The Government


Fannie Mae says it will suspend evictions for single-family foreclosures and two- to four-unit properties during the holiday season, from Dec. 19 through Jan. 2, 2012.

“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards, executive vice president of Credit Portfolio Management for Fannie Mae, said in a statement. “No family should have to give up their home during this holiday season.”

While the holiday moratorium is in place, legal and administrative proceedings for evictions may continue, but “families living in foreclosed properties will be permitted to remain in the home,” Fannie Mae announced in a statement.

Source: Fannie Mae

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Daily Real Estate News | Friday, September 30, 2011

 

Starting Saturday, many borrowers in pricey housing markets may find they’ll need a higher down payment or pay higher rates. The size of mortgages that the government will back in several high-priced regions is set to drop on Oct. 1, which some analysts expect will serve as another thorn to the housing market.

In 2008, Fannie Mae and Freddie Mac raised its cap on conforming loans up to $729,750 in some of the most expensive housing markets so that larger mortgages would be available to home buyers. But those caps are set to reset on Oct. 1, scaling back to a maximum of $625,500 in some areas of the country.

Housing analysts say the drop will make it more expensive and harder for some buyers to qualify for home purchases in expensive markets, particularly along the coasts.

“The down-payment issue is the most significant aspect form borrowers standpoint,” says Greg McBride, a senior financial analyst at Bankrate.com. “These changes will price some prospective borrowers out of the market.”

Source: “Big Borrowers Face Larger Down-Payments, Rates,” MarketWatch (Sept. 30, 2011) and “Big Mortgages: Harder to Get and More Expensive With Loan Caps,” CNNMoney (Sept. 30, 2011)

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On Loan Limit Drop, Middle Faces Hard Hit

House Fails to Vote on Extending Loan Limits

As part of the Administration’s plan to increase homebuyer use of private mortgage insurance (PMI) on mortgages underwritten or purchased by Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) has proposed changes to shift the risk of loss on mortgage defaults and foreclosures from the U.S. Treasury to the private sector.

The two government sponsored enterprises (GSEs) currently require PMI or Federal Housing Administration (FHA)-provided insurance on some but not all mortgage loans with loan-to-value ratios (LTVs) over 80%. [For more on the comparative costs of PMI and MIP, see the first tuesday Market Chart, FHA, PMI, or neither?]

The FHFA now seeks to make GSE-based financing more comparable to financing independently provided by the private sector, partially in an effort to recoup losses sustained by Fannie and Freddie (and thus the U.S. Treasury) during the Great Recession and financial crisis. Fannie and Freddie have been repeatedly criticized since the collapse of the housing market for their loss-generating business practices and lack of “skin in the game.” [For other recent attempts to encourage private-style lending practices from GSEs, see the May 2011 first tuesday article, Fannie and Freddie show some skin.]

first tuesday take: Political ill will for Fannie and Freddie as they currently exist seems likely to succeed in the long run — either by making the GSEs fully-independent private entities or dissolving them altogether. Neither step, however, can take place successfully unless private mortgage bankers step up to the plate and deliver the loans it is their business function to make.

The federal government needs to quickly take the GSEs out of the lending business – especially by removing their government guarantees. Only then, when the playing field is leveled, will private mortgage bankers see they can achieve profitability through fully-regulated mortgage activity structured to prevent any hazardous competitive advantage in the market.

With luck, we can soon do away with both GSEs once and for all, and in the process be rid of their government-backed guarantees that have so badly misaligned mortgage funding and misallocated personal wealth in the real estate industry. With the removal of these agencies, and the simultaneous elimination of harmful mortgage interest tax deductions, it will finally be possible to achieve long-term stability in sales volume and prices. [For more on the flaws of mortgage tax deductions, see the June 2011 first tuesday article, Subsidizing the American dream.]

RE: “FHFA changes may boost private mortgage insurance”, from Housingwire.com

 

 

 

S&P Lowers Fannie, Freddie Credit Rating-Daily Real Estate News | Tuesday, August 09, 2011

Standard & Poor’s downgraded the credit rating of lenders backed by the federal

government on the heels of the first-ever lowering of the U.S.’s credit rating.

Fannie Mae, Freddie Mac, and other government-backed lenders were lowered one step from AAA to AA+, S&P reported in a statement issued Monday. Some analysts say the downgrade may force home buyers to pay higher mortgage rates.

“The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government,” S&P said in a statement. “Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government.”

The GSEs own or guarantee more than half of U.S. mortgage debt.

Freddie Mac said that the lower debt rating will cause “major disruptions” in its home-lending by possibly reducing the supply of mortgages it can purchase. It said in a Securities and Exchange Commission filing that the lower rating could hamper home prices and even lead to more home-loan defaults on mortgages it guarantees.

Meanwhile, the Federal Housing Finance Agency on Monday assured investors that securities issued by GSEs are sound. “The government commitment to ensure Fannie Mae and Freddie Mac have sufficient capital to meet their obligations, as provided for in the Treasury’s senior preferred stock purchase agreement with each enterprise, remains unaffected by the Standard & Poor’s action,” said Edward DeMarco, FHFA acting director.

