Archive for the ‘Fannie Mae’ Category

Fannie and Freddie Could Raise Fees in 2012

September 26, 2011

Realty Biz News

Analysts believe that the government may need to charge higher fees to lenders and increase mortgage insurance from borrowers in order to guarantee loans when they go ahead and overhaul Fannie Mae and Freddie Mac – a move that could lead to increased borrowing costs.

The government is trying to boost competitiveness within mortgage markets, and at the same time reduce their expenses over the next ten years by $28 billion.

Currently, government-sponsored enterprises (GSEs) purchase mortgages before packaging them into securities which are sold on to investors. As part of the transaction, GSEs ask for a “guarantee fee”, and this is set to be increased next year.

Such an increase, says the Wall Street Journal, would result in borrowers seeing a modest increase in their monthly repayments. If guarantee fees are increased by just 0.1%, as has been proposed by the government, a $220,000 mortgage’s monthly payments would rise by about 15%.

In order to reduce the risk to taxpayers, Fannie Mae and Freddie Mac would likely ask borrowers to take out additional mortgage insurance, as GSEs have been federally-owned since 2008.

However, any changes would have to be introduced gradually, says Edward DeMarco of the Federal Housing Finance Agency, in order to avoid causing any more harm to fragile housing markets.

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Fannie, Freddie refi market set to enter housing Twilight Zone

September 7, 2011


U.S. residential mortgage lending volume will struggle to reach the mid-$800 billion range in 2012, according to market research, as the recent boom in refinancings dries up at Fannie Mae and Freddie Mac.

Furthermore, the report from iEmergent, paints a picture of a housing market floating in its own Twilight Zone — a reality where "the distribution and location of local lending opportunities will continue to re-shape and reset the long-term home financing prospects and projections for most U.S. communities."

This year, roughly 838,400 Fannie and Freddie loans received a refinancing, according to data released by the Federal Housing Finance Agency.

In 2012, this market share is likely to dry up, according to the forecasting and advisory firm (click chart below).

Even more unfortunate, the other side of the mortgage origination — new home sales, is unable to fill the gap in business.

"Home affordability indicators have never been better, yet total buyer demand shows no signs of life," the iEmergent report states.

The reason for this forecast, according to the analysis, is that housing is in its own dimension of economic recession.

The nation’s economy may be recovering, but in terms of housing, lack of jobs, lower income and continued high levels of negative equity, America’s property ladder is missing more than a few rungs.

"The middle-class buyers on whom future home buying demand depends will continue to struggle to re-build their cash reserves, pay down their debts, and grope their way out of the shadows," the report states. "Their recovery will be very slow."

But there is a silver lining to the forecast that Fannie Mae, Freddie Mac will see higher purchases, yet very low refinance volume in 2012 (click chart below).

In the total originations market, outside of the government sponsored enterprises, iEmergent projections indicate purchase home loan volume might actually rise 0.3%. However, through 2012, mortgage originations as a whole will see less business.

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Another Fannie servicing portfolio up for sale

September 7, 2011


MountainView Servicing Group will help sell a $485 million servicing portfolio of Fannie Mae mortgages.

Nearly all of the loans in the portfolio are fixed rate and primarily located in Illinois. The average delinquency rate on the portfolio is 2.21%. Interest rates average 4.67%, and the average FICO score is 761. The portfolio also carries an average 30-basis-point servicing fee.

A spokesman for MountainView said the portfolio is being sold by a private mortgage bank but did not specify which one. Bids will be taken until Sept. 7.

So far in 2011, MountainView has helped sell more than $800 million in Fannie Mae servicing portfolios. In April, the firm began marketing a $262 million portfolio. It also sold a $110 million portfolio in January.

It is also marketing a $45 million portfolio of Ginnie Mae servicing rights. All of these loans are fixed rate with more than 78% of the mortgages located in California. The seller of these loans will be taking bids through Sept. 7 as well.

MountainView is a financial services firm specializing in asset management and valuation, among other services. It is also a subsidiary of MountainView Capital Holdings, a financial advisory firm to banks, thrifts and credit unions.

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Fannie Mae: Negative equity environment saps would-be homebuyers

August 15, 2011


With 64% of Americans expressing pessimism over the state of the economy in the second quarter, Fannie Mae’s latest quarterly national housing survey shows consumers walking a tight rope into a housing market focused more on renters as employment worries persist.

That’s the highest percentage of Americans with a negative view of the country’s economic shape, according to Fannie Mae, which began the survey in the first quarter of 2010.

What’s more, negative equity levels continue to rise nationwide as house prices remain suppressed. In the second quarter, 26% of mortgage borrowers were underwater, or owed more than the property is worth, compared to 23% in the first quarter.

And when mixed with rising costs of living and fewer jobs, more and more would-be homebuyers say they are unlikely to get a mortgage.

