Dallas Real Estate News, Housing Trends, Home Prices, Home Tours, Candy Evans, DallasDirt Blog D Magazine » Fannie Mae

RE: Just So We Don’t Blame Bush

Candy Evans — Wed, 25 Feb 2009 20:48:37 +0000

Vital point from a commenter:

“Regardless of political mudslinging, the crux of the discussion is this section
“Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a
conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes
his or her monthly payments on time for two years, the one percentage point premium is dropped.”

So Candy, how many of the current defaulters used that program? I am sincerely asking the question. Is it 1% of the current defaulters, 10%, 50%, 0%? What is it?

Don’t go pointing fingers without having some answers.”

Anyone have the answers?

Where Was The PMI: The Answer I’ve Been Seeking

Candy Evans — Fri, 20 Feb 2009 23:40:53 +0000

I finally found out why private mortgage insurance didn’t help with the mass of defaulting loans, thanks to this comprehensive article from Housingwire.com, which is kind of bullish on the HASP. GSE (government sponsored enterprises, like the Fannies and Freddie) charters prohibit financing for more than 80% of property value. If the loan to value ratio is higher than that, the loan must have third party credit support.

“Historically, this credit support has been in the form of PMI, but in the bubble-building years, borrowers found piggy-back second mortgages less costly (because they were securitized and off-loaded into CDOs and yield-hungry funds). As much as the GSEs have tightened their credit standards, PMI underwriting is even tougher, and their insurance premiums have gone up to reflect the realities of mortgage risk.”

$275 Billion Home Stimulus Plan At First Blush

Candy Evans — Thu, 19 Feb 2009 07:38:36 +0000

I know the reports are preliminary, but I am already getting ulcers over President Obama’s cure for our housing woes. Here’s my first report card:

A -$8000 tax credit for first-time buyers, l like very much. Assuming this will work like a section 179 deduction and come right off the taxes, not add 5 more pages or 6 hours of CPA billable hours to the tax return, essentially using tax dollars to help fund the home purchase.

F- Revamping U.S. bankruptcy rules, giving judges the power to reduce mortgage payments and set lower interest rates. Excuse me, but I think part of our problem was that banks got too big, unregulated and complex. So now we are going to let judges play banker? This will slow down lending and banks will have to recoup their losses from somewhere —charge more to the customers who pay their bills, or higher PMI or PMI for everyone or higher interest rates.

Not fair, folks.

C – The government will match reductions lenders make to keep borrowers home payments at 31% of their income. What income — stated income? Does that include alimony?

Incomplete – Flushing Fannie Mae and Freddie Mac with $900 billion.

So Whatever Happened To P.M.I???

Candy Evans — Fri, 30 Jan 2009 05:07:46 +0000

Did PMI have PMS? I actually had a dream last night about P.M.I. — that is, private mortgage insurance. (The trillion dollar bail-out is so mind-boggling I am dreaming about it.) I recall when we bought our first house we had to buy P.M.I. which was a sort of default insurance that would pay off the mortgage loan in case we didn’t. The bigger our equity has become over the years, the less we have had to pay.

But what about people who bought with zero down? Didn’t they have to pay P.M.I? Or were they, instead, encouraged to get second mortgages so that instead of having an insurance policy on default, they would screw over two banks instead of one?

May I make a modest suggestion: whoever initiated the dumping of P.M.I. helped make a significant contribution to the mortgage crisis and current financial meltdown. Agree?

Mortgage Rates At 4.7%???

Candy Evans — Thu, 18 Dec 2008 16:15:22 +0000

That’s what Zillow reports, trolling (and rightfully so) for customers. Yo, local mortgage brokers, what are the rates in Dallas today? Is 4.7 fixed for thirty years, conforming or non-conforming? Points? Homestead or second/investment property? Does the Fed want us all to refinance?

Mortgage Rates: What’s The Story, Glory Or Gory?

Candy Evans — Wed, 17 Dec 2008 06:27:40 +0000

My prediction: glorious low rates in 6 months. Today was my last full day of class at Champion School of Real Estate before my elective and then — I take the state exam! I am getting my real estate license to be a better real estate reporter for the D Empire and our forthcoming new website. Learned a ton – have TOTAL new respect for agents and brokers. From remembering intermediary to sub agent to IABS forms always need to be in size 10 type to HB 489 to independent contractor status to TRELA and TREC, ostensible authority and agency by estoppel, MLS to agent with appointment, without appointment, all I know is HOW DO YOU AGENTS DO IT? And I need an appointment with a glass of wine!

