Freddie Mac Weekly Mortgage Update: Slightly Higher but Still Affordable

30-Year and 15-Year Rates Still at Incredibly Low Levels

30-year fixed-rate mortgage: Average 0.7 point for the week ending December 31, 2009, up from last week when it averaged 5.05 percent. Last year at this time, the 30-year FRM averaged 5.10 percent.

The 15-year fixed-rate mortgage: Averaged 4.54 percent with an average 0.7 point, up from last week when it averaged 4.45 percent. A year ago at this time, the 15-year FRM averaged 4.83 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.54 percent with an average 0.7 point, up from last week when it averaged 4.45 percent. A year ago at this time, the 15-year FRM averaged 4.83 percent.

One-year Treasury-indexed ARMs: Averaged 4.33 percent this week with an average 0.6 point, down from last week when it averaged 4.38 percent. At this time last year, the 1-year ARM averaged 4.85 percent.

Freddie Sayz

Although long-term mortgage rates rose for the fourth week in a row, they still remain affordable by historical standards, said Frank Nothaft, Freddie Mac vice president and chief economist. Based on todays median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one third less than a decade ago when rates peaked at 8.6 percent in May 2000.

This translates into almost 50 percent less in interest payments over the full 30 year term. Nationally, the housing market is slowly improving. House prices rose for the fifth consecutive month in October to the highest level since the beginning of 2009, according to the S&P/Case-Shiller 20-city composite index . Eleven of the cities experienced positive growth.

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Fannie and Freddie Mae Get a Blank Check For Christmas

Freddie Mac reported a 13% drop in mortgage purchases in November, Fannie Maes book of business declined at an annualized rate of 6.7% in the same month.

Portfolios continue to deteriorate. The single-family serious delinquency rate climbed to 4.98% in October, which is the most recent month of data. The multifamily delinquency rate dipped to 0.61% in October from 0.62% in the previous month. Delinquency rates in both categories swelled from October 2008, when the single family delinquency rate was 1.89% and 0.21% for multifamily loans.

Blank Check for Freddie and Fannie

The Treasury Department uncapped potential aid to Fannie Mae and Freddie Mac, lifting the existing $400 billion cap on government cash available. On Christmas Eve, President Obama removed cap on each of the two mortgage underwriters, they will have access to unlimited Treasury funds through 2012

Oversight

First, the timing speaks volumes to me about how much more bad paper is in the pipeline. Doing this on Christmas Eve amounts to hiding and the corporate beneficiaries cant be far behind. With trillions of dollars in taxpayer exposure, we need transparency. When the Govt changes the rules and gives blank checks to institutions, in a less than transparent fashion, we need oversight. We should be sure that we are not getting ripped by the lenders that put us here in the first place.

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FHA and Fannie Mae Propose Rule Change

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FHA Has New Rules

FHA and Fannie Mae Propose Rule Change

Because of ongoing weakness in the real estate sector, the institutions that have filled the vacuum left by lenders, have run into trouble... they need to change the rules.

In order to assure that mortgage originations continue, its become necessary for FHA and Fannie Mae to reduce risk. The FHA proposes to increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the practices of their correspondent mortgage brokers.

Lender Approval

1.FHA-approved Mortgagees must assume liability for all the loans they originate and/or underwrite
2. Mortgage brokers will no longer receive independent approval for origination eligibility. The FHA-approved mortgagee will have to assume responsibility and liability for the FHA-insured loan underwritten and closed by the approved mortgagee.
3. FHA has required approved mortgagees have a minimum net worth of $250,000. To assure financial vialbility in the future, the proposed rule would require mortgagees maintain a minimum net worth of $1 million in the first year and at least $2.5 million within three years.

New Credit Policy Rule Changes

1. Mortgagees will be required to submit audited annual financial statements to the FHA.
2. Proposed rules to establish new requirements for seasoning, payment history, income verification, and demonstration of net tangible benefit to the borrower
3. A cap maximum on LTV at 125 percent.

