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.”
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 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.
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.
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.