But, while I was ensconced in academia, history was made in the interest-rate realm. Here a couple of takes on that, jump for one from Philip Walker, one of my favorite agents at Keller Williams Turtle Creek, who brought lunch to recruit the A-plus students. Mortgage rate comments are on and the meter is running:

Fed Funds Cut Again To A Historical Low! What does this mean? Great Talking Points!

In our commitment to be the “Go To” source for market information, we felt that this important information could not wait until the end of the week. As you may be aware, the Fed Committee created today a new target range for its Fed Fund rate so that it will hover between an unprecedented 0-.25 percent (which means the target decreased .75-1.00)! That dramatically lowers the Fed’s targeted rate, called the federal funds rate, which had stood at 1 percent.

The bold move surprised economists, most of whom were predicting the Fed would cut the funds rate in half to 0.50 percent. The funds rate is the interest banks charge each other on overnight loans (and is a daily moving target). With the Fed’s key rate dropping to rock-bottom levels, the central bank is moving into uncharted territory. The cut of .75-1.00, (to a new target rate of 0-.25), makes this a historical move and the lowest Fed Fund Rate- ever. Our phones (and yours) will start ringing, so what do these numbers mean for the consumer?

First a little history (ok, don’t glaze over- it is important that you know how to explain this to your clients who ask- and it is also great conversation to throw out at your next Christmas party ).       The Fed Funds Rate is the rate banks charge each other to borrow money or the “wholesale” cost to borrow money. The rate is short term & is often referred to as the “overnight lending rate.” It changes daily and is a sensitive indicator of general interest rate trends. The Federal funds rate is one of the two interest rates controlled by the Fed (the other is the Discount Rate- what banks borrow overnight from the Fed). It is important to note also here that the Discount Rate was decreased to .50 today (another unprecedented and historical decrease of .75)- which again is the lowest ever in the history of our economy.

So, when you hear that Fed Chairman Bernanke has “lowered (or raised) interest rates”, they’re talking about the Federal Funds Rate. The Federal Open Market Committee (FOMC) meets eight times per year wherin they set a target for the federal fund rates (although they can – and have- changed it outside the scheduled meetings)   Other rates, including the Prime Rate (typically @ 3% higher than Fed Fund), derive from this base rate.

The Fed’s most important role is to fight inflation, deflation, recession & keep the economy on track. How do they do this? They do this by influencing the cost to borrow money with the Fed Funds Rate. This historical move is to attempt to loosen credit lines so that businesses and individuals can obtain short-term credit again and so that more people will be prone to purchase.   This should simulate more inventory selling, and hopefully more jobs available so that the employees can then purchase more (and the cycle goes on). In addition, this historical move is further triggered by the announcement today that the Consumer Prices dropped more in November than any other month on record (ever!), due in large part to falling gas and energy prices. Based on these numbers, inflation is almost non-existent and now shifts thinking towards fears of deflation. Also today, housing starts for November came in at their lowest level since records began in 1959, and building permits were reported at record lows.   These types of numbers is the effect of the “food-chain” economy- people are scared so they don’t purchase, then companies lay off because their goods are not purchased, then their laid off employees cant purchase… and the circle of recession goes on and on.   With this historical cut, the Feds are hoping to infuse confidence. So far, though, the Fed’s aggressive rate reductions have failed to stabilize the economy- hopefully this cut will be one that does the job (we really cant go any lower than 0.00)!

Contrary to popular belief, the Fed or the Fed funds rate does NOT control the fixed rate for mortgages. The fixed rates are based on the mortgage bonds.    Historically, fixed rates have moved in the opposite direction of a Fed move. When the Fed decreases the Fed Funds rate, it is typically a bad thing for the bonds (fixed rates). So what we see is that many times when the Fed Fund decreases, mortgage rates (fixed rates) actually increase. But wait- there’s more……    J   Along with the announcement today of the Fed Fund historical decrease, the Feds also announced that they will continue to purchase Mortgage Backed Securities (MBSs)- this along with the announcement late last month to buy $600 billion in debt and mortgage-backed securities from mortgage giants Fannie Mae and Freddie Mac should actually push mortgage rates down even lower in the next few days.   We are currently seeing a huge rally in bonds and in stocks. This rally of the bonds is directly from the MBS announcement, NOT the Fed Fund or Discount Rate historical cut.