Appraisals Rules May Change Too

1. An appraisal will be required in all cases where a borrower wants to add closing costs to the transaction.
2. Mortgage brokers and commission based lender staff are prohibited from ordering appraisals.

Fannie Mae Also Changes The Rules
loans for those who can afford it and prove they can keep it

Data now shows that buyers with lower FICO scores/excessive debt defaulted at rates nine times higher than those with solid FICO scores and more manageable debt load. So beginning Dec. 12, Fannie Mae will reject borrowers who have at least a 20% down payment but a credit score below 620.

Whats it Mean For Buyers and Sellers.

1. Many buyers that were pre qualified may now find they no longer qualify for the price range they had been shopping.
2. Tighter financial requirements may mean they have to settle for less house.
3. Buyers expectations may have to adjust downward, given stricter financing rules.
4. Seller pricing strategies will adjust, buyers will have more trouble meeting new debt-to-income requirements.
5. We should see more private equity come into the market to fill the vacuum and possibly more seller financing.
6. The higher end may suffer as buyers that could have stretched into more home, no longer can.
7. It will hurt the younger person with 20% down, but no credit history.

* Some of these rules may be applied at this writing. The FHA and Fannie Mae web site will have updates and changes to proposals.
*Photo thanks to Queens University Canada

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Freddie Mac weekly Update: Rates Just Over 5%

30-Year and 15-Year Rates Still at Incredibly Low Levels

30-year fixed-rate mortgage: Averaged 5.05 percent with an average 0.7 point for the week ending December 24, 2009, up from last week when it averaged 4.94 percent. Last year at this time, the 30-year FRM averaged 5.14 percent.

The 15-year fixed-rate mortgage: Averaged 4.45 percent with an average 0.6 point, up from last week when it averaged 4.38 percent. A year ago at this time, the 15-year FRM averaged 4.91 percent.nt.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.40 percent this week, with an average 0.6 point, up from last week when it averaged 4.37 percent. A year ago, the 5-year ARM averaged 5.49 percent.

One-year Treasury-indexed ARMs: Averaged 4.38 percent this week with an average 0.6 point, up from last week when it averaged 4.34 percent. At this time last year, the 1-year ARM averaged 4.95 percent.

Freddie Sayz

Although interest rates for 30-year fixed rate mortgages are above 5% this week for the first time since the end of October, they are still around 0.5 percentage points below this years peak set in. ARM rates increased by a lesser amount as the market consensus calls for no rate hikes by the Federal Reserve in the immediate future. Meanwhile, the housing market continues to show improvement. Total existing home sales jumped 7.4% in November to an annualized pace of 6.54 million units, which was the most since February 2007. Moreover, the number of unsold existing homes was the lowest since December 2006 and the number of unsold new homes was the least since April 1971, which may leave future room for new construction

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Mortgage Bankers Weekly Update: Loan Apps Decline

Mortgage Bankers Association for the week of 12/23/2009

Market Composite Index: (loan application volume) decreased 10.7 percent on a seasonally adjusted basis from one week earlier

Refinance Index: decreased 10.1 percent from the previous week and the seasonally adjusted Purchase Index decreased 11.6 percent from one week earlier.

Purchase Index: decreased 13.4 percent compared with the previous week and was 32.7 percent lower than the same week one year ago

Refinance Share of Mortgage Activity: increased to 75.9 percent of total applications from 75.2 percent the previous week.

ARM Refinance Activity: decreased to 3.8 percent from 4.1 percent of total applications the previous week.

MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

The MBAA sees unemployment rate at about 10% at the end of 2010, and core inflation rates of below 2%. Fed rate is expected to remain at its current level throughout 2010.

But, property values will not recover until unsold inventory returns to normal levels. Affordability is at record levels, yet there is no strong indication that the demand recovering. People do not yet seem to trust the recovery and many do not have the necessary down payment or can clear tighter loan qualifications

The MBAA site economic report indicates a fragile recovery, but makes note that without credit the recovery remains tepid at best. The site makes note: Smaller businesses and consumers are heavily dependent on banks for obtaining credit, and there is little evidence that, as yet, banks have loosened the purse strings.

