Mortgage rates slowly edged down, moving closer to historic lows, according to Freddie Mac’s Primary Mortgage Market Survey.
The 30-year, fixed-rate mortgage averaged 4.13% for the week ended July 17, a drop from last week when it averaged 4.15%. In 2013, the 30-yr, FRM averaged 4.37%.
Meanwhile, the 15-yr, FRM came in at 3.23%, a slight decline from 3.24% last week and 3.41% a year ago.
The 5-yr Treasury-indexed ARM fell from 2.99% a week prior to 2.7%. This is also down from 3.17% last year.
The 1-year Treasury-indexed ARM averaged 2.39%, decreasing from 2.40% last week and 2.66% in 2013.
“Mortgage rates were little changed amid a week of light economic reports. Of the few releases, industrial production rose by 0.2% in June, below the market consensus forecast. Also, the producer price index for final demand rose 0.4% in June, rebounding from a 0.2% decline the prior month,” said Frank Nothaft, vice president and chief economist with Freddie Mac.
In addition, Bankrate reported that the 30-yr, FRM dipped from 4.31% to 4.30%.
The 15-yr, FRM came in at 3.40, down from 3.41%, while the 5/1 ARM stayed unchanged at 3.33%.
“Like many Americans, mortgage rates seem to be taking a midsummer vacation. Economic news has been mixed, and Federal Reserve Chair Janet Yellen’s recent Senate testimony indicated that the central bank will not announce a rate hike anytime soon. That’s good news for borrowers who have not refinanced yet or need more time to find a house. But don’t expect mortgage rates to rest forever,” Bankrate said.
Freddie Mac does great blogs. They’re simple, educational and sometimes so obviously necessary you wonder why there isn’t more of this kind of thing out there.
For example, one of its crowd-authored blogs from yesterday reminds potential homeowners that there are additional costs associated with the commitment to own property.
This is no ‘well, duh’ moment; this is seriously good advice.
“Shopping for your first home is undoubtedly an exciting time. You’ve worked hard to build up funds for your down payment and now you’re ready for the fun part: finding the home that’s perfect for you – location, size, and more – and signing on the dotted line,” the blog states.
Then the post asks: “The hard part of saving money is in your rear view mirror and now it’s easy street, right?”
Wrong. Paying the mortgage isn’t enough.
“Homeownership can be very rewarding, as well as a good financial investment, but it’s important to remember that responsibilities are part of the package – requiring both financial and time commitments,” the blog states.
Every single person thinking about buying a home should read this blog post.
In addition to making the mortgage payment on time, each and every month for typically 30 years, there are two other financial responsibilities to consider when buying a home (I’m going to flesh it out a bit based on my own experience).
The other major housing-related costs are added into the monthly payment. This includes mortgage-insurance, hazard insurance and Homeowner Association dues (where applicable). Being vigilant in keeping up with insurance payments are part of that responsibility, I’ll add, because allowing the policy to lapse can lead to a potentially larger, forced-placed premium applied by the mortgage servicer.
For example, my hazard insurance runs about $1,900 a year. Force-placed insurance in this case could go as high as $4,000 by comparison. I know because my mortgage servicer Wells Fargo tried it when my insurance lapsed in 2010.
But the biggest housing related cost — depending on your state — is typically the property tax, which can swing wildly from year to year. In one year, my property taxes were below $3,000; this year they are above $4,000.
Also, homeowners need to maintain their house according to all local bylaws. These are typically simple requirements like keeping the lawn tidy and the house visibly appealing, in order to help maintain the curb appeal and keep neighborhood values stronger overall.
This costs money, true, but not nearly as much as big repairs to your plumbing or foundation. A smart homeowner should have a stash of cash for unexpected repairs or face paying for a service with a credit card which will up-leverage the homeowner.
So there is a lot there to keep thinking about.
As Freddie points out: “Saving for your down payment and signing on the dotted line are simply the first steps to homeownership.”
Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) shareholders continue to face massive uncertainty with respect to the underlying values of the common stocks of these two companies.
