10 Jan 12 Fannie Mae CEO Quits
Michael J. Williams, the CEO who was hired to help Fannie Mae find the road to financial recovery in 2009 announced he was stepping down, step down as its CEO. Williams says he will continue as CEO and as a director until a successor is found. “I decided the time is right to turn over the reins to a new leader,” Williams said in a statement.
According to Bloomberg, Fannie Mae mortgage bonds gained after the government-supported companies detailed changes to their refinancing rules. Fannie Mae’s 6.5%, 30-year fixed-rate mortgage securities rose about 0.20 cent on the dollar to 110.55 cents, the highest since Oct. 14, as of 12:05 p.m. in New York, according to data compiled by Bloomberg. The bonds outperformed similar-duration U.S. government notes by about 0.25 cent. Fannie Mae and Freddie Mac offered additional information yesterday on adjustments to refinancing rules for loans to borrowers with little or no home equity under the Home Affordable Refinance Program. The government-controlled companies’ letters to lenders suggested less relief for so- called representations and warranties that can be used to forced mortgage repurchases than some investors anticipated. “The rep and warranty relief newly offered by Fannie Mae through yesterday’s announcement is not all that significant and, at the very least, somewhat lower than what has been already been priced in,” Nomura Securities International Inc. analysts led by Ohmsatya Ravi in New York wrote in a note to clients.
Most loan companies have shelved their bad credit mortgage loans until the default rate drops dramatically.The mortgage companies also revealed the maximum upfront fees they plan to charge on high- risk mortgages will fall to 0.75%, from 2 %, unless homeowners refinance into debt with terms of 20 years or less. On October 24th, their regulator said they would eliminate the fees for short-term debt and reduce them for other loans without providing details
13 Dec 11 Increasing Mortgage Fees to Fund the Payroll Tax Cut
Wow, it seems politicians will go to great lengths for Obama’s reelection campaign as they are now moving to fund the payroll tax cuts by taxing future government mortgages. It’s hard to believe that with the social security well running dry that we would slash the payroll taxes that actually fund it, but then to hear that they are going to use mortgages bought by Fannie Mae and Freddie Mac to fund it is even more absurd.
Democrats and Republicans continue to wrangle over how to pay for extending the payroll tax cut, one option floated by both parties on Capitol Hill is to tap into mortgage giants Fannie Mae and Freddie Mac to raise $38 billion in revenue over 10 years. But the proposal, which would require that the two Government Sponsored Enterprises (GSEs) undergirding the housing market raise the fees they collect from lenders, has real estate industry groups in an uproar. And housing experts say the additional fees could be yet another headwind for the shaky housing market.
The idea of boosting the fees Fannie Mae and Freddie Mac collect was first floated by the now defunct congressional Super Committee tasked with finding $1.2 trillion in deficit-reduction measures, and it had garnered bipartisan support at the time. Now, as Congress looks for ways to pay for an extension of the payroll tax cut, the proposal has resurfaced in legislation put forth by both House Republicans and Senate Democrats. If Congress doesn’t act the payroll tax cut is scheduled to increase by two %age points, to 6.2% from a rate of 4.2% – which would effectively increase taxes by $1,000 for the average family next year.
Fannie Mae and Freddie Mac don’t issue mortgages themselves, but they buy them from lenders and repackage them into securities that are then sold to a wide range of investors. The two GSEs now own or guarantee about half of U.S. home mortgages, or nearly 31 million loans. To protect against any defaults, they charge the originating lenders “guarantee” fees. Last year, those fees averaged 0.26 percentage points of a loan’s value. Under the new Republican and Democratic proposals, the fees would rise by at least an eighth of a %age point – and the money raised would go to the Treasury Department, not to Fannie and Freddie.