Bank loans to businesses and consumers are still falling with few signs of stopping or slowing down. Part of the decline is declining demand, but the fall is too large to be explained by weakness in demand alone. The banks are simply not yet stepping up to fill the vacuum.

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NAR: Existing Home Sales Report

The sales pace for resale homes rose for the third straight month in November climbing 44.1% compared to the same month last year, the National Association of Realtors reported today. rushed to close sales before the original November 30 deadline for the recently extended and expanded tax credit, according to the National Association of Realtors.

Existing Home Sales: are 44.1 percent higher than November 2008. Current sales
remain at the highest level since February 2007, first-time buyers purchased 51 percent of homes in November

Total Inventory: Total housing inventory at the end of November declined 1.3 % to 3.52 million existing homes available for sale, which represents a 6.5 month supply at the current sales pace, down from an 7.0-month supply in October.

Single-family homes: Sales jumped 8.5 percent to a seasonally adjusted annual rate of 5.77 million in November from a level of 5.32 million in October, and are 42.1
% above the pace of 4.06 million in November 2008.

Existing condominium and co-ops: Sales in November were unchanged. But are 60.1% above the 481,000-unit pace a year ago. The median existing condo price was $178,000 in November, which is 3.1 percent below November 2008.

NAR: NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said conditions are optimal for buyers in the current market. Inventories have steadily declined and are closer to balanced levels, which indicate home prices in many areas are either stabilizing or could soon stabilize and return to normal appreciation patterns.

The fly in the soup

Sales of new homes fell 11.3% in November to a seasonally as a popular tax break for first-time homeowners was set to expire. Sales of new single-family homes declined in three out of four regions in November, with only the Midwest posting a gain, of 21.4%. Declines of 3.3% , 21.1 %, and 9.2% were recorded in the Northeast, South and West, respectively, according to the National Association of Home Builders.

Existing home supplies still outstrip demand and the tax credit which supported better existing home sales figures is set to expire. Freddie Mac and Fannie Mae along with the FHA have control of almost 90% of all mortgages (where are the banks?).
The Treasury is still the source of liquidity for the secondary markets,

Banks are barely loaning any money and are facing another big crises. The Alt A loans and the commercial markets are all looking for new money as they recast to higher monthly rates. They will need to rebuild balance sheets before they take on more risk. Yes, we are coming out, but real estate, almost 20% of the US economy, is still very much dependent on Govt support.

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Freddie Mac Weekly Mortgage Update: Still Below 5 Percent

Mortgage Rates Follow Bond Yields Higher

30-year fixed-rate mortgage: Averaged 4.94 percent with an average 0.7 point for the week ending December 17, 2009, up from last week when it averaged 4.81 percent. Last year at this time, the 30-year FRM averaged 5.19 percent.

The 15-year fixed-rate mortgage: Averaged 4.38 percent with an average 0.6 point, up from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.37 percent this week, with an average 0.6 point, up from last week when it averaged 4.26 percent. A year ago, the 5-year ARM averaged 5.60 percent.

One-year Treasury-indexed ARMs: Averaged 4.34 percent this week with an average 0.5 point, up from last week when it averaged 4.24 percent. At this time last year, the 1-year ARM averaged 4.94 percent.

Freddie Sayz

Mortgage rates followed bond yields higher once again this week amid signs of an improving economy, said Frank Nothaft, Freddie Mac vice president and chief economist. On the consumer side, retail sales jumped 1.3 percent in November and consumer sentiment, as measured by the University of Michigan, rose above the market consensus forecast to the highest reading since September. Industrial production also showed large gains in November.

Interest rates on 30-year fixed-rate mortgages have remained below five percent over the past seven weeks and are contributing to a wave of refinance activity. Roughly three out of four mortgage applications were for refinancing during the first two weeks of December, according the Mortgage Bankers Association .

