The housing news this week has been a mixed bag, with good news on interest rates and a decline in new housing starts offset by a drop in new mortgage applications and with Freddie Mac and Fannie Mae following the lead of Citigroup, JP Morgan Chase and Bank of America in announcing a foreclosure freeze.
Thursday Freddie Mac and Fannie Mae followed the lead of many large private lenders and announced a 6-week moratorium on foreclosures and evictions of occupied homes, which will provide some temporary relief to the fire sale mentality in some districts. The move is practical as well as humanitarian as it will provide an opportunity for some of these homeowners to qualify for housing bailout refinance loans and for the lender’s workout departments to help avert some foreclosures in other ways. For more information about workout options and avoiding foreclosure see this page.
The Mortgage Bankers Association reported Fixed Rate Mortgage (FRM) rates down and 1-year Adjustable Rate Mortgage (ARM) rates up for the week ending November 14 and Freddie Mac reported rates down across the board for the week ending November 20. The Mortgage Bankers Association also reported a 12.6% drop in new applications for home purchase mortgages. Refinance applications rose 2.6%.
Housing starts fell last month as builder sentiment hit another record low with Wells Fargo/National Association of Homebuilders reporting its Housing Market Index at 9. The index of sales expectations held steady.
Freddie Mac attributed the drop in interest rates to continued signs of economic weakness, which reduce bond market inflation fears, and noted that:
the Federal Reserve during its October 28-29 committee meeting lowered its economic growth forecasts for 2008 and 2009, according to its minutes released this week.
Possibly one of the best signs for the mortgage market and, eventually by extension, the housing market has been the recent narrowing of the gap between the Freddie Mac conforming 1-year ARMs and the Mortgage Bankers Association’s 1-year ARM average, which includes jumbos and other non-conforming mortgages. The MBAA rate had been reported above 7% even as the longer term rates were under 6%. Though the rate is still higher than the long term rates, there’s been a significant drop that indicates some improvement in the market for these loans.
Mortgage Bankers Association Average Mortgage Rates At a Glance
30-year FRM: 6.16%, 1.24 points*
15-year FRM: 5.87%, 1.24 points
1-year ARM: 6.80%, 0.63 points
Freddie Mac Conforming Rates At a Glance
- 30-year FRM: 6.04%, 0.7 point
- 15-year FRM: 5.73%, 0.7 point
- 5-year hybrid ARM: 5.87%, 0.6 point
- 1-year ARM: 5.29%, 0.5 point
* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.
[tags]housing market,mortgages,mortgage market,mortgage rates,subprime[/tags]
LONG-TERM MORTGAGE RATES DOWN FOR THIRD CONSECUTIVE WEEK
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.04 percent with an average 0.7 point for the week ending November 20, 2008, down from last week when it averaged 6.14 percent. Last year at this time, the 30-year FRM averaged 6.20 percent.
The 15-year FRM this week averaged 5.73 percent with an average 0.7 point, down from last week when it averaged 5.81 percent. A year ago at this time, the 15-year FRM averaged 5.83 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.87 percent this week, with an average 0.6 point, down from last week when it averaged 5.98 percent. A year ago, the 5-year ARM averaged 5.88 percent.
One-year Treasury-indexed ARMs averaged 5.29 percent this week with an average 0.5 point, down from last week when it averaged 5.33 percent. At this time last year, the 1-year ARM averaged 5.42 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
“Long- and short-term mortgage rates fell for the third consecutive week amid continuing signs of a slowing economy,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Retail sales fell for the fourth straight month in October and consumer sentiment remained near a 28-year low in November.
“In fact, the Federal Reserve during its October 28-29 committee meeting lowered its economic growth forecasts for 2008 and 2009, according to its minutes released this week.”