Business groups are opposed both to the higher fees and to the idea of diverting the money to the Treasury. The National Association of Realtors and the National Home Builders Association on Thursday sent a letter to Sen. Bob Casey, D-Penn., author of the Democratic proposal, arguing that the fees “should not be diverted for purposes unrelated to the safety and soundness of the housing finance system.” The groups said the congressional proposal is “counterproductive” and said the fees should be used “solely for the purpose of minimizing the loss exposure of these government-sponsored enterprises, investors and taxpayers.” The National Association of Realtors will send another letter to the House GOP leadership on Friday stating its fierce opposition to using revenue from a fee increase to fund programs outside of housing.
Some in Congress are also adamantly opposed to the higher fees. “Fannie Mae and Freddie Mac are currently being propped up by taxpayer dollars, so it makes no sense to use them as an ATM to pay for other government spending,” says Rep. Dennis Cardoza, D-California. “Although I support extending the payroll tax cut, it is imperative we find another source of funding instead of playing these shell games. Fannie and Freddie are already floundering under the weight of the ongoing housing crisis and I fear this could only further worsen their ability to help struggling homeowners.” California lenders continue to express concerns over increased mortgage insurance premiums so this could really burden borrowers in the Golden state.
The Government Sponsored Enterprises are still burdened with financial problems of their own. Since the Bush administration seized control of the mortgage giants in September 2008, they have received $151 billion in taxpayer funding – money that they must still repay. Having the guarantee fee go to the Treasury instead of Fannie and Freddie would only make it harder for them to pay down their debts, says Susan Wachter, professor of financial management at the University of Pennsylvania’s Wharton School. “If it is raised and goes to pay for Treasury deficits, it’s not covering the deficit that Fannie and Freddie owe, which ultimately is a tax payer liability as well,” she says. “It’s not accomplishing what it’s supposed to accomplish.”
Read the original Fiscal Times Articles on Paying for the Payroll Tax Cut.
08 Nov 11 Home Affordable Refinance Revived
After a year of talking about the U.S. government stepping in again to help revive the housing sector, the HARP mortgage breathed new life as the Obama Administration rolled out there plane to expand the Home Affordable Refinance Program.
When the HARP mortgage program was initially rolled out, it was very difficult to find a lender who offered this government refinance plan for liens owned by Freddie Mac or Fannie Mae. Most lenders were not willing to take a risk lending to an upside down borrower that had a mortgage greater than their property’s value.
According to Nationwide, the new HARP refinance has been revised with no loan to value restrictions. That means no matter how underwater homeowners are, they have a new opportunity to refinance if they meet the HARP criteria. There are specific program requirements, so make sure you verify with your loan officer the qualification criteria.
Last week, the federal government announced the HARP refinance, implementing changes that would “allow many more struggling borrowers to refinance their mortgages at today’s ultra-low rates, reducing monthly payments for some homeowners and potentially providing a modest boost to the economy.” Read the original article online > HARP Mortgage Helps Homeowners Refinance.
28 Nov 10 Fannie Mae Tightens Mortgage Lending Guidelines
It’s no secret that lenders have tightened Freddie Mac, Fannie Mae and FHA guidelines in 2010. Fannie Mae has made it clear that they will continue to require more from borrowers in 2011. Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts.
The maximum ratio for those seeking a conforming 30-year fixed rate mortgage loans will drop to 45% from 55% under the new guidelines. But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from four.
Interested Party Contributions (IPCs) funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower. Fannie Mae does not permit IPCs to be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.
26 Oct 10 Fannie Mae and Freddie Mac Fueling Mortgage Crisis
Wall Street insiders continue to discuss the future mortgage bailouts of Fannie Mae and Freddie Mac. Home foreclosures and mortgage defaults continue to mount, even as FHA mortgage rates have fallen below 4% on fixed rate 30-year terms. Home mortgage refinancing applications are up starkly from the previous quarter, but the mortgage crisis deepens.
Another Bailout for Mortgage Giants Fannie and Freddie?
httpv://www.youtube.com/watch?v=UgG5CU2Iq_0
“It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies.” Bank of America court filing, June 2010, a court filing made by Bank of America back in June is adding another twist to the foreclosure document crisis, a problem that could mushroom into more write-downs for the banking industry, and headaches for Fannie Mae, Freddie Mac, and the New York Federal Reserve, which now owns $1.25 trillion in mortgage-backed securities guaranteed by Freddie Mac, Fannie Mae and Ginnie Mae.