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 home buyers and more than five million renters.

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Mortgage Bankers Weekly Update

Mortgage Bankers Association for the week of 12/16/2009

Market Composite Index: (loan application volume) increased 0.3 percent on a seasonally adjusted basis from one week earlier.

Refinance Index: increased 11.1 percent from the previous week and the seasonally adjusted Purchase Index increased 4.0 percent from one week earlier.

Purchase Index: decreased 0.1 percent from one week earlier. The unadjusted Purchase Index decreased 3.6 percent compared with the previous week and was 15.4 percent lower than the same week one year ago

Refinance Share of Mortgage Activity: increased to 74.4 percent of total applications from 72.1 percent the previous week.

ARM Refinance Activity: decreased to 4.1 percent from 4.7 percent of total applications from the previous week, which is the lowest share since mid-June 2009.

MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

But, property values will not recover until unsold inventory returns to normal levels. Affordability is at record levels, yet there is no strong indication that the demand recovering. People do not yet seem to trust the recovery and many do not have the necessary down payment or can clear tighter loan qualifications The MBAA site economic report indicates a fragile recovery, but makes note that without credit the recovery remains tepid at best. The site makes note: Smaller businesses and consumers are heavily dependent on banks for obtaining credit, and there is little evidence that, as yet, banks have loosened the purse strings. Bank loans to businesses and consumers are still falling with few signs of abatement. To be sure, part of the decline stems from declining demand, but the magnitude of the fall is too large to be explained by weakness in demand alone

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Should You Stop Paying Your Mortgage

Moral Failure or Strategic Decision

According to the Mortgage Bankers Association More than 40% of borrowers are 60 or more days past due on payments. So many homes have lost value and never recover. About one in four homeowners, or 10.7 million Americans, are considered underwater.

This is far from over. The sub prime mess may be behind us, but the Alt A implosion is now. More and more home owners will find themselves paying off homes that will never recover.

A moral dilemma for many home owners is what to do when you believe that you will never see your money back. If you owe more than your home is worth, you have to struggle with some uncomfortable options.

We have been raised to pay our debts and never be a deadbeat. But what do you do when its clear that the best financial decision may be to walk away from an investment that will never recoup.

What Happens If You Take a Walk

Your ability to borrow becomes severly constrained. You are a bad risk, but not forever. Fannie Mae won't back another loan for five years for a borrower involved in a foreclosure, except because of an extreme circumstance like a medical event or unemployment. Missed mortgage payments and defaults show up on your credit report and remain for seven years

White, a University of Arizona law school professor, said to the Washington Post, that in anti-deficiency states such as Arizona and California, mortgage lenders have limited or no legal rights to pursue defaulting homeowners assets beyond the house itself. In fact its not that simple. Some mortgages that have been refinanced may no longer be non recourse loans. Its a very complicated and should not be taken lightly.

Homeowners who decide that having a foreclosure on their credit report rather than continue to throw good money after bad is not necessarily immoral. It may just be realistic. In fact, a good business decision.

The lenders are also responsible. Im not absolving bad decisions made by borrowers to take on more excessive debt, but the poor decisions to lend as if real estate could only go up is the other half of the equation. They also made irresponsible business decisions and should play a bigger part in the cost of the bust.

Its imperative that the Banks Step Up

The FDIC acquires failed banks, some 124 just this year and may soon be require failed banks to cut principal mortgage debt rather than forbearing a portion until a later day or lowering interest rates.

FDIC Chair Sheila Blair told Bloomberg news that the FDIC is considering a loss-sharing for failed banks, requiring the banks to write down mortgage principals because job loss is driving mortgage distress.

For lenders, watching debtors walk away from their mortgages is harsh lesson, but bankers partnered with the homeowner in the deal. If they dont begin to take responsiblity along with the borrower for bad business decisions, they will simply be laying the groundwork for the next bubble.