So, what does the actual Fed Funds Rate directly impact? The Fed Funds rate directly impacts the prime rate (which as stated above is typically @ 3% above fed fund rate and is a lending benchmark), the adjustable rates & many others including credit card rates, consumer loans, etc. However, it is important to note that it may take up to six months to get the full effect of a Fed Fund cut. Let’s hope that this effect is lasting and positive for an economy that desperately needs a boost

NAR Week, 2008 Sales Downgraded

Candy Evans — Fri, 07 Nov 2008 23:09:55 +0000

The National Association of Realtors is meeting in Orlando — believe Catherine is there — and the trade group reports altered sales expectations for the rest of this year. Of note is how powerful housing is to our entire nation’s economy — at least according to NAR economist Lawrence Yun:

“The depth of the recession depends entirely on housing — with sufficient housing stimulus, the recession will be shallow. If government actions stay focused on housing, the cost to the Treasury would be much less that the potential losses in the nation’s output and income in a severe recession.”

Jim Landers: Blame The Credit Rating Agencies

Candy Evans — Wed, 22 Oct 2008 05:54:03 +0000

Oh yes, oh yes! Standard and Poor’s and Moody’s hired financial engineers who cooked the computer assessment of securities and tweaked until they got the answers they liked, then gave them to the rating agencies for AAA ratings. Not only does this sound like Enron, it also reminds me of those studies the government pays millions of dollars to figure out something we all know, like how children get better grades when they do homework in a quiet room without the distraction of televison.

Republicans Tried To Warn: Fannie Mae And Freddie Mac Were Cheating On Us

Candy Evans — Mon, 20 Oct 2008 20:31:35 +0000

Now they are playing hard-ball: The Mortgage Insider says that, beginning December 13, 2008, Fannie Mae and Freddie Mac have a bunch of guideline changes that will make it harder for people to obtain mortgages– basically ”No home equity, no down-payment, no dice.” Primary refi’s will be limited to 85% loan to value ratio, 75% for second homes and you’ll have to have a 25% equity stake in investment props for refi’s.

As a stock holder — or whatever I am now — I say too little, too late, baby. Loved this report depicting how a group of Republican Senators led by Chuck Hagel from Nebraska wanted to regulate FM/FM back in 2005 because they were smelling trouble. FM secretly paid a Republican consulting firm $2 million (of stockholder’s money) to lobby against this legislation: “If effective regulatory reform legislation… is not enacted…American taxpayers continue to be exposed to the enormous risk that FM/FM pose to the housing market, the overall financial system and the economy as a whole.”

Anyone else sick and tired and not wanting to take it anymore?

Today, Tomorrow, May Be A Great Time To Get A Mortgage

Candy Evans — Mon, 29 Sep 2008 20:22:23 +0000

Because rates are falling. No zero-down loans and if your credit is a mess, wait. But 5, 10, 20 percent down loans are out there at great rates like 6%. The good folks at Keller Williams Turtle Creek told me so this morning, as did the good people from Shelter Mortgage. Now the Mortgage Reports Blog is saying ditto.

$700 Billion Bail Out Hammered Out… WaMu Execs Make Out Like Bandits?

Candy Evans — Sun, 28 Sep 2008 20:53:31 +0000

They say it all started with housing: low interest rates that were supposed to help more people buy homes. But it wasn’t just low interest rates. It was mortgage brokers and others who saw gaping loopholes in the system and ways to make instant money. Over the weekend I spoke with a Real Estate investor who built condos on the Gulf coast. He told me something I’ve heard whispered at many a cocktail party: mortgage brokers were making upwards of $400K and $500K/year in commissions a year pushing mortgages. (Do you recall, about five years ago, how every other spam email you received was from a mortage broker trying to sell you a new loan or re-fi an existing?) Of course they tried to get everyone “qualified” — that was how they got paid. What a racquet! Stated income loans, no money down loans, 110% equity loans, all around 6% interest rates or lower teaser rates. Everyone with a pulse got a loan regardless of whether they could pay it back or not. Then these shaky, shot-gun loans were “bundled” (whatever that means) and sold as Wall Street “securities” to unsuspecting investors. Us. Now we’ve got to bail out the idiots who conceived this. But wait, they are not idiots: most have MBAs from places like Wharton and Northwestern. And the CEO’s negotiated mega salaries and bonuses and giant severances even if the companies failed! At Washington Mutual, it appears that the departing execs are going to make out like bandits:

“The WaMu executive with the biggest termination package is Stephen Rotella, president and chief operating officer, who is entitled under his current employment agreement to a cash severance of $12.7 million if he is terminated or quits with “good reason.”

Is anyone else as agitated as I am about this? Bad enough when people get stiffed, worse when the “stiffer” flees with millions in tote. Why don’t the shareholders revolt? Where in the bejesus has Barney Frank been, he is chairman of the House Financial Services Committee? His office sent this press release in July… it should have been out three years ago!