Survey results show 73% of single-family renters believe it would be difficult to qualify for a mortgage, with 33% citing their own credit histories as a hurdle.

The survey studied consumer confidence across generational lines and found 51% of Gen X (ages 35 to 44) claim it would be hard for them to qualify for a mortgage. When looking at Generation Y (ages 18 to 34) —  the cohort most likely to be first-time homebuyers— the number rises to 59%.

Even though pessimism abounds across the market, the younger cohort seems more optimistic about the future. Fifty-seven percent of Generation Y participants said they expect their personal situation to improve over the next year, compared to 42% in Gen X and 35% of baby boomers.

The survey, which is based on interviews with more than 3,000 Americans, found 26% worry about losing their job.

One-third of respondents perceive their savings to be sufficient, while 44% said household expenses have increased significantly in the past year.

"Consumers are more cautious due to concerns over employment and household finances," said Doug Duncan, vice president and chief economist of Fannie Mae. "As a result, consumer spending, which accounts for about 70% of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market."

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S&P lowers ratings on Fannie, Freddie

August 12, 2011


Standard & Poor’s lowered the ratings on Fannie Mae and Freddie Mac Monday after downgrading the U.S. government’s sovereign debt rating to double-A-plus late last week.

Analysts also lowered the ratings on 10 of the 12 Federal Home Loan Banks and on senior debt held by FHLB banks as well. All went from triple-A to double-A-plus. The outlook on all affected institutions is negative.

"The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government," S&P said in a statement. "Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government. In addition to the implicit support we factor into our ratings, the U.S. Treasury has demonstrated explicit support by providing these entities with capital quarterly, as necessary."

S&P also lowered ratings on the senior debt issued by the Federal Farm Credit Banks to double-A-plus, although ratings on the individual farm member banks are not affected.

The Chicago and Seattle Federal Home Loan Banks weren’t downgraded because S&P already rated them at double-A due to lower stand-alone credit profiles.

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Fannie Mae unwind slows down

August 2, 2011


Mortgage securitization business at Fannie Mae got a little smaller in June, according to the monthly survey from the government-sponsored enterprise, but the rate at which Fannie Mae business contracts is slowing down.

Fannie Mae’s gross mortgage portfolio declined at a compound annualized rate of 9.4% in June.

Under Dodd-Frank financial reform, both Fannie Mae and Freddie Mac are required to unwind operations, though the speed at which this happens is a variable.

For example, the new numbers show that the unwind is slowing down.

Fannie Mae said its gross mortgage portfolio fell at a much-faster compound annualized rate of 15.2% in February, while the government-sponsored enterprise’s entire book of business fell 0.7%.

Fannie Mae’s total book of business lessened at a compound annualized rate of 1% June.

Year-on-year, Fannie Mae mortgage-backed securities portfolio declined by a little more than $50 million to $231 million, compared to $282 million in June 2010.

Fannie Mae mortgage servicers completed 17,246 loan modifications in June, for a total of 101,379 loan modifications in the six months ended June 30, 2011.

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Fannie, Freddie investors likely steady, even in default

August 1, 2011


The U.S. debt compromise deadline is days away with the prospect of a national downgrade looming in lieu of a solution.

In such an instance, it is likely that bonds issued by Fannie Mae and Freddie Mac will experience an implied downgrade as well, considering the implied government backing.

Indeed, in a commentary in The Washington Post, Neel Kashkari, managing director of the investment management firm PIMCO, suggested a U.S. downgrade has the potential to be as bad or perhaps worse than the Lehman Bros.’ shock.

"The more strongly held a belief, and the larger the asset class it supports, the greater the potential damage to the economy when the belief is turned upside down," he writes. "We may not be certain what will happen if U.S. credit is downgraded, but there is no upside to finding out."

However, analysts at Barclays Capital are not as worried when it comes to Fannie Mae and Freddie Mac. They say among the largest investors of these bonds, there is little chance of a widescale withdrawal from the market. Banks have been a major source of demand for mortgage-backed securities this year, alongside real estate investment trusts, adding in excess of $100 billion in the past three quarters.

They admit that an investor concern is that a downgrade could sap bank demand by potentially raising the level of regulatory capital that must be held against the asset.

"But we do not think this will be the case," they say.

"We see the likelihood of regulatory capital increases based on a rating downgrade as extremely low," the Barclays Capital analysts write. "As such, in the event of a downgrade, there should not be much change in bank demand for this sector."

See the investor breakdown for Fannie, Freddie below.

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Fannie and Freddie cuts vanishing from debt ceiling proposals

August 1, 2011


As the debt ceiling talks continue to limp along in Washington, government savings from reducing operations at Fannie Mae and Freddie Mac are disappearing from both the House and Senate proposals.

