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.

24 Feb 10 Home Purchase Loan Demand Drops

According to Reuters, U.S. home loan applications fell for a third straight week, with demand for home purchase loans sinking to the lowest level in 13 years as inclement weather weighed, data from an industry group showed on Wednesday. The current mortgage rates remain the lowest interest rates in decades and high affordability helped the hard-hit U.S. housing market find some footing in 2009 after a three-year slump.

More key insight into the state of the housing market will emerge on Wednesday when the U.S. Commerce Department releases January new U.S. single-family home sales data.

18 Feb 10 Fed Hikes Discount Rate and Mortgage Rates Rise

Mortgage Rates Pulse announced that the Federal Reserve increased the discount rate today and mortgage rates rose almost immediately.  This is the rate at which banks lend to each other.   When banks stopped lending to each other overnight altogether in the fall of 2008, discount window for home mortgage loans became even more crucial. The Fed even narrowed the penalty banks paid for using discount window money, moving the discount rate closer to the Federal funds rate during the crisis. 

According to mortgage executive, Bryan Dornan, “Clearly, the Fed is signaling a change in direction for interest rates.”  Dornan continued, “Now that the Fed is raising rates, expect mortgage rates to begin retreating upwards.” Now that the crisis has blown over, the Federal Reserve wants things to get back to normal.

Late Thursday afternoon, it surprised the markets by raising the discount rate it charges though its emergency window to 0.75% from 0.50% while keeping its targeted Federal funds rate at between zero and 0.25%. The change will take effect on Friday. Meanwhile, the duration of the mortgage loans will revert to the normal overnight period from 30 days come mid-March. Though many thought the Fed was headed in this direction, most everyone thought it wouldn’t act until its next Open Market Committee meeting next month.  See the original post online at > Fed Reserve Raises Interest Rates.

03 Feb 10 FHA Credit Improving

The FHA home loans originated last year went towards borrowers with better credit scores than in previous years. These borrowers migrated to FHA when the subprime market disappeared.  The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said. 

The agency banned 268 FHA lenders from making FHA mortgage loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA mortgage lenders –Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter.   Consumers taking out FHA mortgage loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10% instead of the usual 3.5% down-payment.  Read the original article from the FHALoanBlog, > Better Credit FHA Loans Performing Well

08 Jan 10 Will the Fed Let the Mortgage Market Walk?

Many mortgage industry insiders believe the Federal Reserve will take their hands off the housing sector in 2010, when the central bank enables mortgage market to stand on its own two feet.  The Fed is unlikely to step in again after its bad credit mortgage buying program devised at the height of the financial meltdown expires. That would take a renewed crisis, like a sudden and destabilizing hike in mortgage interest rates.

Besides conventional and FHA mortgage rates, there are other impediments to a fresh round of mortgage-backed debt purchases, including the Fed’s desire to keep inflation expectations under control.  One of the reasons the Fed capped its bond-buying program, which included more than $1.4 trillion in mortgage-related securities and $300 billion in Treasury debt, was the perception that the central bank was “monetizing” federal deficits printing money to keep the government solvent.  This latent fear, prevalent in financial markets and reflected in the elevated price of gold, has the potential to turn more than $1 trillion in dormant excess bank reserves into a runaway rise in prices, analysts say.

Barring a double-dip in housing, however, Fed officials are unlikely to meddle.  Their reluctance to intervene anew has many roots. For one thing, it would signal a policy about-face that could adversely affect markets as investors reassess what they believed was an improving economic outlook.  > Read the original article online.