Friday Rate Update

Mortgage Rates Drop

The average interest rate on 30-year, fixed-rate mortgages dipped to 3.59 percent this week from 3.66 percent last week, Freddie Mac reported yesterday. A year ago, rates for 30-year mortgages averaged 4.22 percent.

Notes on the Economy

Consumer Confidence Falls in August

The Consumer Confidence Index declined to 60.6 in August from 65.4 in July, the New York-based Conference Board reported yesterday. “A more pessimistic outlook was the primary reason for this month’s decline in confidence,” said Lynn Franco, director of the Conference Board’s Consumer Research Center. “Consumers were more apprehensive about business and employment prospects, but more optimistic about their financial prospects despite rising inflation expectations. Read more.



Home Prices Increase in July
The Standard & Poor's/Case-Shiller Home Price Index of 20 major cities rose 2.3 percent in June, the third straight monthly increase, the group said yesterday. Prices rose in all 20 cities tracked by the index, with Detroit, Chicago and Atlanta posting the highest monthly increases. 

--ABA Daily Newsbytes

Fannie Tightens Some Mortgage Standards



Fannie Mae is changing some qualification standards for people buying homes or refinancing loans based on new data and loan performance, the company said in a memo to lenders this week.

The changes include a reduction from 97 percent to 90 percent in the maximum loan-to-value ratios for some adjustable-rate mortgages; an increase from 620 to 640 in minimum credit scores for adjustable-rate mortgages not vetted by Desktop Underwriter computer software; and an end to the FannieNeighbors option that offered underwriting flexibility for borrowers in underserved areas
---ABA Daily Newsbytes

Rates on the Rise

MBA: Mortgage Refinance Activity declines as Rates Increase

by Bill McBride on 8/22/2012 07:01:00 AM

From the MBA: Refinance Applications Decline as Rates Increase

The Refinance Index decreased 9 percent from the previous week to the lowest level since early July. The seasonally adjusted Purchase Index increased 0.9 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.86 percent from 3.76 percent, with points decreasing to 0.42 from 0.47 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans

Read more at http://www.calculatedriskblog.com/#5squYppS6zmYLbZV.99

Treasury Announces Moves to Expedite GSEs’ Resolution

The Treasury Department on Friday modified its financial support of Fannie Mae and Freddie Mac to accelerate the winding down of the government-sponsored enterprises.
The GSEs will no longer pay a 10 percent annual dividend to Treasury on its preferred stock investments in Freddie and Fannie. Instead, they will give Treasury all of their profits, agency officials said. The GSEs also will reduce their investment portfolios at a 15-percent annual rate, rather than 10 percent per year. As a result, the GSEs’ investment portfolios would reach the $250 billion goal in 2018, four years earlier than originally scheduled.

“With today’s announcement, we are taking the next step toward responsibly winding down Fannie Mae and Freddie Mac, while continuing to support the necessary process of repair and recovery in the housing market,” said Michael Stegman, counselor to the Treasury secretary for housing finance policy.

ABA applauded Treasury’s steps. “[The] changes are consistent with [the Federal Housing Finance Agency’s] strategic plan and ABA’s reform priority of a reduced government presence in the housing market,” association President and CEO Frank Keating said.

---ABA Daily Newsbytes

Friday Rate Update

Mortgage Rates Rise

The average interest rate on 30-year, fixed-rate mortgages rose to 3.62 percent this week from 3.59 percent last week, Freddie Mac reported yesterday. A year ago, rates for 30-year mortgages averaged 4.15 percent.

St Casimirs Already Provides Appraisals

Federal Agencies Propose Rule for Higher-Risk Mortgages

Six federal regulatory bodies have proposed a rule for 'higher-risk' mortgages that would require a creditor to use a licensed or certified appraiser who writes a report based on inspection of the property's interior. The rule also would require a creditor to disclose information to loan applicants about the purpose of the appraisal and provide them with free copies of any appraisal report. Meanwhile, the Consumer Financial Protection Bureau has proposed a rule that would require lenders to give all mortgage applicants copies of appraisals and other home-value estimates generated in connection with their applications.

From "Federal Agencies Propose Rule for Higher-Risk Mortgages"
Philadelphia Inquirer (08/16/12) Heavens, Alan J.

