Fannie, Freddie Suspend Foreclosures During Holidays

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NEW YORK — Fannie Mae and Freddie Mac, the two biggest U.S. home loan finance companies, on Thursday said they would suspend foreclosures of occupied homes until early 2009, as the government moves to stem the tide of home losses plaguing the economy.

Fannie Mae and Freddie Mac said the hiatus on foreclosures — which will run from November 26 through January 9 — will give mortgage servicers more to work out easier borrowing terms for troubled homeowners.

Regulators and lawmakers have leaned harder on the two companies to help stabilize the crumbling U.S. housing market since they own or control about half of residential mortgages outstanding.

The government effectively seized Fannie Mae and Freddie Mac in a conservatorship in September amid concern that steep mortgage losses were hurting their ability to remain viable and thus backstop the mortgage market.

“This is another news item that the government is hoping will stem the tide of foreclosures,” said Walter Schmidt, head of mortgage strategy at FTN Financial Capital Markets in Chicago. “But I don’t know it helps, it could put off the inevitable” because falling home prices give homeowners incentives to walk away, he said.

The move by the two government-sponsored enterprises comes a week after their regulator unveiled a plan that could cut payments for hundreds of thousands of borrowers by easing terms on their loans. Homeowners facing foreclosure who are spending more than 38 percent of their income on mortgage payments could have payments reduced by the companies, under the program.

Loan modifications by lenders have increased but so far failed to stop record increases in foreclosures.

The “streamlined modification” program of Fannie Mae and Freddie Mac is slated to begin on December 15. Fannie Mae and Freddie Mac estimated their foreclosure suspensions may affect about 16,000 borrowers if the homes are occupied.

“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,” Herb Allison, Fannie Mae’s chief executive officer, said in a statement.

The foreclosure moratorium also appears to lend credence to speculation the government is pushing the companies to operate more in a public policy role, perhaps at the expense of profit. That has some investors concerned since the government has not defined the roles of the shareholder-owned companies after the conservatorships are lifted.

Source:  http://www.newsmax.com/newsfront/foreclosure_suspension/2008/11/20/153609.html

First-time buyers miss out on benefits of plunging house prices as mortgage rates rise 1%

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First-time buyers are missing out on the benefits of falling house prices because of  big hikes in mortgage rates for people with small deposits.

The best mortgage deal available for someone with only a 10 per cent deposit has increased by more than 1 per cent during the past year, despite the Bank of England base rate nearly halving from 5.75 per cent to 3 per cent during the same period.

The lowest rate currently available for people with a 10 per cent deposit is a 6.24 per cent variable rate deal from Yorkshire Bank, according to financial information group Moneyfacts.co.uk.

This is more than double the current Bank of England base rate of 3 per cent and well up on the best mortgage available for a borrower with a 40 per cent deposit of 3.99 per cent, offered as a variable rate loan by HSBC and a one-year fixed rate deal by the Woolwich.

The best rate for people who want a fixed rate mortgage on a 90 per cent loan to value ratio is 6.54 per cent for a two-year deal from Britannia Building Society.

These rates for people with small deposits are well up on a market leading fixed rate loan of 5.35 per cent offered by Stroud & Swindon Building Society 12 months ago to people looking to borrow 95 per cent of their home’s value, despite the Bank of England base rate being at 5.75 per cent at the time.

First-time buyers taking out a typical £120,000 mortgage on this deal would have had repayments of £735 a month.

House prices have fallen by 15 per cent during the past year, according to the Halifax measure, meaning that first-time buyers would now have to pay only £102,000 to purchase a comparable property.

This would have reduced their mortgage repayments by more than £110 a month if the 5.35 per cent deal was still available.

But much of the savings made through house price falls have been wiped out by the higher mortgage rates borrowers now face.

A £102,000 mortgage at today’s best buy rate of 6.24 per cent for someone with a 10 per cent deposit would cost £680 a month, only £55 less than borrowers would have paid on a leading rate when house prices were higher.

The difference is further reduced if people wanted to opt for a fixed rate deal, with a best buy rate of 6.54 per cent costing £699 a month.

Both of these deals are also only available to people with a 10 per cent deposit, while last year’s best buy of 5.35 per cent was available to people with only a 5 per cent one.

