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October 31, 2012

Home Loan Limits with Fannie Mae

Category: Fannie Mae News,Home Loan News,Published Articles – admin – 10:23 am

Money News published a good report on conventional loan amount limits with respect to Fannie Mae. Both government sponsored companies are looking to protect taxpayers as many new mortgage lenders have engaged to do business with them. This is also helping many of the largest banks realize more revenues, but Fannie Mae has been forced to set 2013 loan limits on conforming mortgages at a conservative level to minimize risks. It is no secret that the Federal Reserve has committed a significant amount of money and resources in an effort to stimulate the housing sector in the United States.

Will 2013 Loan Limits Stay High on Fannie Mae Mortgage Products?

Fannie Mae, has begun limiting how many mortgages annually it will guarantee or buy from certain firms. Limited competition in the industry and a lack of capacity to meet demand is helping JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon get “very high” home loan margins. That’s frustrating central bankers such as William Dudley, the Federal Reserve Bank of New York president, who said this month that rates on 30-year mortgage refinancing were higher than they could be after the Federal Reserve said it plans to acquire $40 billion of mortgage securities a month. “More direct access to Fannie would end up in more mortgage companies getting a better price and consumers would benefit,” said John Robbins, head of Bexil American Mortgage Inc., who founded two lenders later sold to banks now part of JPMorgan and Wells Fargo & Co. “The problem is, if you’re Fannie you just can’t let all these companies have unlimited access. You don’t want to give a high-speed, temperamental race car to someone who just got a driver’s license.”

Fannie Mae and Freddie Mac were seized by the government that year and have received $137 billion of aid since then, enabling them to finance about two-thirds of new loans. Even with steps to reduce their dominance, including increases to how much they charge for mortgage guarantees, there are few signs of progress. “Reform is not going to happen next year and probably not until 2015,” said Isaac Boltansky, a Washington-based policy analyst for Compass Point Research & Trading LLC.
The future of Fannie Mae and Freddie Mac has been on the backburner this year amid a presidential election and a recovery in housing, including higher prices, home sales and construction. That’s being driven in part by the Fed’s policy of buying mortgage bonds to push down borrowing costs. The Obama administration also adjusted rules to allow more borrowers to tap record-low rates. Refinancing applications soared to a three-year high with 30-year mortgages reaching 3.36 percent this month, straining staffs of lenders, which held rates higher than they could offer in part to reduce demand.

Fed Governor Elizabeth Duke said this month the economy needs more small lenders and that new regulation may drive more out of business. These firms historically have been willing to give more consideration to good borrowers with unusual situations that bigger lenders don’t want to deal with, she said. “You need to make sure you can still make the irregular loan, the one that doesn’t fit exactly in a box,” Duke said.

Regulators are writing rules such as national servicing guidelines that will be relatively more costly for smaller lenders to comply with, said Robert Bostrom, who served as general counsel for Freddie Mac for five years through 2011.“There’s just not enough capacity in the marketplace,” said Bostrom, who is now at law firm SNR Denton. “And we all know who’s going to end up paying for it: the consumer.” Read more: Fannie’s Mortgage Limits Help Banks 

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December 9, 2011

Fannie and Freddie Lobbying for Payroll Tax Cuts

Category: Fannie Mae News,Freddie Mac News,Published Articles – admin – 3:52 pm

Just when you thought you heard enough of Fannie Mae and Freddie Mac in the finance home news, the government sponsored enterprises make headlines again. Congress and the Obama administration are turning to an unlikely source to pay for the proposed extension of the payroll-tax cut: mortgage-finance giants Fannie Mae and Freddie Mac. The revenue source proposed by both Senate Democrats and House Republicans would boost fees that Fannie and Freddie collect from lenders. But that is raising hackles in the real-estate industry. Builders, Realtors and lenders say it would amount to a tax that would be passed on to mortgage borrowers.

Fannie Mae and Freddie Mac do not originate home loans, but instead buy them from mortgage lenders. They bundle those loans into securities that are sold to investors, and promise to make investors whole if the loans default. To cover any defaults, Fannie and Freddie charge “guarantee” fees to lenders when they buy the home loans. These government entities are not throwing all their eggs in the baskets of mortgage lenders for poor credit any more. Yes they both want to provide financing for borrowers with a range of credit scores, but they are seeking lower risk borrowers.

Lenders pass the home loan-guarantee fees on to borrowers in the form of higher rates. Last year, those fees averaged around one-quarter of one percent of the home loan amount. The Senate proposal directs Fannie and Freddie’s regulator to raise those fees by at least one-eighth of one percent over the next two years. The House proposal calls for an increase of one-tenth of one percent over the same period.

The proposal also would change who receives the fees. Instead of allowing those additional funds to flow to Fannie and Freddie, the plan would send them straight to the Treasury Department, which effectively owns the companies.

The provision wouldn’t have a significant effect on mortgage demand because the home loan rate is at the lowest levels in decades, said Guy Cecala, publisher of Inside Mortgage Finance. Still, he added, “All you’re doing is putting another tax on the homeowner.”

The proposal is the latest example of how the open-ended federal stewardship of Fannie and Freddie is moving in new and unforeseen directions. The companies were taken over three years ago, and Congress and the White House have made no progress figuring out how to revamp them.  ”It’s the precedent here that is troubling,” said Anthony Sanders, a professor of real-estate finance at George Mason University in Fairfax, Va. “This isn’t going to help Fannie and Freddie pay back what they owe and almost adds a permanency to Fannie and Freddie as a slush fund for Congress and the administration.”