Buying the common stock of the two government-sponsored enterprises is a speculation on Washington’s inaction with respect to fundamental reform of the U.S. housing finance market. In addition, investors bet that U.S. courts will overturn the net sweep agreement and strengthen shareholder rights.
Difference between investing and speculating
There is a vast difference between being an investor and being a speculator. Investors do their research and are pretty much backed up by solid fundamentals relating to an investment target’s business or industry.
Speculators, on the other hand, often bet on a price movement, either short-term or prolonged, which is expected to be precipitated by some projected catalyst. Buying the government-sponsored enterprises Fannie Mae and Freddie Mac, most notably their common stocks, certainly should be classified as a speculative action, not as an investment based on financial due diligence.
The outcome of a long position in Fannie Mae and Freddie Mac largely hinges on the courts and the inability of both political parties to reach a compromise about housing finance market reform.
After the government-sponsored enterprises ran into serious solvency issues during the financial crisis, Fannie Mae and Freddie Mac were placed into conservatorship of its immediate regulator, the Federal Housing Finance Agency, or FHFA.
Ultimately, because of extremely high mortgage losses, which threatened to push the two companies into bankruptcy, both GSEs received a capital infusion of $187 billion from the Treasury.
As a result, a ‘net sweep agreement’ was put in place, which requires both companies to transfer all of their (prospective) earnings to the Treasury.
The most important characteristic of the net sweep: The dividends swept over by Fannie Mae and Freddie Mac aren’t applied against the bailout balance. In other words, though the GSEs keep on paying an ever increasing stream of dollars to the Treasury, the companies, technically, have not repaid their bailout funds.
High-profile investors involved
Some investors, most notably, Perry Capital, filed suit against the net sweep agreement and many investors including Bill Ackman from Pershing Square Capital Management, Bruce Berkowitz, Morningstar’s mutual fund manager of the decade from Fairholme Funds and Carl Icahn from Icahn Enterprises have initiated contrarian, high-risk equity positions in the common stocks of Fannie Mae and Freddie Mac.
As you can imagine, investors easily got fired up by the involvement of highly successful investors — many with extremely appealing activist records.
The common stock, said to be worthless because of the net sweep, kept soaring throughout much of 2013 and the first quarter 2014 until a Senate Banking Committee made its best effort yet in March of 2014 to wind down Fannie Mae and Freddie Mac.
Though the Johnson-Crapo bill, which aimed at reducing the role of the government-sponsored enterprises in the mortgage finance market, was largely expected to not have any chances at all to succeed, the discussion of the bill and vote on it in the Senate Banking Committee forcefully injected volatility into the common stock of the two GSEs.
Expect high volatility going forward
After some volatile trading days and investors coming to terms with the fact, that the Johnson-Crapo reform bill will go nowhere, shares of Fannie Mae and Freddie Mac have found a bottom around the $4 mark, while both common stocks eagerly wait for new impulses.
Just last week, Fairholme Funds achieved a minor victory in court as Judge Margaret Sweeney in the U.S. Court of Federal Claims sided with Bruce Berkowitz and ruled that the discovery process in Fairholme Funds’ suit against the government could proceed.
The news was responsible for sending shares of Fannie Mae and Freddie Mac up 9% and 10% respectively, indicating just how volatile an ‘investment’ in the GSEs can be. Investors should continue to expect high volatility in either stock going forward.
The Foolish Bottom Line
The purchase of Fannie Mae’s and Freddie Mac’s common stock is a high-risk bet that reform attempts of the mortgage finance market will be unsuccessful in an election year as well as beyond 2014.
Further, investors bet, that the courts will side with shareholders and overturn the net sweep.
There is an important distinction to be made between investing and speculating. If you buy the common stock of the two GSEs, you are speculating and you should only allocate a small amount of your funds to such a risky bet.
MCLEAN, VA–(Marketwired – July 21, 2014) – Freddie Mac (FMCC) released today its U.S. Economic and Housing Market Outlook for July, showing mixed data results for the housing recovery as we head into the second half of the year. A short preview video and the complete July 2014 U.S. Economic and Housing Market Outlook and forecast table are available here.
