Freddie Mac: 30-yr mortgage average still falling

October 8, 2009

SAN FRANCISCO (MarketWatch) — Freddie Mac (FRE) said Thursday that the 30-year fixed-rate mortgage average declined further to 4.87% with an average 0.7 point for the week ending Oct. 8 from 4.94% last week. The last time the average was this low was May 21, when the average was 4.82%. The average was 5.94% a year ago. “Such low rates are spurring mortgage demand,” said Frank Nothaft, Freddie Mac chief economist, in a statement. “Mortgage applications surged to a 19-week high over the week ending on October 2nd, according to the Mortgage Bankers Association. Moreover, applications for home purchases were at the strongest pace since the beginning of this year.”


U.S. 30-year mortgage rate retests record lows

October 1, 2009

Thu Oct 1, 2009 10:35am EDT

NEW YORK, Oct 1 (Reuters) – The average rate on 30-year U.S. home loans fell in the past week to retest record lows, helping stimulate housing demand, Freddie Mac (FRE) said on Thursday.

The most widely used long-term borrowing cost dropped 0.10 of a percentage point in the week ended Oct. 1 to 4.94 percent, the lowest since late May, and near the all-time low of 4.78 percent set in April.

A year ago, before government interventions aimed at cutting borrowing costs to stimulate housing and the economy, the rate was 6.10 percent.

Freddie Mac started tracking 30-year mortgage rates weekly in 1971.

The 15-year average mortgage rate, which it started tracking in 1991, set a record low of 4.36 percent in the latest week. A year earlier, this rate was 5.78 percent.

“Low mortgage rates are helping to stabilize home sales,” Frank Nothaft, chief economist at Freddie Mac, said in a statement.

New home sales in August rose to the highest annualized pace since September 2007, while unsold inventory fell to the lowest sine February 1983, he noted.

Sales of existing homes declined in August but were at the second-highest pace in almost two years. And home prices, based on the S&P/Case-Shiller indexes, have risen for three straight months through July after plummeting for three years.

Pending home sales gained 6.4 percent in August in the seventh straight monthly increase, reaching the highest level since March 2007.

The U.S. housing remains depressed despite the recent signs of life and there is growing concern about how the market will hold up if the federal $8,000 first-time home buyer tax credit is not extended past November 30.

Home prices on average remain more than 32 percent below 2006 peaks, and many economists expect further erosion under the weight of rising foreclosures.

Lenders charged an average 0.7 point in fees for 30-year loans, up from 0.6 point the prior week.

(Reporting by Lynn Adler)


Investors trading 3 stocks that may be doomed

August 27, 2009

Investors still trading Fannie, Freddie, AIG shares, even though prices are likely to hit zero

Daniel Wagner, AP Business Writer
Thursday August 27, 2009, 5:36 pm EDT

WASHINGTON (AP) — Investors are still trading common shares of Fannie Mae (FNM), Freddie Mac (FRE) and American International Group Inc. (AIG) by the billions, even though analysts say their prices are almost certain to go to zero.

All three are majority-owned by the government and are losing huge sums of money. The Securities and Exchange Commission and other regulators lack authority to end trading of stocks in such “zombie” companies that technically are alive — until the government takes them off life support.

Shares of the two mortgage giants and the insurer have been swept up in a summer rally in financial stocks. Investors have been trading their shares at abnormally high volumes, despite analysts’ warnings that they’re destined to lose their money.

“People have done well by trading them (in the short term), but when it gets to the end of the road, these stocks are going to be worth zero,” said Bose George, an analyst with the investment bank Keefe, Bruyette & Woods Inc.

Some of the activity involves day traders aiming to profit from short-term price swings, George said. But he said inexperienced investors might have the mis-impression that the companies may recover or be rescued.

“That would be kind of unfortunate,” he said. “There could be a lot of improvement in the economy, and these companies would still be worth zero.”

The government continues to support the companies with billions in taxpayer money, saying they still play a crucial role in the financial system.

Fannie and Freddie buy loans from banks and sell them to investors — a role critical to the mortgage market. They have tapped about $96 billion out of a potential $400 billion in aid from the Treasury Department.

Officials have said AIG’s failure would be disastrous for the financial markets. Treasury and the Federal Reserve have spent about $175 billion on AIG and AIG-related securities. The company also has access to $28 billion from the $700 billion financial industry bailout.

But analysts say the wind-down strategies for the companies are almost sure to wipe out any common equity, making their shares worthless.

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Housing fix leans on troubled firms

February 24, 2009

Obama is relying even more heavily on mortgage finance agencies Fannie and Freddie to help troubled borrowers and keep the housing market afloat.

By Tami Luhby, CNNMoney.com senior writer
Last Updated: February 24, 2009: 3:19 PM ET

NEW YORK(CNNMoney.com) — Fannie Mae (FNM) and Freddie Mac (FRE) won’t be leaving the federal government’s nest anytime soon.

President Obama is leaning heavily on the teetering mortgage finance titans to help stabilize the housing market, even as it pumps hundreds of billions of dollars into them to keep them afloat.

As the housing crisis deepens, the question of the companies’ long-term future has been set aside.

“The Obama administration has indicated that Fannie and Freddie will continue having a key role in the nation’s economy as we go forward,” James Lockhart, director of the Federal Housing Finance Agency, which regulates the companies, said in a speech last week. “At this point, our primary focus has to be getting through the present crisis.”

Fannie and Freddie, which long straddled the line between private companies and government agencies, were taken into conservatorship last September to prevent their collapse. Each were given a lifeline of $100 billion.