As a result first-time buyers would have to save at least £10,200, nearly double the £5,000 they would previously have had to put down.

Excluding deals that are aimed specifically at first-time buyers, there are now only two deals for people with just a 10 per cent deposit featured in the Moneyfacts best buy tables.

This is in stark contrast to this time last year, when all but four mortgages in the tables were for people borrowing 90 per cent or more of their home’s value, with the majority of loans aimed at people borrowing 95 per cent.

There has been a steep reduction in the number of different deals available for people with only a 10 per cent deposit with just 250 loans now available, compared with more than one thousand before the credit crunch first struck.

But 28 per cent of these deals are also limited to people living in certain regions of the country, and once these are stripped out, there are only 180 loans available.

Unsurprisingly, figures from the CML showed that the average size of deposit put down by first-time buyers has increased during the past 12 months, rising from 10 per cent a year ago to 16 per cent now, as people try to qualify for better rates.

Source: http://www.dailymail.co.uk/news/article-1086696/First-time-buyers-miss-benefits-plunging-house-prices-mortgage-rates-rise-1.html

Citigroup to let 53,000 employees go

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NEW YORK (AP) – Citigroup Inc. is cutting approximately 53,000 more jobs in the coming quarters as the banking giant struggles to steady itself after suffering massive losses from deteriorating debt.

The plans, posted on the company’s Web site, are being discussed by CEO Vikram Pandit at the company’s town hall meeting in New York Monday with employees.

The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels. The total workforce reductions include thousands of jobs that will be lost when Citigroup completes the sale of Citi Global Services and its German retail banking business.

The New York-based bank has posted four straight quarterly losses, including a loss of $2.8 billion during the third quarter. The company said that in addition to job cuts, it plans to lower expenses by about 20 percent, and that is has reduced its assets by more than 20 percent since the first quarter of the year.

Citi shares fell 42 cents, or 4.4 percent, to $9.10 in morning trading. The company’s shares have been trading at 13-year lows.

Shortly before the town hall meeting in New York, Citigroup Chairman Win Bischoff said at a business forum in Dubai, United Arab Emirates, that it would be irresponsible for Citi and other companies not to look at staffing in the event of a prolonged economic downturn.

“What all of us have done – and perhaps injudiciously – we’ve added a lot of people over … this very benign period,” Bischoff said.

“If there is a reversion to the mean … those job losses will obviously fall particularly heavily on the financial sector,” he added. “Certainly they will fall particularly heavily on London and New York.”

A Citigroup spokesman said that while certain regions and businesses might have higher concentrations of job cuts, they would generally be across the entire company and around the world.

In his comments to the Associated Press, Bischoff did not rule out the likelihood that Citi’s leaders would go without bonuses this year – a move that would effectively amount to a substantial pay cut for the company’s executives.

“Watch this space,” he said when asked about lost bonuses.

On Sunday, Goldman Sachs Group Inc. said seven top executives, including Chief Executive Lloyd Blankfein, opted out of receiving cash or stock bonuses for 2008 amid the ongoing credit crisis.

Source: http://www.kcby.com/news/business/34580299.html

Mortgage rates drop for second week

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WASHINGTON | Mortgage rates dropped for a second straight week, reflecting the impact the weakening economy is having on financial markets.

Freddie Mac, the mortgage giant, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.14 percent this week, down from 6.20 percent last week. It marked a sharp decline since rates hit a high of 6.46 percent two weeks ago.

Analysts attributed the back-to-back decreases to financial markets growing more confident that the Federal Reserve will cut rates again at its final meeting of the year in December in an effort to combat a severe slowdown many economists fear could deepen into a prolonged recession.

“Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide,” said Frank Nothaft, chief economist for Freddie Mac.

Thirty-year mortgage rates hit a high for the year of 6.63 percent in late July and then dropped below to a seven-month low of 5.78 percent for the week ending Sept. 18.

Rates on other types of mortgages also fell this week with the exception of one-year, adjustable-rate mortgages which showed a slight increase.

For 15-year, fixed-rate mortgages, which are popular with people who are refinancing, rates dropped to 5.81 percent, from 5.88 percent last week.

Rates on five-year, adjustable-rate mortgages fell to 5.98 percent, from 6.19 percent last week. Rates on one-year, adjustable-rate mortgages edged up slightly to 5.33 percent, from 5.25 percent last week.