- Projecting that new housing construction will increase about 14 percent in 2014 compared to 2013. Housing starts for 2014 are forecast to be 1.05 million dwellings with multifamily accounting for about one-third.
- After a disappointing first part of the year, expect home sales to play catch up and accelerate for the remainder of the year. As such, our home sales forecast remains at 5.4 million, a slippage of about 2 percent compared to last year. Existing sales are projected to be 3 percent lower, whereas new home sales are projected up by 10 to 15 percent.
- The employment picture has improved, with a net monthly growth of 231,000 nonfarm jobs for the first half of 2014. Stronger employment will translate into more household formations and a pickup in rental housing demand, with future gains for the single-family sales market.
- Single-family mortgage originations are down following a lackluster spring home buying season and a sharp drop in refinance. For this reason, the mortgage originations forecast for 2014 was reduced by 6 percent to $1,175 billion.
- We expect fixed mortgage rates to rise very gradually during the year in keeping with the Fed’s plan to keep interest rates low at this time. Look for the average 30-year fixed mortgage rate to end the year still near historic lows at around 4.4 percent.
Attributed to Frank Nothaft, Freddie Mac vice president and chief economist.
“Although the economic news for the first half of 2014 has been bittersweet, there is good news to share as we head into the latter half of summer. In particular, employment was up by nearly 1.4 million during the first six months and this will bolster household formations, resulting in positive gains most immediately for the rental housing market and then, longer term, for single-family home sales. The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There’s no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic.”
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
- Real Estate
- Freddie Mac
Eight members of the Greater Boston Association of REALTORS® (GBAR) are among the latest real estate brokers and agents nationwide to be conferred with the REALTOR® Emeritus membership status by the National Association of REALTORS® (NAR). This prestigious honor is awarded to licensed real estate professionals who have held membership in the REALTOR® organization for a minimum of 40 years. Currently, less than 2,500 brokers and agents across the U.S. have earned this distinguished designation.
Each of the GBAR members who achieved REALTOR® Emeritus this spring has held membership in the REALTOR organization since 1974. They are: Robert Grigsby, a broker with Fortini Wilcox in Natick; Glorya Geltman, a broker with Realty Executives Boston West in Framingham; Sally Harper, a broker with Gibson Sotheby’s International Realty in Weston; Richard J. Loughlin, Jr., a broker and former president of Coldwell Banker Residential Brokerage of New England, of Concord; James H Marr, broker-owner of Marr Real Estate in Winthrop; Lynne Mironer, a salesperson with The Higgins Group, REALTORS® in Lexington; Bonnie Traylor, a broker with Century 21 Commonwealth in Westwood; and Faye Winer, a broker with RE/MAX Best Choice in Framingham.
All eight receive a waiver of future association membership dues, as well as a commemorative pin and REALTOR® Emeritus certificate which were presented during ceremonies.
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June 22, 2014
One of the biggest engines of the American economy is the housing sector — and, more specifically, the markets for new and existing homes.
It’s for this reason that America’s smartest investors will be closely watching two reports this week that will shine a light on the strength of the ongoing recovery.
Existing home sales
The first is the monthly report of existing home sales, which the National Association of Realtors is set to release on Monday.
Just to be clear, this is the single most important indicator related to the housing sector. Not only are 10 times as many existing homes sold relative to new homes each year, but it is also a key indicator for a multitude of peripheral businesses and industries.
Two primary examples are Home Depot (NYSE: HD ) and Lowe’s (NYSE: LOW ) , the nation’s two largest home-improvement retailers. As the former’s chief financial officer noted on a recent conference call:
As we look at the macro, we think housing will be a contributor to our growth next year of about 200 basis points. We think it contributed about 250 basis points in 2013.
According to the National Association of Realtors, existing home sales rose by 1.3% in April compared to March but were still down by a disturbing 6.8% on a year-over-year basis — click here to read the official NAR statement.
New home sales
The second and related report is the monthly release of new home sales, which the U.S. Census Bureau will publish on Tuesday.