Congress has until Aug. 2 to come to an agreement on how to raise the debt ceiling, according to the Treasury Department. The House was expected to vote on a revamped proposal from Rep. John Boehner (R-Ohio) Friday evening, while Sen. Harry Reid (D-Nev.) prepped one of his own in anticipation of striking down the Boehner deal.

Buried in the flurry of negotiations were potential ramifications for Fannie and Freddie, the two mortgage giants that have cost the U.S. government roughly $164 billion in bailouts since the housing downturn.

According to the Congressional Budget Office, the original Boehner plan and subsequent Reid proposals would have saved the government $30 billion via reductions to Fannie and Freddie operations. This, sources within the House told HousingWire, would have meant raising the guarantee fees — the fees Fannie and Freddie charge for guaranteeing a pool of mortgages — up 5 basis points.

Sources said this contributed more than $26 billion to government "cuts," but it was eventually considered a "tax revenue" and was removed from not only Boehner’s proposal but Reid’s as well.

It was unclear Friday whether the Reid bill had any language pertaining to Fannie and Freddie within it, but an aide for one senator said the situation was "extremely fluid."

Rumors even flew Friday afternoon of a possible reduction to the conforming loan limit below the reduction that is already scheduled to occur Oct. 1. The conforming loan limit is the maximum amount Fannie and Freddie can purchase or guarantee.

In 2008, Congress raised the conforming loan limit to $729,750, but the limit is scheduled to expire Oct. 1 and drop to $625,500, varying by county. Discussions over the debt ceiling included talks of taking that limit down to $417,000 by 2013  for the cost savings it would provide in numbers of loans that the GSEs would guarantee going forward. However, sources on the Republican side of the House said such plans never surfaced in the deal.

Should any language regarding Fannie Mae and Freddie Mac disappear from the debt ceiling agreement, it would mark the latest landmark legislation since the Dodd-Frank Act that failed to address the future of housing finance.

Even though Republicans in the House made initial steps toward reforming fringe operations of the government-sponsored enterprises, including raising the g-fee, legislation on how to replace the roles of these companies have yet to be taken up by committee.

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Fannie Mae sees light at the end of housing tunnel

July 25, 2011


Home sales in the second quarter of 2011 were bad, according to Fannie Mae. Home prices also remain volatile, moving with gains and losses, over the past two years.

However, according to a housing forecast report card released on Friday from the government-sponsored enterprise, 2012 is likely to be a different story.

Next year will likely see meaningful gains in both categories, especially in the multifamily space. Both home sales and house prices should begin to improve from the third quarter 2011, with faster growth in the final two quarters of 2012.

Meanwhile, the GSE said full-year growth is projected to slow to 2.4%, down from 2.8% in 2010.

There are many economic uncertainties dragging the recovery, the research states. Disruptions in Europe may impact the U.S. banking system to the downside, for example. Furthermore, consecutive poor employment reports are directly impacting home purchases.

"Clearly, the renewed slowdown in hiring underscores the uncertainty surrounding the economic outlook," said Fannie Mae Chief Economist Doug Duncan. "The lack of sustained, robust job growth continues to push out into the future the time for the housing market to heal, which is crucial to a meaningful economic expansion."

Fannie Mae also predicts mortgage rates on 30-year fixed to hit 5% in the second quarter of 2012 and keep rising from there. Liquidations, on the other hand will remain at low levels for the long term.

Demands for rentals should remain robust, according to Kim Betancourt, Fannie Mae director of multifamily economics and market research, in a separate research report.

"There is some concern that multifamily fundamentals may stagnate if job growth remains anemic, however, new rental supply will be limited, likely resulting in keeping current rent levels stable," Betancourt wrote.

"The outlook for the second half of 2011 remains the same for the multifamily sector, with an annualized increase of 3% expected for average asking rents and the vacancy rate expected to stay fairly stable, declining to 6.5% from 6.75% by the end of the year," the text states.

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Freddie, Fannie Delinquencies Down a Full Point

July 8, 2011

RIS Media

The percentage of seriously delinquent mortgages—those that are 90 days past due or in foreclosure—held by Fannie Mae and Freddie Mac have fallen more than a point in the last year.

The decline in GSE delinquency rates is one more sign that delinquencies have been steadily abating over the past 12 to 18 months.

Fannie Mae reported that the serious delinquency rate decreased to 4.14% in May, down from 4.19% in April. This is down from 5.15% in May of 2010. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate decreased to 3.53% in May from 3.57%in April. This is down from 4.06% in May 2010. Freddie’s serious delinquency rate peaked in February 2010 at 4.20%.

The Mortgage Bankers Association and private data firms like CoreLogic and LPS also have reported a decline in delinquencies. LPS reported last week that the May delinquency rate had fallen to 7.9 percent, an 18.3 percent decline from May 2010.

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