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Stock Market Views On The Housing Recovery

Investors can bet on the direction of home prices based on the Case Shiller 10 MSE using exchange-listed securities designed to mimic home prices.

The UMM or MacroShares Major Metro Housing Up will rise when U.S. housing prices climb.The DMM or MacroShares Major Metro Housing Down, profits when real estate values fall.

Housing Markets Today

While there is evidence that the worst is over, doubters persist. They point to 4 million homeowners either in foreclosure or at least three payments behind on their mortgages.

Even if a quarter of those borrowers are able to stay in their homes, there's a lot of potential inventory coming into the market next year, said Jay Brinkmann, chief economist with the Mortgage Bankers Association to cbsmarketwatch.com.

Stock Markets On The Direction Of Home Prices

A short look at how the stock markets view the housing market recovery. The Micro Market ETFs, which allow you to bet on the direction of home prices provides us with a view of how people are viewing the real estate recovery.

The chart shows us market consensus on home prices based on the Case shiller 10 MSE index. The MacroShares Major Metro Housing Up (UMM) had been on a tear as optimism about a stabilization in residential real estate prices. But they have been drifting downward ever since they peaked at 40%. The DMM (red)shares have stabilized and are not showing much directional conviction.

Its Still Fragile Out There

Its anybodys guess as to why the consensus is obviously that home prices have seen there best times, at least for now. Still the optimists are in charge, the UMM has almost doubled in the last six months.

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Freddie Mac Weekly Mortgage Update: Rates Higher This Week

Mortgage Rates Follow Bond Yields Higher

30-year fixed-rate mortgage: Averaged 4.81 percent with an average 0.7 point for the week ending December 10, 2009, up from last week when it averaged 4.71 percent. Last year at this time, the 30-year FRM averaged 5.47 percent.

The 15-year fixed-rate mortgage: Averaged 4.32 percent with an average 0.6 point, up from last week when it averaged 4.27 percent. A year ago at this time, the 15-year FRM averaged 5.20 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.26 percent this week, with an average 0.5 point, up from last week when it averaged 4.19 percent. A year ago, the 5-year ARM averaged 5.82 percent.

One-year Treasury-indexed ARMs: Averaged 4.24 percent this week with an average 0.7 point, down slightly from last week when it averaged 4.25 percent. At this time last year, the 1-year ARM averaged 5.09 percent .

Freddie Sayz

Following an upbeat employment report, long-term bond yields rose slightly and fixed mortgage rates followed, said Frank Nothaft, Freddie Mac vice president and chief economist. The economy shed only 11,000 jobs in November, far fewer than the market consensus forecast, and the unemployment rate unexpectedly fell to 10 percent. In addition, revisions added 159,000 jobs to September and October.

Notwithstanding, rates on 30-year fixed mortgages are almost 0.7 percentage points below those at the same time last year. This translates into an $81 lower monthly payment on a $200,000 conventional mortgage.

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Mortgage Bankers Association: Weekly Mortgage Survey

Mortgage Bankers Association for the week of 12/09/2009

Market Composite Index: (loan application volume) increased 8.5 percent on a seasonally adjusted basis from one week earlier

Refinance Index: increased 11.1 percent from the previous week and the seasonally adjusted Purchase Index increased 4.0 percent from one week earlier.

Purchase Index: increased 41.7 percent compared with the previous week and was 18.8 percent lower than the same week one year ago. The increase in purchase applications reflected a 10.0 percent increase in Government Purchase applications and a 0.2 percent decrease in Conventional Purchase applications, both on a seasonally adjusted basis.

Refinance Share of Mortgage Activity: increased to 74.4 percent of total applications from 72.1 percent the previous week.

ARM Refinance Activity: decreased to 4.7 percent from 4.8 percent of total applications the previous week.
MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

The Federal Reserve will extend their agency MBS purchase program through the end of the first quarter of 2010. However, Fed and Treasury purchases have accounted for the vast majority of all new issuance in this sector in recent months, and rates will increase when the Fed steps out of the market completely.