The home building industry was hobbled during the financial crisis and has only lately begun to reassert itself with any semblance of strength. This crippled the economy, as it’s estimated that each new home built generates between two and three new jobs.
When this data was last reported, the Census Bureau observed that, like existing home sales, the pace of new homes increased in April by 6.4% compared with March, but they were down by 4.2% relative to the same month last year.
How will these figures come out this week? It’s hard to predict, but investors can rest assured that a large surprise either way will reverberate through the markets.
Once the only game in town when it came to digital transaction solutions, zipLogix has met with many viable competitors since its start in 1991. Speak to some of the Fraser, Mich.-based company’s many users, however, and you’ll realize why they’re so loyal. Whether it’s at the association, MLS, broker or agent level, zipLogix has been creating raving fans for years by providing a comprehensive collection of high-functioning, reliable, digital solutions for transacting more and better real estate business. Here’s why.
For most, their relationship with zipLogix has been a long and happy one, marked by high-quality, great communication and impressive responsiveness. More importantly, utilizing the firm’s products has been essential to conducting real estate business in the modern age.
“We’ve been in a relationship (with zipLogix) since 2000,” says Mike Barnett, vice president and COO of the Texas Association of REALTORS® (TAR), which offers zipLogix tools as a membership benefit included in basic dues. “It’s our job to offer Texas REALTORS® modern tools to help them be more efficient and more productive. We should never stand in the way of them doing business. Through the consistency and credibility of products from zipLogix, we are able to bring our members a higher level of comfort and security.”
Andrea Bushnell, executive vice president of the North Carolina Association of REALTORS®, agrees. “Everyone who is a member has access to the zipLogix suite of products,” she explains. “When we talk about creating our value proposition to members, we’re always looking to provide the best products and services we can within the parameters of our dues structure. For example, we know that forms are the most critical aspect of the transaction, so we feel that offering zipForm® is a strong part of our value proposition.”
As the eighth largest association in the country with approximately 32,000 members, choosing a provider to work with is no small decision. Previously operating with an in-house forms program, Bushnell chose zipLogix for several key reasons.
“We selected zipLogix since they were the most comprehensive and, quite frankly, the biggest,” explains Bushnell. “They are amazing to work with and one of those things I don’t have to deal with day-to-day. But when I do have a member on the other end of the line in the middle of a transaction, and they can’t get the form to print and they’re sitting with the client and need to get the offer in, I can get it resolved by zipLogix immediately. It’s mission critical to our members that they’re getting their problems resolved with no delay.”
Jodi Dines, chief information officer for Michigan’s Real Estate One, has been working with zipLogix since she joined the firm 13 years ago. While the relationship was initiated by her predecessor, Dines has been happy to keep it going during her tenure.
“I’ve weighed the features of other products against zipLogix and they don’t hold up to zipLogix’s feature set,” says Dines. “When we first selected them, they were the only player. Since then, other competitors have started up, but zipLogix is still the Cadillac.”
The fact that zipLogix is part of the National Association of REALTORS® Member Benefits Program helps to solidify their reputation as a credible partner. “We are always trying to support organizations and vendors who are aligned with the state or national association, or both, as the case may be,” says Bushnell. “It’s important to keep the business in the family.”
A Transaction Treasure Chest
The zipLogix product suite offers an array of tools to help brokers and agents facilitate more efficient, more secure real estate transactions.
Barnett, for example, began offering zipForm® in its original desktop version, zipForm® Standard. Quickly recognizing the direction in which technology was headed, Barnett switched to offering the company’s bundled package, zipForm® Plus, which integrates both the Digital Ink e-signature solution and the file-storage interface, zipVault®. Additionally, members are increasingly subscribing to zipForm® Mobile, says Barnett.
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Fannie Mae, Freddie Mac- Alice’s rabbit hole via TimHoward717.com
To truly understand the magnitude of the court victory in the Fairholme lawsuit this week one must first take a step back and review some of what has transpired leading up to this decision. The government attorneys have forced everyone Judge Sweeney included to follow them down Alice’s rabbit hole into a land where reality is suspended by an endless stream of lies. So I think it’s important to back up a little here and review this a little closer.