The mortgage rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

A year ago the nationwide average rate on 30-year mortgages stood at 6.24 percent, 15-year mortgage rates averaged 5.88 percent, five-year adjustable-rate mortgages were at 5.96 percent, and one-year adjustable-rate mortgages stood at 5.50 percent.

 

Source:  http://www.thetimesonline.com/articles/2008/11/14/business/business/doc4bbf06e43c42648c8625750000680385.txt

RPT-US mortgage applications rise as interest rates drop-MBA

 

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NEW YORK, Nov 13 (Reuters) – U.S. mortgage applications rose last week, recovering from an almost 8-year low, as potential borrowers took advantage of a sharp drop in interest rates, an industry group said on Thursday.

Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Nov. 7 increased 11.9 percent to 425.0, up from the previous week when the reading reached its lowest level since December 2000.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.24 percent, down 0.23 percentage point from the previous week.

It was the largest interest rate drop since the week ended Sept. 12 when it fell by 0.24 percentage point to 5.82 percent.

Interest rates are below the peak of 6.59 percent reached during the summer, but above the 2008 low of 5.49 percent in January, according to the trade group.

Interest rates were below year-ago levels of 6.19 percent.

Treasury yields, which are linked to mortgage rates, have fluctuated sharply in recent months, causing home loan demand to shift sharply on a weekly basis.

The MBA’s seasonally adjusted purchase index rose 9.0 percent to 284.4. The index came in well below its year-ago level of 432.6, a drop of 34.3 percent.

Overall mortgage applications last week were 39.9 percent below their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 3.7 percent.

WEEKLY REFINANCING ACTIVITY JUMPS

The group’s seasonally adjusted index of refinancing applications jumped 16.1 percent to 1,248.4. The index was down 46.1 percent from its year-ago level of 2,315.7.

The refinance share of applications increased to 45.1 percent from 42.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 2.3 percent, down from 2.5 percent the previous week.

Fixed 15-year mortgage rates averaged 5.90 percent, down from 6.14 percent the previous week. Rates on one-year ARMs decreased to 6.77 percent from 6.86 percent.

The U.S. housing market is currently suffering the worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.

While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.

Source: http://www.forbes.com

WEAKER JOBS MARKET LEADS TO LOWER MORTGAGE RATES

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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 6.20 percent with an average 0.7 point for the week ending November 6, 2008, down from last week when it averaged 6.46 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.

 

The 15-year FRM this week averaged 5.88 percent with an average 0.7 point, down from last week when it averaged 6.19 percent. A year ago at this time, the 15-year FRM averaged 5.90 percent.

 

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.19 percent this week, with an average 0.6 point, down from last week when it averaged 6.36 percent. A year ago, the 5-year ARM averaged 5.89 percent.

 

One-year Treasury-indexed ARMs averaged 5.25 percent this week with an average 0.4 point, down from last week when it averaged 5.38 percent. At this time last year, the 1-year ARM averaged 5.50 percent.

 

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

 

“Mortgage rates fell this week amid new indications of a pullback in consumer spending and a weaker jobs market,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The economy shrank by 0.3 percent in the third quarter, led by the first decline in consumer spending since the fourth quarter of 1991. In September alone, consumer spending fell by the most since June 2004. More recently, job layoffs more than doubled in October compared to September on year-over-year basis.

 

“With the economy contracting and experiencing record home foreclosures, lenders tightened their credit standards further, according to the October Federal Reserve Senior Loan Officer survey. Approximately 70 percent of banks raised their lending standards for prime mortgages and about 90 percent of banks that offer nontraditional mortgages did so as well.”

 

Source: freddiemac.com

Meltdown 101: Why the world’s interest rates vary

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WASHINGTON (AP) — European central banks cut their interest rates dramatically Thursday, but most of them are still higher than the Federal Reserve’s 1 percent target rate. Which raises a question: If the financial meltdown is global in nature, why do interest rates vary so widely around the world?

 

The Bank of England, for example, announced a huge 1.5 percentage point cut Thursday, but its rate is still 3 percent. The European Central Bank is still at a 3.25 percent rate even after Thursday’s half-point cut. Central banks in Switzerland and Denmark also cut rates – though they too remain higher than the rate in the U.S.

