With the continued growth of technology and the convneience of the internet bill paying can almost be automatic these days. After taking over the finances a couple of months ago I recently decided to start paying as many of our bills online as possible. I was excited to see last month our electric company sent [...]
House and Senate negotiators have reached an agreement on loan limits, and it appears that the maximum amount for the Government Sponsored Enterprise (GSE)Fannie Mae, Freddie Mac, and Federal Housing Administration FHA loans will be $625,000.
Negotiations on a massive housing bill are getting serious, with the House of Representatives scheduled to vote on the legislation tomorrow.
In markets where housing prices exceed the $417,000 conforming loan limit, the maximum loan amount of Fannie Mae and Freddie Mac loans would be determined by multiplying the median home price by 115%, up to a maximum of $625,000, sources say.
The same holds true for FHA loans, except that the multiplier kicks in at $271,050, or 65% of the conforming loan limit. If the median home price is $300,000, the maximum FHA loan amount in that area would be $345,000 ($300,000 x 115%).
House Financial Services Committee Chairman Barney Fran, D-Mass., told The Washington Post that the House has agreed to accept Senate provisions that ban seller funded downpayment assistance on FHA loans and impose a 12-month moratorium on the charging of risk-based premiums by the FHA.
This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all but one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing. Generally speaking, despite the lack of a data-packed calendar, I would still maintain constant contact with your mortgage professional.
Interest rates remained volatile last week as worries about inflation continued to influence the mortgage market. Comments from the Federal Reserve indicated that the current rate of inflation is above desired levels. When the Fed is concerned about inflation, they tend to raise interest rates. We recommend locking now before they go up.
Inflation data continues to hammer headlines and our wallets. News this week demonstrated what we have all been feeling; prices are higher at the pump, the grocery store and anywhere else you use your debit card. Interest rates trade off of bond prices and bonds HATE inflation. Coupled with this is concern about a declining economy which could hold rates back a bit, but the overall trend is higher for those seeking a mortgage in coming months.
Volatility being what it is these days, mortgage rates bounce around a lot. Upward pressure for rates one day gives way to downward pressure the next, only to succumb to upward pressure again.
The see saw between concerns about growth and fears about inflation tilted toward the inflation side again this week, after Fed Chairman Ben Bernanke addressed Congress in the semi-annual report on monetary policy. While detailing the challenges facing the economy, Bernanke noted that inflation was above desired levels and that upside risks for higher prices have “intensified” lately. A Fed seeing higher inflation usually can be expected to react with an upward move to the Fed Funds and Discount Rates at some point in the not-too-distant future. In fact, the Federal Reserve Open Market Committee explicitly noted at its last meeting that “with increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate.”
The federal banking and thrift agencies today issued final guidance outlining the supervisory review process for banking organizations implementing the new advanced capital adequacy framework known as Basel II. The final guidance relating to supervisory review is aimed at helping banking organizations meet certain qualification requirements in the advanced approaches rule, which took effect April 1.
The advanced approaches rule consists of three pillars: minimum risk-based capital requirements (Pillar 1); supervisory review of capital adequacy (Pillar 2); and market discipline through enhanced public disclosures (Pillar 3). The final Pillar 2 guidance details the agencies’ standards for ensuring that each institution subject to the advanced approaches rule has a rigorous process for assessing its overall capital adequacy in relation to its risk profile and a comprehensive strategy for maintaining appropriate capital levels.
Although the guidance does not differ significantly from the proposed Pillar 2 guidance issued in February 2007, the agencies made some enhancements based on comments received and in consideration of key lessons from the events of the past year. The Pillar 2 guidance is being issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The effective date of the Pillar 2 guidance is 30 days following its publication in the Federal Register, which is expected shortly. The final Pillar 2 guidance is attached.
2008 Banking and Consumer Regulatory Policy
Financial stocks, especially those tied to the mortgage industry, helped fuel a 237-point drop in the Dow Jones industrial average on Wednesday.
Freddie Mac’s shares plunged by $3.20, or 24%, on the day, closing at a new 52-week low of $10.26.
Fannie Mae’s shares fell $2.31, or 13%, to close at $15.31.
Bank of America, which recently closed on its acquisition of Countrywide Financial, saw its shares fall $1.48, or 6%, to close at $22.06.
Radian Guaranty’s shares fell by 18 cents, or 11%, to close at $1.53.
Analysts attributed Wednesday’s broad market decline to concern about a slowing economy, more bad debt at banks, and higher oil and commodity prices.
It appears that HUD is trying to pilot a FHA Foreclosure Prevention but as simple as it appears, why has it taken so long?