Fannie Mae (OTCB:FNMA), Freddie Mac (OTCB:FMCC) beginnings
This all began when the Government attorneys introduced the motion for a protective order with the absurd rationale that to release any documents concerning when and how the companies could be released or revealing any financial projections from years ago would have dire consequences. The release of this information would likely tank the MBS market causing interest rates to skyrocket and the world economy to crash. If they were allowed to withhold this information, our case would have been put in serious jeopardy which explains the downward pressure, we saw on our shares since early June.I didn’t think anyone thought she would grant such an absurd motion, but everyone is obviously not reading our blog.
They then followed this up with the request that if they were forced to produce all of the doomsday documents than they would want Judge Sweeney to classify virtually every document that they produced in discovery to be labeled “protected information .”To ensure that nothing they produced would ever see the light of day.
Judge Sweeney smashed the governments attempts to withhold this valuable information. Just as she has every step of the way, for many of these arguments have been repeated over and over by the government. She has forced them to comply and already I am sure hundreds of documents are flowing to Fairholme’s attorneys.
Fannie Mae (OTCB:FNMA), Freddie Mac (OTCB:FMCC) FOI
She also smashed their request that every document be labeled “protected information” In her order Judge Sweeney forced the government to justify why each item they seek to hide deserves such an extraordinary designation. In another huge victory, She also agreed with Fairholme attorneys that if a document could be released under an FOI request then it would not be able to be classified as protected.
Needless to say if judge Sweeney went along with the governments delusions our case could have been greatly hampered, and the ideal of open government crushed.
Regardless of how hard she try’s to appear objective To hear judge Sweeney make mention of the governments ” dire consequences “argument, it is like listening to someone refer to a crazy uncle. She actually took it a step further in Wednesdays hearing when we saw this exchange:
Fairholme attorney Mr. Colatriano : Your Honor, we certainly have no interest in being party to something that — Judge Sweeney: Causing doomsday? (From Wednesdays hearing)
She elevated it from mere dire consequences to doomsday in this amusing exchange.
I will be posting part two tomorrow. Keep the Faith!
Government-sponsored enterprise Fannie Mae has priced its fourth – and largest – credit risk sharing transaction under its Connecticut Avenue Securities (C-deals) series.
The $2.05 billion note offering was priced on July 17 and is scheduled to settle on July 25. This deal (Series 2014-C03) is consistent with prior transactions and includes reference loans with original loan-to-value (LTV) ratios of up to 97%.
“We’ve continued to see strong investor demand in our Connecticut Avenue Securities transactions and the size of this deal reflects the ongoing market appetite and interest,” says Laurel Davis, vice president for credit risk transfer at Fannie Mae. “As planned, we have been coming to market with new issuance on a regular, quarterly basis. We plan to come to market again next quarter, likely in November.”
C-deal notes are bonds issued by Fannie Mae. The amount of periodic principal and ultimate principal paid by Fannie Mae is determined by the performance of a large and diverse reference pool.
The reference pool for the Series 2014-C03 transaction contains over 330,000 single-family mortgage loans with an outstanding unpaid principal balance of $210.3 billion. This reference pool consists of eligible loans acquired in the second quarter of 2013 – part of Fannie Mae’s new book of business underwritten using strong credit standards and enhanced risk controls.
The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages, and the reference pool is subdivided into two loan groups by original LTV. Group one includes loans with original LTV ratios between 60.01% and 80.00%. Group two includes loans with original LTV ratios between 80.01% and 97.00%.
The deal included a broad distribution of diverse investors, including asset managers, hedge funds, insurance companies, depository institutions and real estate investment trusts.
Morgan Stanley was the lead structuring manager and joint bookrunner on the transaction. Nomura was the co-lead manager and joint bookrunner. Bank of America Merrill Lynch, Credit Suisse, JP Morgan and Wells Fargo Bank NA were co-managers, and Great Pacific Securities participated as a selling group member.