Attorneys general in 50 states are now investigating allegations of falsified foreclosure documents, where banks allegedly have not proved they own the underlying mortgage and in turn have the right to seize a home when a borrower defaults. But now the question is not just who owns the property the home loans but whether Wall Street and the mortgage industry pumped out too many mortgage-backed securities built on these loans? Specifically, the question is how many mortgages were overpromised and overpledged — sometimes two, three maybe five times, maybe umpteen times — to back securities? How many fraudulent mortgage-backed securities now sit on Fannie and Freddie’s books? At the New York Fed? Who will be on the hook for those securities?
A New York Fed official tells me that because Fannie and Freddie back its $1.25 trillion mortgage-backed securities portfolio, it won’t face any losses for rotten securities. Fannie and Freddie officials tell me that while they do have that unlimited pipeline into the US Treasury, they are going to turn around and make the banks swallow the losses for the bad securities they built on loans. Wall Street analysts concur. That is called a put-back. But if the banks cannot, then taxpayers will because the US Treasury is backing up the balance sheets at Fannie and Freddie.
14 Sep 10 Conventional Mortgages Rebounding
Mortgage rates crept up slightly last week, but demand continues to be strong for homeowners seeking a refinance loan. According to Colorado mortgage lender, Shawn Downs who founded Downs Financial Inc., “The mortgage industry has certainly seen better days, but at the end of the day conventional lenders are very good at underwriting mortgages to perform and not default.
A recent report by the regulator of Fannie Mae and Freddie Mac shows that mortgage loan securities packaged by Wall Street firms and mortgage lenders have had substantially worse outcomes than securities backed by the two mortgage titans. The report from the Federal Housing Finance Agency looked at the risk characteristics of loans that had been purchased directly by Fannie and Freddie between 2001 and 2008, and compared them to loans that had been sold to investors as “private-label” securities, or those without government backing.
The report reviews $10.6 trillion in home loans, is being issued as policy makers in Washington begin to more carefully consider the future of the firms, which have been heavily criticized for inflating the housing bubble. Nearly 80% of those loans were acquired by Fannie and Freddie, while the rest were financed through private-label securities. While around 30% of all private-label loans have been 90-days delinquent at some time, that rate falls to 10% for all loans backed by Fannie and Freddie. But Fannie and Freddie have been hard-hit by the housing bubble because of their massive exposure to housing, and because they were thinly capitalized. The government took over the firms two years ago as losses mounted, and it has committed $148 billion and counting to keep the companies afloat.
Loans in private-label securities were generally riskier than those backed by Fannie and Freddie. For example, less than half of mortgages financed by private investors had credit scores above 660, compared to 84% of loans financed by Fannie Mae and Freddie Mac. Around 5% of home loans purchased by the companies had credit scores below 620, generally considered subprime, compared to 32% of loans that went into private-label securities.
The data also showed that loans sold to Wall Street firms had less equity and that private underwriters were much more likely than Fannie and Freddie to finance adjustable-rate loans, including those with artificially low “teaser” rates. But the main conclusions of the report—that private-label securities were riskier and performed worse than those bought by Fannie and Freddie offer little comfort today.
Tags: Downs Financial Inc
14 Aug 10 Has Obama Mortgage Relief Gone Too Far?
The Obama administration funded the Home Affordable Refinance Program, Home Affordable Modification Program, Hope for Homeowners and now the Emergency Homeowner Loan Program. Most of these tax-payer funded mortgage-bailout programs failed miserably. However, the Home Affordable Refinance Program,initiatve did help underwater homeowners with 125% mortgage refinancing , but only a small percentage of homeowners met th Fannie Mae and Freddie Mac loan requirements. Rates on fifteen-year loans dropped to 3.92% this week and the thirty-year rates fell to 4.44%. Nationwide reported that economist have forecasted that approximately 20 million homeowners will have an underwater mortgage at some point in 2011. The Fed announced this week they it would use the proceeds from Fannie Mae and Freddie Mac portfolio of mortgage-backed securities to purchase government debt.