But, property values will not recover until unsold inventory returns to normal levels. Affordability is at record levels, yet there is no strong indication that the demand recovering. People do not yet seem to trust the recovery and many do not have the necessary down payment or can clear tighter loan qualifications.

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A Follow up

Rising unemployment - Clocking in at 110,000 this month
Declining home prices - Home prices are doing better than last year, but foreclosures, tighter credit requirements and job loss will keep a lid on price.
Alt A mortgage rate resets- More than $200bn of outstanding pay-option adjustable-rate mortgages. More than 40% of borrowers are 60 or more days past due on payments

The home crises is far from over and millions of Americans are still faced with underwater mortgages and increasing mortgage payments. It is estimated that 10 to 12 million more foreclosures may take place. Clearly, the Govt programs are no longer sufficient, if the metric is to slow the foreclosure process and keep homes off the market.

The FDIC acquires failed banks, some 124 just this year and may soon be require failed banks to cut principal mortgage debt rather than forbearing a portion until a later day or lowering interest rates.

FDIC Chair Sheila Blair told Bloomberg news that the FDIC is considering a loss-sharing for failed banks, requiring the banks to write down mortgage principals because job loss is driving mortgage distress.

Last week I wrote that Citigroup had suggested that banks would have to step up and do principal write downs to share in the burden of this great recession. It wont be long before we hear from Obama about how its time for the banks to step up and share the burden. About time, I think


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Freddie Mac Weekly Update

30 Year Fixed Rate Falls Below 5 Percent

30-year fixed-rate mortgage: Averaged 4.71 percent with an average 0.7 point for the week ending December 3, 2009, down from last week when it averaged 4.78 percent. Last year at this time, the 30-year FRM averaged 5.53 percent. The 30-year has never been this low since Freddie Mac began its weekly survey in 1971.

The 15-year fixed-rate mortgage: Averaged 4.27 percent with an average 0.6 point, down from last week when it averaged 4.29 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991, and breaks the record low set last week.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.19 percent this week, with an average 0.6 point, up slightly from last week when it averaged 4.18 percent. A year ago, the 5-year ARM averaged 5.77 percent.

One-year Treasury-indexed ARMs: Averaged 4.25 percent this week with an average 0.6 point, down from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.02 percent. The 1-year ARM has not been this low since the week ending June 30, 2005, when it averaged 4.24 percent.

Freddie Sayz

Interest rates for 30 year and 15 year fixed-rate mortgages fell for the fifth consecutive week to an all time record low while the average rate on 5-year ARMs hovered near its record set in the previous week, said Frank Nothaft, Freddie Mac vice president and chief economist.

In addition, interest rates on 30 year and 15 year fixed mortgages thus far in 2009 averaged one percentage point below their respective average in 2008. Low mortgage rates and the cumulative decline in house prices have contributed to an extremely affordable housing market and helped spur home sales this year. For instance, total new and existing home sales in October were 36 percent higher than their January low on a seasonally adjusted, annualized rate, according to the U.S. Census Bureau and the National Association of Realtors (NAR ). The NAR also reported that pending existing home sales rose for the ninth straight month in October, representing the longest consecutive gain since the series began in 2001, according to the National Association of Realtors . Seven of those months were the most affordable on record dating back to 1971, based on the NARs Housing Affordability Index

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Mortgage Bankers weekly Update

Mortgage Bankers Association for the week of 11/25/2009

Market Composite Index: (loan application volume) decreased 4.5 percent on a seasonally adjusted basis from one week earlier.

Refinance Index: decreased 9.5 percent from the previous week

Purchase Index: increased 9.6 percent from one week earlier.

Refinance Share of Mortgage Activity: increased to 72.1 percent of total applications from 71.7 percent the previous week

ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

The Federal Reserve will extend their agency MBS purchase program through the end of the first quarter of 2010. However, Fed and Treasury purchases have accounted for the vast majority of all new issuance in this sector in recent months, and rates will increase when the Fed steps out of the market completely.