Some analysts and lenders have said they don’t see the fallout from the S&P downgrade on the U.S. and other banks as having such a widespread affect. “It’s likely that once the storm passes, you’ll get an increase in mortgage rates because of this, but it won’t be significant,” says Anika Khan, a housing economist at Wells Fargo.

S&P also announced on Monday that it had lowered its credit ratings for 10 of 12 federal home loan banks and federal farm credit banks from AAA to AA+.

Source: “S&P Lowers Fannie, Freddie Citing Reliance on Government,” Bloomberg (Aug. 8, 2011); “S&P Downgrades Fannie and Freddie, Farm Lenders and Bank Debt Backed by U.S. Government,” Associated Press (Aug. 8, 2011); Freddie Mac Reports $4.7B Loss, Says S&P Downgrade Will Disrupt Mortgage Market,” Associated Press (Aug. 8, 2011); and “FHFA Assures Investors After Fannie, Freddie Downgrade,” HousingWire (Aug. 8. 2011)

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Will the S&P Downgrade Affect Interest Rates?

Will the S&P Downgrade Affect Interest Rates?

Daily Real Estate News | Monday, August 08, 2011

 

Standard & Poor downgraded the U.S.’s credit rating on Friday, despite Congress reaching a deal in the final hours on the debt ceiling crisis last week. And now many of your customers may be asking: What does this mean for interest rates?“The impact on your wallet of the Standard & Poor’s downgrade of the nation’s credit rating is similar to what would happen if your own credit score declined: The cost of borrowing money is likely to go up,” the Washington Post explained in the aftermath of S&P’s decision.

S&P downgraded the U.S.’s top-notch AAA credit rating for the first time in history, moving it down one notch to AA+; the rating reflects a downgrade in S&P’s confidence in the U.S. government’s ability to repay its debts over time. It’s not clear, however, whether S&P’s downgrade will instantly effect rates, analysts say.

The 10-year Treasury note is considered the basis for all other interest rates. And “the downgrade could increase the yields on those bonds, forcing the government to spend more to borrow the same amount of money,” the Washington Post article notes. “Many consumer loans, such as mortgages, are linked to the yield on Treasurys and therefore would also rise.”

Watch this video with NAR Chief Economist Lawrence Yun for more information.

While consumers who have fixed interest rate mortgages will be immune to any changes in borrowing costs, home buyers shopping for a loan or those with mortgages that fluctuate may see a rise in rates later on, some analysts say.

Mark Vitner, senior economist at Wells Fargo Securities, told the Associated Press that he doesn’t expect the downgrade to drive up interest rates instantly since the economy is still weak and borrowers aren’t competing for money and driving rates higher. However, he expects in three to five years, loan demand will be much higher and then the downgraded credit rating might cause rates to rise.

Analysts are still waiting to see if the other rating agencies, Moody’s and Fitch, follows S&P’s lead in its downgrade of the U.S. credit rating. If so, the aftermath could be much worse, analysts say.

The debt deal reached by Congress last week was expected to save the U.S. from any credit rating downgrade. However, S&P said lawmakers fell short in its deal. Congress’ deal called for $2 trillion in U.S. deficit reduction over the next 10 years; S&P had called for $4 trillion.

Source: “5 Ways the Downgrade in the U.S. Credit Rating Affects You,” The Washington Post (Aug. 8, 2011); Questions and Answers on Standard & Poor’s Downgrading of U.S. Federal Debt,” Associated Press (Aug. 6, 2011); and S&P Downgrade Will Shake Consumer and Business Confidence at a Fragile Time, Economists Say,” Associated Press (Aug. 6, 2011)

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Real Estate OK in Debt Deal But Risks Remain

Loan-Limit Deadline Looms

Practitioners are speaking out against proposals in Congress that could potentially devastate sales.

 

July 2011 | By Robert Freedman

 

 

 

 

Vacaville, Calif., is a middle-class outpost on the outskirts of pricey San Francisco and nearby East Bay communities like Walnut Creek. In some parts of the city, homes sell for about $300,000, says local practitioner Jeannette Way, CRS, of Gateway Realty. The vast majority of buyers—up to 90 percent, Way estimates—rely on financing backed by the Federal Housing Administration because the conventional lending market simply isn’t there.But now even FHA lending is at risk because of a proposal floating in the U.S. House of Representatives to change the formula with which loan limits are calculated. It would reset the maximum loan values and could remove the “floor” that keeps FHA limits from dropping to unrealistically low levels—in the case of Vacaville, limits could fall to about $170,000.

“You might as well just wipe the industry away,” says Way, CRS, who also serves as 2011 chair of the NATIONAL ASSOCIATION OF REALTORS®’ Federal Housing Policy Committee. “It just won’t be there anymore.”

Lawmakers are deep into talks about changing limits not just for FHA loans but also for Fannie Mae and Freddie Mac’s conventional conforming loans. Talks are happening now because the current limits expire on Sept. 30, the end of the federal fiscal year.