The Department of Housing and Urban Development is starting a pilot program in Detroit to purchase Federal Housing Administration single family loans from lenders after all loss mitigation options have been exhausted and foreclosure is the next step.
“Under this program, we will create means for lenders or investors to sell their non-performing mortgages before foreclosure to HUD and a joint venture partner who will be responsible for servicing the loan and helping families stay in their homes,” HUD Secretary Steve Preston said.
HUD expects to purchase the FHA loans at a “significant discount” so the joint venture partner can modify the loans and make it more affordable for the homeowners.
Foreclosure filings declined 3% in June but were still 51% higher than the level recorded a year earlier, according to RealtyTrac.
The company’s U.S. Foreclosure Market Report indicates that foreclosure of 252,363 filings that consist of default notices, auction sale notices, and bank repossessions, were reported in June.
“June was the second straight month with more than a quarter million properties nationwide receiving foreclosure filings,” said James J. Saccacio, RealtyTrac’s chief executive officer.
“Foreclosure activity slipped 3% lower from the previous month, but the year over year increase of more than 50% indicates we have not yet reached the top of this foreclosure cycle”.
Bank repossessions continued to increase much faster than default notices or auction notices in June, he said.
The company reported that Nevada, California, and Arizona again recorded the highest foreclosure rates in June.
Proposed changes in accounting rules that could force Fannie Mae and Freddie Mac to move certain Mortgage Backed Securities (MBS) onto their balance sheets should not have a major impact on their capital requirements, according to the Government Sponsored Enterprise (GSE) regulator.
The Office of Federal Housing Enterprise Oversight is working with the Financial Accounting Standards Board on changes to FAS 140, OFHEO Director James Lockhart indicated.
The two government-sponsored enterprises already have a 45-basis-point capital charge on their guaranteed MBS, he noted. Investor concerns that an accounting change would trigger a dramatic rise in their capital requirements "makes no sense," Mr. Lockhart said.
Wall Street stock investors dumped Fannie and Freddie shares on Monday on fears that the GSE might have to raise $75 billion in new capital due to accounting changes.
In an interview on CNBC-TV, Mr. Lockhart stressed that Fannie and Freddie are adequately capitalized and have raised $20 billion in new capital over the past seven months.
Fannie Mae and Freddie Mac See Sell-Off
Shares of Fannie Mae and Freddie Mac fell sharply Monday after an analyst said they may have to raise more capital than anticipated.
Freddie Mac’s share price fell $2.59, or 18%, to close at $11.91. Fannie Mae’s shares fell $3.04, or 16%, to close at $15.74.
Analyst Bruce Harting of Lehman Brothers advised clients that a possible change in accounting rules would require the two government sponsored enterprises to shift off-balance sheet securities to their balance sheets, a move that would require them to raise additional capital to meet regulatory standards.
Separately, Reuters reported that the cost of insuring the debt of Fannie Mae and Freddie Mac rose on Monday.
“IndyMac has announced they will no longer accept any new loan submissions or rate locks in either retail or wholesale, and are closing their “forward” mortgage business.”
Citing regulatory pressure to maintain its capital levels, IndyMac is shifting away from and shutting down much of its forward mortgage origination business to focus on its Reverse Mortgage unit, Financial Freedom, according to a letter from chief executive Mike Perry posted on IndyMac’s corporate blog.
IndyMac said as of July 7 it would no longer accept any new loan submissions or rate locks in its retail and wholesale forward mortgage lending channels, except for its servicing retention channel and would cut roughly half its staff of 7,200 over the next couple of months.
The company said it plans to honor all its existing rate locked loans and continue to fund them.
“While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets,” Mr. Perry said. “At the same time, these operations take up significant balance sheet capacity and ‘feed’ growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital.”
| Date | ET | Release | For | Consensus | Prior |
| July 8 | 10am | Pending Wholesale | May | -2.8% | 6.3% |
| July 8 | 10am | Wholesale Inventories | May | 0.6% | 1.3% |
| July 8 | 3pm | Consumer Credit | May | $7.0B | $8.9B |
| July 9 | 10:30am | Crude Inventories | July 5 | n/a | -1982k |
| July 10 | 8:30am | Initial Claims | July 5 | 395k | 404k |
| July 11 | 8:30am | Export Prices | June | n/a | 0.4% |
| July 11 | 8:30am | Import Prices | June | n/a | 0.5% |
| July 11 | 8:30am | Trade Balances | May | -$62.2B | -$60.9B |
| July 11 | 10am | Michigan Sentiment | July | 55.5 | 56.4 |
| July 11 | 2pm | Treasury Budget | June | $33.0B | $27.5B |