Wednesday, August 27, 2008

Fannie/Freddie slowing down purchases. FHA increasing fees.

In case anyone is thinking mortgage credit contraction is over, from the WSJ (emphasis added):

In their latest monthly reports, Fannie and Freddie disclosed that they cut back on commitments to buy mortgage securities in July. Those purchase commitments, net of planned sales, totaled about $16.3 billion, down from $55.1 billion in June. The companies are providing less support to the mortgage market, while reducing their capital needs.
Fannie increased its holdings of "liquid" investments, cash and short-term securities that can easily be sold, to $103.6 billion, up 43% from June. The move gives the company more flexibility to reduce its future borrowings if market conditions worsen, company officials said.

The GSE can shrink by lowering its purchases below the amount loans in its portfolio get paid off. I don't know what that level of purchases is currently but at the very least they appear to be planning to grow more slowly. I'm sure we will see additional guideline tightening in the near future. I think Freddie Mac is overdue for a tightening based on the guidelines I've read and what I've seen on the broker boards.

So if Fannie/Freddie aren't going to save housing I guess FHA will, except they are raising fees:

In a posting on its Web site Tuesday, the FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That is up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers' credit scores and the amount of the down payment or equity they owned in the home.

The FHA tried to make the increase risk-based but Congress stopped them in the new housing bill. So they just increased the rate for everyone. The biggest issue with FHA is that they are only insurance, someone else (Fannie/Freddie, Ginne, or the FHLB) would have to take the loans off the lenders hands in order for them to make more loans. Ginnie Mae has started becoming more aggressive in getting FHA loans securitized but the slowdown with Fannie/Freddie and FHA increasing fees is a significant development.

1 comment:

Anonymous said...

Please cover the story of Fannie Mae not replying to offers on foreclosed homes. My husband and I have had an active bid on an home in Florida since December 4, 2008. It was approved by the seller, the "intermediary bank" and Fannie Mae has yet to respond to our pre-approved offer. Sen. Schumer's office as well as Rep. Tonko's office as well as Sen. Nelson's office have all been contacted as well as 3 e-mails to the White house (which have been unanswered to date) and a call directly to the White House. The "comments" line at the White House advised me that the Department of Housing is overseeing Fannie Mae and Freddie Mac and I should call them . I called the regional office of the DOH in Orlando and they explained to me that "they have no jurisdiction in this matter"

please have someone in the press or the government take notice!!