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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


August 9, 2010

Freddie Mac Reports Huge Mortgage Losses

Category: Freddie Mac News,Home Loan News – admin – 8:38 am

Freddie Mac has seen their highs and lows in the last few years, but does it make sense for taxpayers to continue to bail out this mortgage giant?  Freddie Mac was created in 1971 by the U.S. government to act as a home mortgage buyer.  After several decades of success, the government mortgage company had to bailed out.  Just a few years later, Freddie Mac is requesting for $1.8 billion in additional federal aid after posting a larger loss in the second quarter. Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period.  Even as home mortgage rates hit record lows, Freddie Mac continues to struggle. The company is required to pay a 10 % annual dividend to the Treasury Department on money it has received from the government. That made up $1.3 billion of the company’s second-quarter losses.  The company lost $840 million, or 26 cents a share, in the same quarter last year.  Many mortgage executives have started to wonder if Freddie Mac is struggling when home loan rates are this low – - – How will they do when interest rates rise?

Freddie Mac VP on Getting a Mortgage

The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure nearly two years ago. The new request means they have needed $148.2 billion to stay afloat, about $63.1 billion of which is being used by Freddie Mac.  Freddie Mac is losing money from bad loans it backed, many of them before the housing market went bust. It had $118 billion in bad loans at the end of June, up from $103.4 billion at the end of last year. It owned more than 62,000 foreclosed properties in June, up from about 35,000 a year earlier.

Can the U.S. Afford Another Mortgage Bail-Out?

Both Fannie Mae and Freddie Mac have both lost tens of billions of dollars during the past two years and both are asking the government to prop them up. Last week, Fannie Mae requested $1.5 billion after posting a loss of $3.13 billion, or 55 cents per share, in the second quarter.  Still, the two companies are taking different approaches to their situations. Fannie Mae sounded optimistic about its future. Freddie Mac offered a more tempered view.  “We recognize that high unemployment and other factors still pose very real challenges for the housing market,” CEO Charles Haldeman said in a statement. “With that in mind, we continue to focus on the quality of the new business we are adding to our book to be responsible stewards of taxpayer funds.”  Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

During the housing boom, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. When the market went bust, defaults and foreclosures piled up, and the government had to take them over. Over the next year, lawmakers plan to review the nation’s mortgage-lending system and consider a potential replacement for Fannie Mae and Freddie Mac. The financial overhaul signed by President Barack Obama didn’t address that issue, despite protests from Republicans that it was incomplete without a such a plan. The administration is holding a public conference on Aug. 17 in Washington to discuss the mortgage system


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.


June 25, 2010

Freddie Mac Reports Lowest Home Loan Rates Since 1971

Are you considering home refinancing?  Freddie Mac announced this week saw the lowest home loan rates since 1971.  The number of loan applicant applying for a mortgage loan dropped by 5.9% during the week ended June 18.  Mortgage refinancing activity fell 7.3% compared with the previous week, while purchase volume slipped 1.2%.

Comparing home refinance rates: A year ago, the average home loan rate was 5.22% and 10 years ago, people were refinancing at 8.15%. Today, the average 30-year mortgage rate is 4.675% and the average 10-year mortgage is now at 3.875%.  Lenders continue to extend low interest rates because to the instability in the market and the European debt crisis.  Read the original article > Compare Mortgage Refinance Rates


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.