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NAR Reports on Pending Sales

NAR Report is Mixed

NAR reported Tuesday that its index measure of pending sales of resale homes gained for the ninth month in a row in October with a 31.8% gain over the same month last year.

NAR expects 5.15 million sales of resale homes this year, compared with 4.91 million in 2008 and 5.65 million in 2007.

New single-family home sales will drop an estimated 18.7 percent this year following a 37.5 percent decline in 2008 and a 26.3 percent decline in 2007. according to the NAR forecast.

Distressed sales and foreclosures accounted for 40 to 45 % of the sales. That coupled with the national median price down 15.5% from last year and its clear that its not strong out there. The market is selling excess inventory, now at 10 months rather than the healthier 6 month forward supply NAR defines as a good market. Yet we are moving towards inventory reduction and price stabilization. I guess we will have to be satisfied with slow and steady and hope that 2010 is the rebound year.

2010 Is The Year
Lawrence Yun, Chief Economist at NAR indicates, that as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families. (Via realtor.org).
Chart Source: The Commerce Dept.

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Fannie Launches the First look Program

Fannies supply of foreclosed homes keeps growing. The First Look program is designed to help owner occupants buy homes. Its a new program aimed at toward stabilizing neighborhoods and building stronger communities in tough times. The idea is to give the owner occupant an advantage over the investor. generally, investors are professionals and cash heavy. They get to the property first and can buy in full. Fannie and Freddie have launched initiatives that give an edge to the owner who will occupy the home, thereby helping to preserve the neighborhood. With First Look, only offers from owner occupants and buyers using public funds are considered during the first 15 days a property is on the market. Offers from investors will be considered only after the first 15 days have passed.

Direct from the Fannie Mae web site:

1. A First Look at properties for buyers using public funds
2. A reserved contract period that gives buyers a chance to renegotiate after obtaining an appraisal
3. An initiative designed to work with HUDs Neighborhood Stabilization Program (NSP)
4. An earnest money waiver for public entities and a discount for individuals (can be as little as $500 for an individual using NSP funds)
5. Extra time for due diligence and closing
6. Freddie Mac has a similar pilot program.

For more information about Fannie Mae’s First Look initiative contact publicentity_reosales@fanniemae.com or go to the Fannie press release

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Citigroup Suggests Mortgage Debt Forgiveness

Nearly one in four U.S. borrowers owe more on their mortgage than their home is worth, indicating that the housing recovery could see another wave of defaults. 23% of mortgage holders, were underwater in the third quarter, and 5.3 million have mortgages that are 20% higher than the value of their home since the recession began. Analysts expect prices to dip again this winter as foreclosures increase and economic growth remains modest. The Wall Street Journal reports.

Its not a new idea and many have always clamored for the banks to take some repsonsibility for loose lending practices that helped fuel the boom. But now it seems that a major institution is on board and will spearhead a push for mortgage debt foregivness.

Citigroups quarterly reports on mortgage borrowers

As unemployment rises, more borrowers need principal forgiveness on their mortgages, not just restructured loans, Citigroup Inc.'s mortgage chief said. To date, Citigroup helped 130,000 homeowners with $20 billion in mortgages outstanding avoid potential foreclosure last quarter. But that number increased 20% from the second quarter. The sub prime debacle is behind us, the culprit now is unemployment.

Unemployment
The Main Cause of Delinquencies

The main problem of the mortgage industry changes from house-price depreciation to unemployment, the mortgage market needs more programs where there is principal reduction for borrowers with negative equity in their home, as opposed to just a loan restructure, Mr. Das said. (Via Wall street Journal).

Loan mods alone are not enough to avoid another tsunami of foreclosures. The housing recovery's momentum has slowed, and it seems likely that house prices will now resume their fall. Re-default rates on loans that had already been modified in the quarter were nearly 39 percent, up 10 percent from the second quarter. High unemployment coupled with a loss of home equity are too big a burden for many home owners and the temptation to walk away, may begin to look like good business sense.