FHA refinancing requirements are getting more difficult for the average borrower as HUD is said to be tinkering with a minimum credit score of 500. Lenders are bracing themselves for tighter FHA guidelines in the coming year as HUD moves to rebuild the reserves for the FHA insurance premiums. Read the original article online > Relief for Refinancing with Short Refinance and Emergency Homeowner Loan Programs
11 Aug 10 Emergency Homeowner Loan Program
Word on the finance street is that the Federal government will soon announce the Emergency Homeowner Loan Program. The latest round mortgage bail-outs from the Obama Administration is said to be focused on aiding homeowners who have under-water mortgages.
According to CNNMoney, the Obama administration pledged another $3 billion in additional funds available to assist distressed homeowners in a foreclosure prevention effort. One part of the mortgage bail-out plan, includes a new $1 billion program that will offer self-employed home loans to unemployed borrowers at risk of losing their homes. The mortgage loan relief, which will be dispersed through non-profit and housing agencies, will carry 0% interest and be good for a maximum of $50,000 for up to two years. In the coming weeks, HUD said it will announce details about the new loan relief program, called the Emergency Homeowner Loan Program.
It was not clear whether or not the Emergency Homeowner Loan Program would be part of the recently discussed bail-out for Freddie Mac and Fannie Mae. HUD announced just last week more government loan relief with the FHA short refinance program that was created to help homeowners refinance their under-water mortgages. It also wasn’t clear whether or not the FHA short refinance program would be part of the Emergency Homeowner Loan Program. HUD was unavailable for comment.
Recent Government Mortgage Relief Programs
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The administration also added $2 billion in home loan aid for its mortgage program that helps struggling homeowners in the states with highest unemployment rates. Today, the Obama administration announced an additional $2 billion that will expand the mortgage relief program to a total of 17 states and the nation’s capital. The regions chosen have suffered significant home value depreciation, high unemployment and high foreclosure rates well above than the national average for a year.
Tags: Emergency Homeowner Loan Program, FHA short refinance program, self-employed home loans, under-water mortgages
03 Aug 10 Fannie Mae Offers Home Loan Advice
Many homeowners are confused by mortgage relief opportunities today, as home refinancing and loan modification offers are being promoted on the TV and airwaves. Homeowners who are struggling to make mortgage loan payments now have a new place to turn for information on home loan programs that could help. Mortgage giant Fannie Mae has just launched a new web site, KnowYourOptions.com, that aims to help homeowners figure out the best solution to a difficult problem. But is a company that has so far racked up $75 billion in bailout funds from the U.S. Treasury in any position to dole out advice? Guy Cecala, the publisher of Inside Mortgage Finance, a trade publication, says yes. While Fannie Mae and its sister company, Freddie Mac, continue to receive attention as the mortgage crisis unfolds, they’re not linked to the borrowers in the deepest trouble, says Cecala. They maintained stricter underwriting standards than the true bad credit mortgage loan programs that were pushed by subprime lenders a few years ago. “The size of Fannie Mae’s problems has more to do with the size of the firm and their footprint in the industry, rather than their underwriting,” Cecala says.
Consumer advocates argue that any effort to educate homeowners about their options is worthwhile. The foreclosures rates continue to rise, with more than 1.6 million properties facing foreclosure filings in the first half of the year. Although the new web site stresses foreclosure prevention as a key goal for any consumer, the options presented don’t always help homeowners remain homeowners. “People are coming to the conclusion that it doesn’t necessarily help people to stay in a home that they can’t afford,” Cecala says. Read more: Mortgage Advice From Fannie Mae? – Personal Finance – Real Estate – SmartMoney.com
06 Jul 10 Mortgage Activity Slowing Despite Record Low Home Loan Rates
2010 has been a roller coaster ride for mortgage professionals because interest rates have been low but consumers are slower to do anything because of our sluggish economy. Record low home mortgage rates have done nothing to stop a renewed housing slide, as new home sales fell to record lows in May and both mortgage refinancing and home buying volumes fell throughout June.
