Mortgage Rate News

It’s a busy Monday morning in the world of mortgage market news. One of the big pieces of news comes from Fannie Mae (and other mortgage lenders). The other piece of news is rather damning evidence that the Bush Administration was pretty well aware of what was coming in terms of the mortgage market crisis. And did nothing.

Fannie Mae tries to avoid de-listing

For weeks, the NYSE has been threatening to de-list Fannie Mae. The company is fighting for survival, insisting that it has a plan to keep its stock about $1 for 30 days. Fannie Mae is above $1 right now, trying desperately to keep things rolling. Fannie was one of the financial companies that closed higher in half-session trading on Friday. However, it remains to be seen whether Fannie Mae can remain afloat and stay in compliance with NYSE rules.

Also in Fannie Mae news, the company is getting some props (and copy cats) for its move — along with Freddie Mac — to halt foreclosures for the holiday season. Mortgage lenders and states all over the country are considering a measure similar to what the GSEs announced recently. The idea is to keep people in their homes until at least January.

Bush Administration and the mortgage crisis

Apparently, there were attempts to warn the President and other top policymakers about the danger of exotic home mortgage loans. Banks were also supposedly warned. However, despite the warnings in 2005, final 2006 rules included no requirements that might have limited the effects of the mortgage market crisis. (Nothing could have prevented it altogether at that point.) Anyway, BloggingStocks reports on some of the irresponsible statements made to avoid regulation of these dangerous mortgage loans:

One of the bankers the Associated Press quotes is David Schneider, home loan President of Washington Mutual who told federal regulators in early 2006, “These mortgages have been considered more safe and sound for portfolio lenders than many fixed-rate mortgages.” I wonder what he was on when he made that statement.

This morning, the Federal Reserve announced a plan specifically designed to send mortgage loan interest rates lower. Right now, mortgage rates are higher than they should be, and that is discouraging some buyers. The new program initiated by the Fed will include directly buying housing-related and mortgage-related obligations from Freddie Mac and Fannie Mae, as well as mortgage backed securities. Included in this mortgage-backed securities purchase is Ginnie Mae. Behind the Mortgage reports on the point of the Fed’s action:

This action is aimed directly at, and intended to narrow, the interest rate “spreads” between Mortgage related securities and treasury securities, which have been leaking wider ever since the Fed stopped short of affirming a “full faith and credit guarantee” for Fannie and Freddie’s obligations.

It is clear that all of the efforts being made by the government so far to increase liquidity have not been working. And, even though a lot of play as been given to the $700 billion bailout, another zero needs to be added in order to get the scope of what has actually been promised in terms of bailouts and rescues: $7 trillion.

New phase in Fed liquidity plan: target consumer loans

Today’s announcement of a plan for easing mortgage loan interest rates was not the only new loan program offered by the Fed. TARP will also soon be including consumer loans in its 4th incarnation. In order to encourage investment in consumer debt-backed securities, loans are being offered to those who invest in such things as credit card debt, car loans and student loans.

The idea behind this particular plan is to encourage lenders to loosen their tightened credit requirements so that borrowers can get more credit. The hope is that lenders will give more loans, and that consumers will then go on a debt-fueled spending spree to help the economy. The Big Hope is that this will come in time for consumers to get the credit lines they need to “save” the holiday shopping season.

With all the largess flowing from Washington, it’s starting to become difficult in terms of figuring out where money is going (no one’s worried about where it’s coming from, at any rate). And I know everyone’s all about the Citi bailout this morning, but another stimulus may be on the way. This one may have more of a direct impact on “ordinary” folks — or at least first time homebuyers. The new stimulus is one suggested by the National Association of Homebuilders (NAHB).

Trying to fix the housing market first

As one might guess, the National Association of Hombuilders is fairly certain that the government is throwing money at all the wrong thigns right now. Instead of fixing the housing market and trying to get things back on track with homeowners and home prices, the government continues to chuck money, through bailouts, at a number of companies that made downright poor business decisions. Instead, suggests the NAHB, the government should aim at creating measures to help get the housing market moving, mainly by:

1. Offering a tax credit that is larger than the $7,500 offered right now to first time homebuyers. Also, NAHB doesn’t think that the credit should be paid back.
2. Subsidy for mortgage interest rates that would, according to Mortgage News Daily, “target interest rates on 30-year fixed-rate government-backed mortgages for conforming loans that would bring rates down from the current 6.0 percent range to around 3 percent for those made in the first half of next year and 4 percent for those originated during the third and fourth quarters of 2009.”

It’s an interesting thought — focusing on people who might be interested in buying. However, it does not address some of the problems facing the economy right now. Like, you know, foreclosure. Instead, the NAHB plan runs the risk of putting more unoccupied homes out there, without doing anything to forestall foreclosure. The other issue is that first time homebuyers can’t take advantage of any of this as long as they can’t get approved for mortgage loans.