 

While such differences may seem small, anyone with a mortgage knows the difference that even a tenth of a percentage point can make to the cost of a loan.

And, if you can believe it, Iceland’s central bank has pegged its rate at 18 percent. Soon it will be cheaper for the whole country to simply use a credit card to borrow money.

 

Here are some questions and answers about the factors that affect interest rates around the world.

 

Q: What effect do central banks have on me?

A: The Federal Reserve is the U.S. central bank. When it cuts (or raises) its benchmark short-term interest rate, most major banks follow suit by cutting (or raising) the interest rate they charge on credit cards, home equity lines of credit and other consumer loans.

 

The Fed has cut rates twice this month, potentially helping U.S. borrowers. Unfortunately, today’s steep cut by the Bank of England won’t reduce your car payment or mortgage, unless you’re reading this from England.

 

Q: Given our global economy, why are central banks’ rates different?

A: Some central bankers are more concerned about inflation than others. Higher interest rates can curb inflation, while rates are generally cut when central banks want to spur faster economic growth – though that carries the risk of increasing inflation.

 

Inflation jumped in Europe earlier this year, as it did in many other parts of the world, after the price of oil and many other commodities soared.

As the price of oil and farm goods such as corn and wheat declined this fall – bringing inflation down with it – the European Central Bank started to come under criticism for not cutting rates faster.

 

Simon Johnson, an economist at MIT’s Sloan School of Management, said European officials “have been behind the curve in understanding the severity of the financial crisis and its impact on the broader economy.”

 

Q: Would better coordination among central banks help counteract the economic slowdown?

A: Many economists think so. And central banks in the United States and Europe seemed to say as much Oct. 8, when six of them engaged in a coordinated rate cut.

 

The European banks are “recognizing the problem, but they’re recognizing it late,” Johnson said.

 

Q: Will the rate cuts help deal with the meltdown?

A: They are intended to help reverse the current economic slowdown, which is affecting Europe as well as the United States. The International Monetary Fund forecast Thursday that the 15 countries that use the euro will see their economies shrink by 0.5 percent next year, while the U.S. economy is projected to decline by 0.7 percent.

 

Q: So why is Iceland’s rate at 18 percent?

A: Iceland’s currency, the krona, plunged in value after three of its banks collapsed and were placed under government control in recent months. Increasing the rate can help attract capital, because those who lend the government money can expect a big rate of return on their investment. That translates into increased demand for Iceland’s currency, which can prevent the exchange rate from worsening.

 

Another reason for the high interest rate: The country’s central bank is forecasting 20 percent inflation next year, and it hopes to get that under control.

 

Source: Ap.org

Nevada, Michigan, Florida lead ‘underwater’ list

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Here’s a shocker: almost half of Nevada homeowners with a mortgage owe more to the bank than their homes are worth.

 

Here’s another: If you add in the homeowners like them in California, Arizona, Florida, Georgia and Michigan, together they account for nearly 60 percent of all homeowners who are “underwater” on their mortgages.

 

Nationwide, almost one out of every five homeowners with a mortgage owes more to their lender than their properties are worth. But if you subtract those states, the rate drops to about one in 10, according to a report released Friday by First American CoreLogic.

 

The new data underscore the staggering scope of the U.S. housing recession, but also the challenges that government officials face in designing a massive new program to help homeowners avoid foreclosure, with layoffs soaring and the economy sinking.

 

Some experts predict the problem will get much worse.

 

Nationally, home prices are already down about 20 percent from their peak in mid-2006. By the time the housing market hits bottom, prices may be down 40 percent from the top, leaving 40 percent of homeowners underwater, according to Nouriel Roubini, economics professor at New York University.

 

“There is a huge incentive to walk away from your mortgage,” said Roubini, who has attracted attention for his gloomy – and accurate – predictions of the U.S. financial market meltdown. He gave no forecast for when the real estate market would bottom out.

 

Another pessimistic analyst, Desmond Lachman of the American Enterprise Institute, said that “unless there’s government intervention on a big scale…we’re really not going to bottom.”