NAR estimates that reverting to the lower FHA limits on Oct. 1 will impact 612 counties in 40 states and the District of Columbia, with an average loan limit reduction of more than $50,000.

Concern in Moderate Markets, Too

In Plymouth, Mich., not far from Detroit, the area would take a hit similar to what’s expected in Vacaville. “The housing market here would come to a standstill and I’d have to find a new job,” says Claire Williams, ABR, GRI, a practitioner with Remerica Hometown One and 2011 vice chair of the Federal Housing Policy Committee.

In parts of Wayne County, homes cost around $200,000, Williams says. But if the proposal circulating in the House becomes law, the maximum FHA loan amount throughout the county, which includes Detroit, would drop to less than $66,000.

NAR President Ron Phipps has made clear that Realtors® would fight such a drastic drop. “Our housing recovery remains fragile at best,” he said in testimony before the House Financial Services housing subcommittee in May. “Changing the loan limits at this critical time will only restrain liquidity and hamper the recovery.”

Since 2008, the floor has been $271,050 for FHA loans and $417,000 for the government-sponsored enterprises Fannie and Freddie. For expensive areas like San Francisco, loans can go up to $729,750 under the FHA and the GSEs.

It’s the FHA floor of $271,050 that would go away under the House proposal. Loans would be limited to 125 percent of the area median home price, so if the median home price is $175,000, the highest loan the FHA would guarantee would be $218,750. But it gets more complicated than that, because the floor would be calculated based on county rather than metropolitan statistical area.

“Counties across the country would see their loan limits reduced by tens of thousands of dollars,” says Barry Rutenberg, a home builder from Gainesville, Fla., who testified at the same House housing subcommittee hearing as President Phipps.

A Push to Keep Limits As Is

NAR has been fighting for months to retain the existing $417,000 loan limit for Fannie and Freddie loans and the $271,050 limit for FHA loans, along with the higher limits for expensive areas. These limits were enacted two years ago, and were critical in helping to stem the home sales crisis, lawmakers have said. NAR and other groups have rallied around bipartisan legislation written by Reps. Brad Sherman (R-Calif.) and Gary Miller (D-Calif.) to make these limits permanent.

Despite bipartisan support for maintaining stable loan limits, keeping limits where they are will be an uphill battle because of the country’s pressing budget concerns, NAR analysts say. To allay those concerns, industry analysts and academics have made clear that higher limits by themselves don’t cost the government more money than lower limits. In fact, higher loan sizes have actually helped the FHA insurance fund because on a historical basis they’ve performed better than lower-balance loans, according to an internal 2009 FHA audit.

The Cost of Non-Action

If lawmakers fail to act on the Sherman-Miller legislation, and if they don’t pass the House proposal to lower the limits and remove the FHA floor, loan limits for both the FHA and the GSEs would revert to levels that were set in emergency legislation enacted during the financial crisis.

Under those levels, FHA and GSE limits would drop from 125 percent to 115 percent of the area median home price, although limits couldn’t go below the current floors: $417,000 for Fannie- or Freddie-backed loans and $271,050 for the FHA-backed loans. Limits in expensive areas would drop to $625,500 for the FHA and Fannie and Freddie alike.

That’s clearly far better than the House proposal, but NAR will continue to urge lawmakers to support the Sherman-Miller bill. “If Congress does nothing and loan limits revert to the levels in the emergency bill, that’s a far better outcome than other scenarios, including if the FHA floor is removed,” says Way, “especially given the pressure Congress is under to address the federal deficit. But it will still hurt. At least 40 states will see their limits drop, and thousands of households won’t be able to buy. We have to keep fighting to keep loan limits where they are.”

Mortgage Rates Hit Record Lows Amid Signs of Weakening Economy

MCLEAN, Va., Aug. 4, 2011 /PRNewswire/ — Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates dropping sharply amid falling bond yields and signs of a weaker than expected economy. The 30-year fixed averaged 4.39 percent, its lowest level for 2011. The 15-year fixed and 5-year ARM set new historical record lows averaging 3.54 percent and 3.18 percent, respectively.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.39 percent with an average 0.8 point for the week ending August 4, 2011, down from last week when it averaged 4.55 percent. Last year at this time, the 30-year FRM averaged 4.49 percent.
  • 15-year FRM this week averaged 3.54 percent with an average 0.7 point, down from last week when it also averaged 3.66 percent. A year ago at this time, the 15-year FRM averaged 3.95 percent.
  • 1-year Treasury-indexed ARM averaged 3.02 percent this week with an average 0.5 point, up from last week when it averaged 2.95 percent. At this time last year, the 1-year ARM averaged 3.55 percent.

Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions.

Quotes

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

  • “Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought allowing fixed mortgage rates to follow this week with the 15-year fixed and 5-year ARM setting new historical lows. The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.
  • “On a positive note, there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year. The CoreLogic® National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.”

Get the latest information from Freddie Mac’s Office of the Chief Economist on Twitter: @FreddieMac

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

SOURCE Freddie Mac

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