Website

I'm Baaaaaaaaaaaaaaaaaaaaaaack

Hey gang,

I took the summer off from blogging. Spent a lot of time w/ my kids and family over the summer. Well, now I'm back w/ more good stuff than ever before. Creit markets are still weird, housing is still a little bit in the dump. But, we're on our way back. Anyway, it's 12:17am and I'm tired after having just watched the Republican's introduce Sarah Palin - so, I'll dig in tomorrow morning for all of you.

Rich