FREDDIE MAC SUSPENDS ALL FORECLOSURE SALES OF OCCUPIED HOMES FROM DAY BEFORE THANKSGIVING UNTIL JANUARY 9, 2009
McLean, VA – Freddie Mac (NYSE: FRE) today announced it has ordered its national network of mortgage servicers and foreclosure attorneys to suspend all foreclosure sales and evictions involving occupied single family and 2-4 unit properties with Freddie Mac-owned mortgages between November 26, 2008 and January 9, 2009. The suspension will help servicers implement the Streamlined Modification Program recently announced by Freddie Mac, Fannie Mae, the Federal Housing Finance Agency (FHFA), HOPE Now and 27 mortgage servicers. The temporary suspension is also expected to give servicers more time to help borrowers avoid foreclosure.
Specifically, Freddie Mac servicers and foreclosure attorneys were told to contact as quickly as possible an estimated 6,000 borrowers with foreclosure sales scheduled between November 26, 2008 and January 9, 2009. If the property is occupied, the servicers and foreclosure attorneys will halt the sale. This temporary suspension of foreclosure sales will not apply to vacant single family properties. Additionally, no evictions will be completed between November 26 and January 9.
“By working closely with FHFA and our servicers, Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year,” said Freddie Mac Chief Executive Officer David M. Moffett. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”
Moffett said that by delaying these foreclosure sales, the nation’s servicers will have the opportunity to work with more borrowers who could qualify for a modification under the new Streamlined Modification program scheduled to begin by December 15.
“Today’s announcement has the potential to enable more families struggling in these extraordinary times to take advantage of this vital new initiative developed with FHFA, the Treasury Department and the mortgage finance industry,” said Moffett.
Moffett also emphasized that lenders servicing Freddie Mac-owned mortgages will continue to work with borrowers to consider all workout options Freddie Mac employs to help distressed borrowers who can and want to stay in their homes, such as permanent rate reductions and mortgage term extension modifications.
This year, Freddie Mac expects to approve 84,000 workouts for the estimated 140,000 who are delinquent on Freddie Mac-owned mortgages.
Freddie Mac’s temporary suspension of foreclosure sales is the latest in a series of efforts to help troubled borrowers. Other recent initiatives have included, delegating expanded workout authority to servicers, doubling the amount of money servicers are paid for successful workouts, and paying non-profit organizations to reach out to worried borrowers.
Builder Confidence Plummets; Congress Needs To Act
November 18, 2008 – Builder confidence in the market for newly built single-family homes plunged in November as worsening problems in the financial markets, job market weakness and overwhelming uncertainty about the economy continued to negatively impact consumer behavior, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI sank five points to 9, the lowest level recorded since the series was created in January of 1985.
“Today’s report shows that we are in a crisis situation. If there’s any hope of turning this economy around, Congress and the Administration need to focus on stabilizing housing,” said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va.. “Tremendous economic uncertainties have driven consumers from the housing market, and it’s going to take some major incentives to bring them back. Beyond the work that is being done to help reduce foreclosures, Congress must immediately incorporate such incentives for qualified buyers in a new economic recovery package.”
“The housing downturn has already cost America three million jobs in construction and related industries, and this downward momentum cannot be stemmed without substantive government intervention,” agreed NAHB’s new Chief Economist, David Crowe. “Congress should consider significant consumer incentives such as expanding the first-time home buyer tax credit and providing a government buy-down of mortgage interest rates for home purchasers. Both policies were successfully combined in the ‘70s to stimulate home buyer demand, and could get housing and the national economy moving again.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
Two out of three of the HMI’s component indexes declined in November. The index gauging current sales conditions fell six points to 8, which was a new record low. Likewise, the index gauging traffic of prospective buyers fell four points to 7 – also a record low. Meanwhile, the index gauging sales expectations in the next six months held firm from the previous month at its record low of 19.
Every region posted declines in builder confidence in November. The Northeast, South and West each registered five-point declines to 11, 11 and 6, respectively, while the Midwest registered a six-point decline to 7.