 

The problem is much worse in far-flung suburban neighborhoods where builders flooded the market with new homes and buyers put down small, or no, down payments, said Mark Fleming, First American CoreLogic’s chief economist. In desirable urban neighborhoods and close-in suburbs, “a lot of people bought their homes years ago. It’s much more difficult for them to be in a negative equity situation.” Fleming said.

 

Rising mortgage rates are also making matters worse for prospective borrowers. The rate on a 30-year, fixed-rate mortgage averaged 6.46 percent this week, up sharply from 6.04 percent last week, Freddie Mac reported Thursday.

 

Higher rates coupled with lower home values means fewer people can tap their home equity. The percentage of U.S. homeowners who pulled cash out of their homes remained at a four-year low in the third quarter, Freddie Mac said.

 

While some underwater borrowers certainly will lose their homes to foreclosure absent a massive – and successful – government refinancing plan, many will continue to make their payments and wait for values to recover. And of course roughly 30 percent of Americans own their homes outright.

 

Still, it remained unclear whether the government would be able to do much for many borrowers in trouble, especially given the amount of time to start up a new program.

 

“Certainly it can’t hurt,” Bernard Baumohl, chief economist at the Economic Outlook Group in New Jersey. “How much it’s going to help is an open question.”

On Thursday, White House press secretary Dana Perino tried to dispel reports that the Bush administration is near agreement on a plan to help about 3 million homeowners avoid foreclosure. Perino said several different ideas are on the table, and that no announcement is imminent.

 

The plan, widely expected to be run by the Federal Deposit Insurance Corp., would be the most aggressive effort yet to limit damage from the U.S. housing recession.

 

Despite all the pessimism, even some bearish analysts see modest signs of encouragement. Home sales have stabilized this fall as bottom-fishing buyers snapped up bargain properties in places like Las Vegas and Southern California. New foreclosures, currently flooding the market, are likely to taper off by the middle of next year, said UBS mortgage securities analyst Thomas Zimmerman.

 

“There may be some turning points not that far away,” Zimmerman said. “The really severe part of this collapse in the housing market may be behind us.”

 

Source: http://hosted.ap.org/dynamic/stories/M/MELTDOWN_UNDERWATER_BORROWERS?SITE=TXDAM&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-10-31-07-51-06

Rates rise sharply on 30-year mortgages

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Rates on 30-year mortgages spiked last week as the tumult in financial markets continued to be felt in housing finance.

Mortgage giant Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.46 percent last week, up from 6.04 percent the previous week. The sharp increase pushed 30-year rates to the highest level since the week of Oct. 16.

Rates on 30-year mortgages hit a high for the year of 6.63 percent in late July and then dropped to a seven-month low of 5.78 percent the week of Sept. 18.

Analysts attributed the increase to the impact the financial crisis is having on bond markets. The upheavals on Wall Street drove investors to the safety of Treasury securities. Now that the panic is easing a bit, investors are moving out of Treasury bonds into other investments. That movement means less demand for Treasury securities, pushing their yields higher. That increase drives up rates for mortgages linked to those investments.

“Long-term mortgage rates followed long-term Treasury bond yields higher last week, pushing fixed-rate mortgages up,” said Frank Nothaft, chief economist for Freddie Mac.

The Federal Reserve cut a key interest rate by one-half point on Wednesday, and Nothaft said that reduction, which followed a similar Fed rate cut three weeks ago, should help to keep interest rates linked to the Fed’s short-term rates such as one-year mortgages about where they are now.

The Freddie Mac survey showed that all categories of mortgages rose last week.

Rates on 15-year fixed-rate mortgages rose to 6.19 percent from 5.72 percent the previous week. Rates on five-year adjustable-rate mortgages rose to 6.36 percent from 6.06 percent, and rates on one-year adjustable-rate mortgages rose to 5.38 percent from 5.23 percent.

The mortgage rates do not include points. The nationwide fee for 30-year, 15-year and five-year mortgages averaged 0.7 of a point. One-year adjustable-rate mortgages averaged 0.6 of a point.

A year ago, the nationwide average rate on 30-year mortgages stood at 6.26 percent, 15-year mortgage rates averaged 5.91 percent, five-year adjustable-rate mortgages were at 5.98 percent and one-year adjustable-rate mortgages stood at 5.57 percent.

Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/02/REIM13R8JH.DTL&type=realestate