Foreclosures initiated in the third quarter rose about 10% from the second quarter but fell about 11% from a year earlier. Completed foreclosures fell less than 1% from the second quarter and about 48% from a year earlier. Things appear to be moderating, although I dont think Citigroup is addressing the Alt A recasts, which are expected to add to the problem, in a big way, beginning this year and into 2012.

Citigroup Speaks Out

Citi proposes new programs to forstall impending foreclosures. Recognizing that existing programs are not enough, the bank wants to reduce the principal owed and to bring this down to a number homeowners could cover. In return for forgivness of some debt, Citi wants to share any potential upside. Banks step up and take a hit along with the home owner, home owner gets to stay in the house, Home stays off the market helping home prices stabilize and bank gets equity share for the effort. Having the lenders in an equity share position with home owners is a solid idea.

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Foreign Real Estate Investors Return To The Market

The 17th annual survey shows strong Interest In US Real Estate.

1. Foreign real estate lenders say they plan to increase lending by 58% in the U.S. in 2009.
2. Equity investors plan to increase investment activity by 40 percent globally and by 73% in the U.S. according to the results of the 17th annual survey

Preferences

D.C. trumps New York as the top global city for foreign investment. London and New York were second and third position for foreign investment interest. Five of the top ten cities were American and the U.S. was ranked as the country with the most opportunity for capital appreciation.

US Real Estate Trends

Our system certainly can surprise, but politically, we are very stable. There is a great deal of faith in our ability to adjust and change. AFIRE members surveyed find the U.S. continues to provide both the most stable and secure real estate investment environment and the best opportunity for capital appreciation.

This year, foreign investors are eying the multi family sector, followed by offices, industrial, retail, and hotel properties. US property is showing signs of an approaching price equilibrium and the dollars decline has made real estate even cheaper for foreign investors. Fed assurances that interest rates will remain low until a full blown recovery virtually assures an inexpensive dollar and once in a generation opportunity for foreign investment.

NAR reports International investors bought 154,000 homes and condos in the 12-month period ending in May, down nearly 10% from 170,000 for the same period a year earlier.But Since June, the dollar has tumbled by 9 to 11% against currencies like the Japanese yen, the Euro and the Canadian dollar. Florida leads the country accounting for 25% of foreign purchases, followed by California, Texas, and Arizona.(via AFIRE)
Green Matters

When asked to what extent a building’s green attributes influenced their decision to purchase a property, 11 percent said significantly so, and 60 percent said somewhat so. In almost the exact same percentages, investors said that green attributes were worth a greater rental premium. This was the first survey in which these two questions were asked. (Via AFIRE)

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Freddie MAc Weekly Update

30 Year Fixed Rate Falls Below 5 Percent

30-year fixed-rate mortgage: Averaged 4.78 percent with an average 0.7 point for the week ending November 25, 2009, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.

The 15-year fixed-rate mortgage: Averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent . A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.

One-year Treasury-indexed ARMs: Average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent . The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent

Freddie Sayz

Long term mortgage rates eased for the fourth consecutive week to record levels, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates for 30 year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this years peak set in mid June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage. House prices are slowly beginning to firm now.

For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. [PDF] Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes

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Mortgage Bankers Weekly Update

Mortgage Bankers Association for the week of 11/25/2009

Market Composite Index: (loan application volume) decreased 4.5 percent on a seasonally adjusted basis from one week earlier.

Refinance Index: decreased 9.5 percent from the previous week

Purchase Index: increased 9.6 percent from one week earlier.

Refinance Share of Mortgage Activity: decreased to 71.7 percent of total applications from 74.6 percent the previous week.
increased to 5.3 percent from 5.1 percent of total applications from the previous week.
ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.

The Federal Reserve will extend their agency MBS purchase program through the end of the first quarter of 2010. However, Fed and Treasury purchases have accounted for the vast majority of all new issuance in this sector in recent months, and rates will increase when the Fed steps out of the market completely.

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