Mortgage Applications Decrease in Latest MBA Weekly Survey
WASHINGTON, D.C. (November 19, 2008) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending November 14, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 398.6, a decrease of 6.2 percent on a seasonally adjusted basis from 425.0 one week earlier. On an unadjusted basis, the Index decreased 7.2 percent compared with the previous week and was down 41.3 percent compared with the same week one year earlier.
The Refinance Index increased 2.6 percent to 1281.2 from the previous week and the seasonally adjusted Purchase Index decreased 12.6 percent to 248.5 from one week earlier. The Conventional Purchase Index decreased 15.3 percent while the Government Purchase Index (largely FHA) decreased 6.5 percent.
The four week moving average for the seasonally adjusted Purchase Index is down 2.7 percent, while this average is up 2.5 percent for the Refinance Index.
The refinance share of mortgage activity increased to 49.9 percent of total applications from 45.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 2.6 percent from 2.3 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.16 percent from 6.24 percent, with points increasing to 1.24 from 1.17 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.87 percent from 5.90 percent, with points increasing to 1.24 from 1.12 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs increased to 6.80 percent from 6.77 percent, with points increasing to 0.63 from 0.43 (including the origination fee) for 80 percent LTV loans.
Fannie Mae To Suspend Foreclosures Until January 2009 While Streamlined Modification Program is Implemented
WASHINGTON, DC — In order to support the streamlined modification program announced on November 11, 2008, Fannie Mae (NYSE:FNM) today issued a notice to its loan servicing organizations and retained foreclosure attorneys directing them to suspend foreclosure sales on occupied single-family properties as well as the completion of evictions from occupied single-family properties scheduled to occur from November 26, 2008 until January 9, 2009.
The temporary suspension of foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement the streamlined modification program scheduled to launch December 15. Foreclosure attorneys and loan servicers will be instructed to use the additional time to reach out to borrowers who have defaulted on their loans and continue to pursue workout options. The initiative applies to loans owned or securitized by Fannie Mae.
The streamlined modification program is aimed at the highest risk borrower who has missed three payments or more, owns and occupies the primary residence, and has not filed for bankruptcy. The program creates a fast-track method for getting troubled borrowers into an affordable monthly payment through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payments on part of the principal. Servicers have flexibility in the approach, but the objective is to create a more affordable payment for borrowers at risk of foreclosure.
“The streamlined modification program by Fannie Mae, Freddie Mac, Hope Now and 27 mortgage servicers is an important step forward in addressing the systemic issues driving the increase in foreclosures,” said Fannie Mae President and Chief Executive Officer Herb Allison. “Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent a foreclosure have an opportunity to stay in their homes. We encourage other servicers of non-GSE mortgages to participate in the streamlined modification program to bolster our collective efforts to stem the foreclosure crisis.”
Fannie Mae will be working with foreclosure attorneys and servicers to reach out to the more than 10,000 borrowers the company estimates would be affected during this period. Borrowers who have Fannie Mae loans that are scheduled for foreclosure between November 26, 2008 and January 9, 2009, will be contacted directly by the attorney handling the foreclosure. If the home is occupied, Fannie Mae has instructed servicers and attorneys to suspend the foreclosure.
Allison also said Fannie Mae’s loan servicers are prepared to work with borrowers during this period, even if previous workout efforts have been unsuccessful. As part of the company’s “Second Look” initiative, Fannie Mae personnel have been reviewing seriously delinquent loans to determine if the borrower has been contacted and all workout options have been exhausted.
The streamlined modification program and temporary suspension of foreclosures are two of a series of steps Fannie Mae has taken to expand its foreclosure prevention efforts, which are designed to give loan servicers and foreclosure attorneys tools to find the best solution for a borrower in financial trouble. Fannie Mae and its many partners in the housing industry urge borrowers in financial difficulty to reach out to their loan servicers, regardless of whether they are facing imminent foreclosure. Solutions may be available that could make an existing mortgage more affordable.
“Fannie Mae is committed to working with FHFA to implement the streamlined modification program as quickly as possible to help prevent unnecessary foreclosures,” Allison said. “We must and will do more.”