An Obama administration official, along with a spokeswoman for Sen. Bob Casey (D., Pa.), who introduced the Democratic proposal, said raising the fees is consistent with the goal of attracting new sources of private capital back to U.S. mortgage markets. That’s because doing so would raise the cost of loans backed by Fannie and Freddie—currently the cheapest in the market —and allow non-government-backed sources of money to emerge.

Still, raising the home loan-guarantee fees could instead steer more borrowers to seek mortgages from the Federal Housing Administration if that agency didn’t take similar steps to raise its mortgage-insurance premiums. Many real estate groups have objected to the home loan-fee provisions because they say it’s largely unprecedented for revenues that Fannie and Freddie collect to be diverted for other purposes.

In a letter to lawmakers Thursday, the Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders said it is “counterproductive” to direct revenue from Fannie and Freddie “for purposes unrelated to the safety and soundness of the housing finance system.”

Read the original WSJ article, > Fannie and Freddie Fighting for Payroll Tax Entitlements

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July 13, 2010

Home Mortgage Rates Continue to Break Records

Who would have thought that home mortgage rates would continue to break record with declining rates across the board?  Of course this is great news for homeowners and perspective home buyers looking to leverage the lowest mortgage rates of the century.

Fannie Mae’s current-coupon thirty-year fixed-rate home loans narrowed 0.03 percentage point to about 0.65 percentage point more than 10-year Treasuries as of 9:33 a.m. in New York, according to data compiled by Bloomberg. The gap, which has fallen from 0.82 percentage point on June 30th, touched a low of 0.59 percentage point on March 29th, two days before the Federal Reserve ended its buying of $1.25 trillion of home-loan debt.

Home loan rates may be rising off record lows and bond prepayments reports released July 7th show limited mortgage refinancing, suggesting there will be less supply to meet demand as borrowers move from loans in bonds on the Fed’s balance sheet.  JPMorgan Chase & Co. analyst, Matthew Jozoff wrote in a July 9th report “refinance-driven supply is the fly in the ointment.”

Yields on the Fannie Mae bonds have advanced to 3.73% from a record low of 3.63% reached July 6th, down from 4.67% on April 5th, Bloomberg data show. The gain has been slower than benchmark Treasuries, whose yields have begun rising as stocks rally, damping demand for the safest assets.

Freddie Mac reported that the average interest rate on a conforming thirty-year fixed-rate home loan fell to a record low 4.57% in the week ended July 8th.  That was a decline from this year’s high of 5.21% in April.

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May 14, 2010

Declining Interest Rates Spur Mortgage Refinancing

Freddie Mac announced today that the current mortgage interest rates are the lowest they have been in 2010. The Wall Street Journal reported that home builder stocks rallied in early trading follow a reported spike in mortgage loan applications last week as homeowners take advantage of some of the lowest home mortgage rates since March.

The Mortgage Bankers Association’s seasonally adjusted index of home loan applications, which includes both purchase mortgage and refinance loans, rose 3.9% for the week ended May 7th. The four-week moving average of mortgage applications, which removes some of the volatility of weekly changes, was up 4.4%. Mortgage refinancing led the way; the MBA’s seasonally adjusted index of home refinance applications rose 14.8%. A 30-year fixed-rate mortgage, including lending fees, averaged 4.96%, the lowest level since week ended March 12th. Refinance rates were still higher the 4.76% last year and the all-time low of 4.6%.  The demand for mortgage loans for buying new homes dropped following the expiration of the heavily publicized federal home buyer tax credits. Read more at Mortgage Refinance Right.com

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May 3, 2010

Fannie Mae Dropping Interest Only Home Loans?

Category: Fannie Mae News,Mortgage Industry News – admin – 11:35 pm

Fannie Mae announced that it will tighten lending requirements for its interest-only loans and adjustable rate mortgage loans. If a borrower wants an interest only mortgage through Fannie Mae, for example, he or she will have to make down payments of 30% of the sale price. For ARM’s, Fannie will only buy those underwritten to ensure that borrowers could still afford payments even if their interest rates reset to the higher of either one of the home loan’s initial interest rate plus two percentage points or 2) the maximum the interest rate the loan can rise to, known in the industry as the cap rate. As an example, for a home mortgage loan with a beginning rate of 5% and a cap rate of 6% borrowers would have to demonstrate they could still keep up payments even if the mortgage rate rose to 7%. If the cap rate is 8%, borrowers would have to be able to afford an 8% mortgage. For an ARM with a fixed period (ie. 5/1 ARM) any initial period with 5 years or less qualify at greater of note rate +2% or fully indexed rate, and interest only mortgage loans will have a maximum LTV 70% and a minimum FICO of 720 with 24 months minimum reserves. Balloon Loans, unless they receive special approval, are going away entirely with Fannie.

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November 2, 2009

Fannie Mae Refinance Loans to 125%

Fannie Mae provides several refinance options including the Home Affordable Refinance Program.  Fannie Mae refinance solutions are only available eligible borrowers who have a mortgage balance less than $417,000 that is owned by Fannie Mae.  125 mortgage options are available for no equity home refinancing.

Fannie Mae Refinance Plus simplifies the refinancing process for loans that are already in a mortgage lender’s servicing portfolio. This Fannie Mae mortgage program allows refinancing to 125% LTV. The Home Affordable Refinance Programs offers a unique refinance alternative because no equity is required.  Fannie Mae pledges to provide home refinancing with increased efficiencies for the origination and underwriting of Fannie Mae.   Fannie Mae allows limited cash-out refinance transactions up to 125 percent loan to value.

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