Their importance to homebuyers and lenders is clear – they accounted for more than 75% of mortgage originations at the end of last year, injecting much-needed financing into the lending arena. They own or guarantee almost 31 million mortgages worth $5.3 trillion.
Crucial to foreclosure rescue plan

And they are playing an pivotal role in Obama’s foreclosure prevention program, which was announced Wednesday.

Under the plan, Fannie and Freddie will provide access to low-cost refinancing to borrowers with little or no equity in their home. The administration expects this will help up to 5 million borrowers avoid foreclosure.

The companies are also contributing more than $20 billion to subsidize struggling borrowers’ interest rate reductions as part of Obama’s $75 billion loan modification program. This is expected to prevent up to 4 million foreclosures.

The administration, realizing it needs to boost confidence in the struggling companies, has agreed to double its level of support for the firms to $200 billion each, as well as boost the amount of mortgages they can own or guarantee to $900 billion, up from $850 billion.

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Obama sets aside $75 billion to slow foreclosures

February 18, 2009

Program would seek to bring mortgage payments down to 31% of income

By Ronald D. Orol, MarketWatch
Last update: 2:38 p.m. EST Feb. 18, 2009

WASHINGTON (MarketWatch) — The White House unveiled a plan Wednesday to help 9 million “at risk” homeowners modify their mortgages, committing $75 billion of taxpayer money to back the initiative.

The plan contains two separate programs. One program is aimed at 4 million to 5 million homeowners struggling with loans owned or guaranteed by Fannie Mae (FNM) or Freddie Mac (FRE) to help them refinance their mortgages through the two institutions.

The Obama mortgage plan

Below is a list of key elements of the plan outlined Wednesday by President Obama that aims to aid as many as 9 million households in fending off foreclosures:

* Allows 4 million–5 million homeowners to refinance via government-sponsored mortgage giants Fannie Mae and Freddie Mac.
* Establishes $75 billion fund to reduce homeowners’ monthly payments.
* Develops uniform rules for loan modifications across the mortgage industry.
* Bolsters Fannie and Freddie by buying more of their shares.
* Allows Fannie and Freddie to hold $900 billion in mortgage-backed securities — a $50 billion increase.

A separate program would potentially help 3 million to 4 million additional homeowners by allowing them to modify their mortgages to lower monthly interest rates through any participating lender. Under this plan, the lender would voluntarily lower the interest rate, and the government would provide subsidies to the lender.

“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in subprime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments,” President Barack Obama said.

Homeowners that have Fannie Mae or Freddie Mac loans, who are having a difficult time refinancing and owe more than 80% of the value of their homes, would be eligible to refinance with this program. Even if homeowners with Fannie or Freddie loans have negative equity on their mortgages, they can qualify for this refinancing program. The program would only help homeowners occupying the property, not individuals who own property as investors.

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Seabreeze’s Kass favors U.S. stocks over Treasuries

December 4, 2008

Thursday December 4, 2008, 10:57 am EST

NEW YORK (Reuters) – Hedge-fund manager Doug Kass, who successfully shorted U.S. equities this year including shares of Fannie Mae (FNM) and Freddie Mac (FRE), is now buying U.S. stocks on the belief that they have hit bottom.

“What are deemed to be risky, that is equities, are becoming safer and I am gingerly buying,” Kass told Reuters on Thursday. Kass is the founder and president of Seabreeze Partners Management.

Also, Kass said U.S. Treasuries are expensive at current levels, particularly the longer end of the government curve, and is shorting the market. “There is huge price exposure in Treasuries and the longer you go out into the Treasury curve, the riskier you are getting,” he said.

A rally in U.S. Treasuries has pushed yields on the 10-year note to the lowest in more than 50 years this week.

Shorting is a bet that a security will fall in price.

Kass said he is specifically shorting the iShares Lehman 20+Year Treasury Index (TLT), whose buyers have been from non-traditional bond investors such as hedge funds and individuals. The exchange-traded fund is up more than 5 percent in December alone and nearly 13 percent the previous month.

U.S. stocks, which have fallen about 40 percent this year, are trading at attractive prices, but a rebound will take time, Kass said. He has been buying selectively, including real estate investment trusts such as Hatteras Financial and housing-related stocks including Ocwen Financial (OCN).

“The harder question is the slope of recovery in stocks which should be frustratingly modest at first,” he said. “I am not yet in a rush to buy aggressively, but I am increasingly confident that investments made in the next three to six months will look terrific two or three years from now.”

Seabreeze has been incubating a small long/short product for the last two years, which the company is now marketing and launching on January 1.


Massive new Fed programs aimed at loosening credit

November 25, 2008

Tuesday November 25, 6:57 pm ET
By Martin Crutsinger, AP Economics Writer

Emergency rescue efforts totaling $800 billion aim to loosen credit for consumers, businesses

WASHINGTON (AP) — Rolling out powerful new weapons against the financial meltdown, the Bush administration and the Federal Reserve pledged $800 billion Tuesday to blast through blockades on credit cards, auto loans, mortgages and other borrowing. Total federal bailout commitments neared a staggering $7 trillion.

Treasury Secretary Henry Paulson, who has been criticized for constantly revising the original $700 billion rescue program, said the administration was considering even more changes in its final two months in office.

Reports on the nation’s economic health weren’t getting any better. The Commerce Department said the overall economy, as measured by the gross domestic product, declined at an annual rate of 0.5 percent in the July-September quarter, even worse than the initial 0.3 percent estimated a month ago as consumer spending fell by the largest amount in 28 years.

In Chicago, meanwhile, President-elect Barack Obama named his budget director and said they both will focus on the nation’s soaring budget deficit — but only after economic revival is under way. Paulson stressed that Obama’s transition team was being kept informed of the government’s moves.

Investors digested it all and sent the Dow Jones industrials 36 points higher, a modest gain but still the first time the average had risen three straight days in more than two months.

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