Congressman, 4th District, Massachusetts

2252 Rayburn Building · Washington, D.C. 20515 · (202) 225-5931

For Immediate Release:

Contact:
Steve Adamske (202) 225-7141
or Heather Wong (202) 226-3314

July 14, 2008

Statement of Chairman Barney Frank on Housing Legislation

Washington, DC – House Financial Services Committee Chairman Barney Frank today released the following statement on pending housing legislation in the House of Representatives:

“Turmoil in the American mortgage markets is at the root of a financial crisis that has undermined confidence in and threatens the stability of the global financial system. Congress will soon send the president a comprehensive package of legislation that makes future crises less likely by: 1.) responding to the current situation; 2.) strengthening regulatory oversight and prohibiting the irresponsible lending practices that brought us here; and 3.) addressing the lack of affordable housing in America.

“First, the legislation we will pass creates a new regulator for the GSEs with strong additional powers. We also make it possible for the FHA to assist homeowners facing foreclosure by refinancing them into sustainable loans. The bill will also strengthen the FHA’s capacity to resume its historical role as a lender of first resort for working families and first time homebuyers.

“Second, the bill will include the proposals announced yesterday by Secretary Paulson to ensure that Fannie and Freddie have the resources they need to continue to play their vital role in America’s housing finance system.

“Third, in a long overdue measure, the legislation creates an affordable housing trust fund that allows us to address decades of under investment in the supply of housing for lower income families.

      “In addition, the Federal Reserve today has adopted regulations implementing the Homeowners Equity Protection Act, passed in 1994, so that the predatory and deceptive lending practices that led to the subprime crisis will be prohibited. Those new rules combined with H.R. 3915, the ‘The Mortgage Reform and Anti-Predatory Lending Act of 2007’, which the House passed last year—and that Senator Dodd assures me the Senate will address this year–will make the problem of irresponsible lending far less likely in the future.”

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Search on Thomas

Fannie Mae Securities Litigation — Calling Glenn Close from DAMAGES

Candy Evans — Mon, 15 Sep 2008 05:51:45 +0000

Just received my first of those all-too-familiar-looking, bar-coded notices notifying me of the class-action lawsuit against Fannie Mae: Franklin Raines, Timothy Howard, and Leanne G. Spencer as well as Fannie Mae’s former auditor KPMG LLP. Alleged violations: Sections 10(b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-6 by the SEC. Gretchen Morgenson at the NYT puts it the best way yet, but this graph really got my blood boiling:

“And, in another twist, we may also be asked to cover the legal bills of Franklin D. Raines, the former chief executive of Fannie Mae, who was ousted after that company’s accounting scandal in 2004. Under the terms of his separation agreement, Fannie Mae paid these bills.”

I hope Glenn Close is considering taking on this case.

The Day The Housing Market Turns Up

Candy Evans — Mon, 15 Sep 2008 04:33:33 +0000

We will have much to celebrate this New Year’s Eve, when the national housing market might be close to being wheeled out of ICU and into a regular HMO hospital room. (No private suites – too many ailing roommates on that policy – Bear Stearn, Lehman Brothers.) Alan Greenspan tells us we have to wait until 2009 for the national housing market to stabilize — stabilize meaning the patient is no longer on death’s doorstep, not meaning patient is jogging across the ICU floor. An article by James J. Cramer, co-founder of TheStreet.com. in last week’s issue of New York Magazine, targets the market-pick-up date as June 30, 2009. Personally, I think they are both taking Happy Pills.

Greenspan gets a lot of heat for the mess we are in, but I think he tried to make homes affordable for more Americans, particularly the influx of immigrants that our nation needs, immigrants the current administration has tried to keep out. (Cramer says it doesn’t matter who wins the election, both Obama and McCain will be more immigrant friendly than Bush has been. As the grandchild of immigrants, I have always thought it was dumb to try and “close the door”. We need immigrants, we just need to screen for terrorists better than we do. But illegal immigrants do overload our healthcare system, the next ICU patient.) It is not Greenspan’s fault that greedy mortgage brokers and even greedier Wall Street financiers made slippery loans, pocketed their fees, and then sold the packages to the next unsuspecting investor. Like a game of hot potatoe, these were passed to the last person holding the bag with the most subprime loans.

How Mr. Cramer can decide on a specific date is interesting. I hope he’s right: since Dallas hasn’t been hurt as much as other parts of the nation, that is only good news for us. June 30 will be the time next year’s spring market starts revving up, the key turning over about March. Maybe he means people will dip their toes in the water in April, May and June and find out the water’s not too bad. So everyone will dive in, much like they did five years ago. Some folks trusting enough to get back in the mortgage business would help. June 30, 2009? Let’s see what happens this week as more poo poo comes down… enough poo poo perhaps to maybe push interest rates down further?

(Cannot wait for New Year’s Eve!)

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