Mortgage Rate News

The chairperson of the FDIC, Sheila Bair, has been pushing an aggressive plan, modeled off of what was tried when IndyMac went under, to help stop foreclosures. Her efforts, though, have been running into opposition from the Treasury Secretary, Henry Paulson, as well as other prominent members of the Bush Administration. The current administration seems reluctant to fund such a comprehensive plan aimed at helping individual homeowners. Now, though, it seems as though she can bide her time and wait for a Barack Obama administration. Maybe Timothy Geithner will be a more compatible and understanding Treasury Secretary.

Right now, though, Bair is working with the Obama transition team and sharing ideas. National Mortgage News reports on the process:

“We are certainly sharing our best ideas,” Ms. Bair told a Fortune 500 forum. The FDIC has developed a systematic loan modification program that could be expanded through the use of loan guarantees or loss sharing arrangements on newly modified loans. But the Bush administration has blocked funding for the loan guarantees. Ms. Bair said such a program could prevent one-third of foreclosures and help stabilize housing prices, which continue to spiral downward due to “unnecessary foreclosures.”

It certainly seems as though president-elect Obama is likely to be on board with many of Bair’s proposals. He made preventing foreclosures one of the main issues of his economic plan during the campaign, and he seems sympathetic to the plight of homeowners as well as to the troubles experienced by mortgage lenders and other big companies.

Bair has made a name for herself in recent months, since the IndyMac collapse, as someone who is sensible and who comes up with workable ideas. They may be a bit difficult to implement, but they are still feasible, and the plans worked out have potential. Now, if only we could get mortgage loan modification for those of us who made sound financial and mortgage decisions.

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.

There have been a lot of programs and plans announced over the past year or so meant to prevent foreclosures and stop their effect on the economy. One of the latest programs is one introduced as the Neighborhood Stabilization Program. This program is rolled out on the federal level, and aims to target areas that are prone to foreclosure and work on changing neighborhoods around. Real Estate Pro Articles describes the main thrust of the program:

The plan for these areas is to buy out units that are considered soon-to-be foreclosures. The units will then be handed over to non-profit housing organizations. Such associations will then be tasked to rehabilitate the properties. The repossessed houses will be made available to qualified buyers.

It seems like a pretty good idea. I like how the plan focuses on:

1. Buying homes before they enter foreclosure.
2. Fixing up homes and neighborhoods.
3. Qualified buyers will be screened for the properties.
4. It helps non-profit housing programs.

Alone, though, this program probably won’t be enough. Coordinated efforts are needed to fix this housing crisis. And, once it works its way through the mortgage market and the economy, sensible regulation is needed to prevent it from happening again. Unfortunately, many programs meant to reduce foreclosures only delay them for awhile (like the mortgage rate freeze enacted almost a year ago). Additionally, many of the efforts, though well-meaning, are a disconnected bunch of policies. Only a few bright spots have been seen, and they are disjointed, so they are not working in tandem to help the mortgage and housing market.

In any case, there are some good ideas out there. But I fear that the best solution is to let the housing bottom come as quickly as possible, and then let the whole thing work itself out. Oh, and people need to have a change in mind-set, harking back to the days when they bought what they could afford, and were reasonably satisfied with a modest home.