Beware of Financial Spies

Consumer Bureau Seeks Sleuths for Bad Bankers

The Consumer Financial Protection Bureau is recruiting investigators in ads that suggest the agency plans to go undercover to pursue cases against banks, credit card companies and other financial companies. “As needed,” one recent recruitment ad stated to potential investigators, “establish and conduct surveillance activity to develop both intelligence and evidence to further investigations. Utilize surveillance activities to identify subjects, their activities and their associates, corroborate source information and collect evidence.” The bureau also said that investigators, who would earn $98,000 to $149,000 per year, may have to arrange for and oversee contracts with private investigators. These private investigators “may know the players, culture, history in a specific geographic area in which a case is centered,” according to the advertisements, which outline a host of other responsibilities.

From "Consumer Bureau Seeks Sleuths for Bad Bankers"
Washington Times (08/12/12) McElhatton, Jim

Consumer Protection Bureau Proposes to Tighten Rules on Mortgage Servicers

On Aug. 9, the Consumer Financial Protection Bureau formally proposed stricter rules for mortgage servicers that would require them to give borrowers monthly statements, inform them of impending interest rate adjustments, and provide more options to prevent foreclosure. Public comments on the proposal will be accepted through Oct. 9, with the final rules expected in January. The rules would amend the Truth in Lending Act and the Real Estate Settlement Procedures Act.

From "Consumer Protection Bureau Proposes to Tighten Rules on Mortgage Servicers"
New York Times (08/10/12) P. B4 Wyatt, Edward

Lower Losses for Freddie

by Bill McBride on 8/07/2012 03:30:00 PM

From Tom Lawler:

Freddie Mac reported that its GAAP net income “attributable” to Freddie Mac was $3.020 billion last quarter, up from $577 million in the previous quarter and a net loss of $2.371 billion in the second quarter of 2011. The biggest “swing” factor last quarter was a sharp drop in the provision for credit losses -- $155 million last quarter compared to $1.825 billion in the previous quarter and $2.529 billion in the comparable quarter of last year.

Freddie attributed the sharp drop in its loss provision – which fell far short of charge-offs, resulting in a steep drop in its loan loss reserves – to “improvements in the number of newly impaired loans and to lower estimated future losses due to the positive impact of an increase in national home prices.” Freddie’s internal national home price index, which is based on repeat transactions of homes backed by mortgages owned or guaranteed by Freddie or Fannie with state weights based on Freddie’s SF mortgage book, jumped by 4.8% from March to June, and the June HPI was up about 1.0% from a year ago.

Read more at http://www.calculatedriskblog.com/#YDE8esE1aZy715dz.99

Senators Advocate for Broad QM, Safe Harbor

Three senators in a letter Friday urged Consumer Financial Protection Bureau Director Richard Cordray to include a broad definition of “qualified mortgage” -- and a true legal safe harbor for conforming loans -- in the bureau’s pending ability-to-repay rule.


“If the ultimate definition of a QM is excessively narrow, otherwise creditworthy borrowers could find themselves unable to obtain affordable mortgage credit,” wrote Sens. Roy Blunt (R-Mo.), Jerry Moran (R-Kan.) and Mark Begich (D-Alaska).


The senators said a safe harbor also would prevent an unnecessary restriction of credit due to legal confusion or cost. “As the Federal Reserve correctly stated in its preamble to the draft rule, the ‘drawback of treating a qualified mortgage as providing a presumption of compliance is that it provides little legal certainty for the creditor, and thus little incentive to make a qualified mortgage,’” they said.

ABA agrees with the lawmakers and will continue its aggressively advocacy -- which has included meetings with the CFPB, appeals to lawmakers, testimony, letters and coalition building -- for a broad QM that includes a safe harbor.


----ABA Daily Newsbytes

Less Taxpayer Money for Fannie & Freddie

Saying Fannie Mae and Freddie Mac have already cost taxpayers more than $188 billion, the acting chief of the Federal Housing Finance Agency, which regulates those lenders, says he has concluded that those firms won't participate in the Obama administration's program to cut the amount struggling homeowners owe.

Edward DeMarco, the acting chief of the FHFA, said in a letter to the Senate Banking Committee that he's given the matter a lot of thought, but that the principal reduction part of the Home Affordable Modification Program "would not make a meaningful improvement in reducing foreclosures in a cost-effective way for taxpayers."

U.S. Treasury Secretary Timothy Geithner has already responded to express his disapproval of DeMarco's decision.

“I am concerned by your continued opposition to allowing Fannie Mae and Freddie Mac to use targeted principal reduction in their loan modification programs,” he wrote, according to MarketWatch. He argues that participating in the program could lead to help for 500,000 homeowners and save Fannie and Freddie $3.6 billion when compared to other loan-modification programs.

Read more here. http://consumerist.com/2012/07/fhfa-says-no-to-cutting-amount-homeowners-owe-on-fannie-mae-freddie-mac-mortgages.html