According to Bob Dorsa, president of the American Credit Union Mortgage Association, “There’s a bit of a fear in the marketplace and people don’t want to do anything.” A strong market in the first quarter of the year had buoyed hopes of a housing recovery, but it appears the first-time homebuyer’s tax credit was a primary driver; since its expiration new home sales were down 32.7% in May to an annualized rate of 300,000. That’s the lowest home mortgage rates reported since record keeping for interest rates began in 1963.
The thirty-year fixed rate mortgage dipped to an average of 4.69%. That is the lowest rates recorded since Freddie Mac between tracking mortgage rates in 1971. The previous record of 4.71% was set in December. The 15-year average fell from 4.20% to 4.13%, also a record low. ARM rates have also moved near record territory, with the average for the five-year ARM falling from 3.89% to 3.85% and the average for the one-year ARM dipping from 3.82% to 3.77%.
Mortgage refinance rates have declined even more over the last two months. Home loan rates tend to track the yields on long-term Treasury debt. Refinance loan volumes have also slowed even as interest rates are falling below levels seen during the “mini-boom” of 2009. Unfortunately most homeowners who are failing to produce enough income to keep their loan payments current usually do not have the required income need to qualify for mortgage refinancing.
In Alabama, Anita Domondon, VP with Meriwest Mortgage noted, “With the Home Affordable Refinance Program enables home refinancing to 125% and for many homeowners that is not good enough because their mortgage is so far underwater.” The notion of a housing double-dip is starting to take hold in some circles, including credit unions. And while CUs across the country have gamely offered loan modifications and debt settlement programs, the rock-bottom rates have left many inflexible on mortgages. The original article was written by Matt Blumenfeld.
Tags: ARM rates, lowest home mortgage rates, thirty-year fixed rate mortgage
20 May 10 Should Fannie Mae and Freddie Mac Unify?
In a recent Mortgage Rates Pulse article, they re-stated the obvious — The mortgage industry continues to struggle. Even with 30-year fixed rate mortgage programs below 5%, we can’t fix the mortgage debacle simply by inducing another refinance boom. Most mortgage executives would concur that regulatory reform for mortgage financing is a “done deal” with this democratic controlled Congress and Senate. Yes we all agree there needs to be some checks and balances installed to prevent future home finance melt-downs, but the Obama Admin is out of control with their shallow and short-sided mortgage relief efforts. Most of the government initiatives look good on paper, but lack the inner back-bone to succeed. Read the entire Mortgage Rates Pulse article > Suggestions for Fannie Mac Mortgage Reform.
24 Feb 10 Fannie Mae and Freddie Mac Post Losses on Tax Credit
According to Bloomberg, Fannie Mae and Freddie Mac, the mortgage loan companies under government control, are reporting fourth-quarter losses after writing down the value of tax credits and setting aside money for housing-market losses.
Freddie Mac posted a $6.5 billion net loss as it marked down $3.4 billion in low-income housing tax credits that the U.S. Treasury Department barred the McLean, Virginia-based company from selling, according to a filing today. Fannie Mae, which plans to report official results this week, said it’s taking a $5 billion charge for the same reason.
Capping a “trying and turbulent year” with $7.1 billion in credit losses and foreclosure-related expenses, as well as $5.2 billion in annual dividends owed to the Treasury for emergency aid, Freddie Mac said there can be “no assurances regarding when, or if, we will return to profitability.” Regulators seized the company, along with Fannie Mae, in 2008 as mortgage delinquencies rose.
Freddie Mac, which buys mortgage loans and guarantees home-loan securities, has tapped $50.7 billion in Treasury preferred stock investment since November 2008 to remain solvent. While Freddie Mac avoided having to take more federal aid for a third straight quarter, the company said new accounting rules that took effect Jan. 1 will reduce its net worth by about $11.7 billion in the first quarter and require going back to for more aid.
A record 3 million U.S. homes will be repossessed by mortgage lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California- based company began compiling data in 2005.
