May 15 average daily rates in Orange County for 30-year fixed loans with one-point fee: Conforming up to 5.943%, Jumbo up to 7.239% and Conforming-Jumbo up to 6.827% (Note: conforming-jumbo rates are for loans from $417,000 to $729,750, while conforming is up to $417,000 -- both types are sold to GSEs. Jumbos here are above $417,000 and not sold to GSEs.)
Source: Newspaper Chart Services 
Are Fannie and Freddie in danger?
May 8th, 2008, 12:01 am · 12 Comments · posted by Matt Padilla, Register Reporter and Blogger
On the heels of Fannie Mae’s $2.2 billion loss reported Tuesday, the New York Times published a story questioning its solvency and that of its little sibling Freddie Mac. I recommend the read, and here are some key points from it:
- Fannie and Freddie handled more than 80 percent of all mortgages bought by investors in the first quarter of this year, more than double their market share in 2006.
- They have a combined $83 billion in capital to offset $5 trillion in debt and other financial commitments.
- They suffered more than $9 billion in mortgage-related losses last year, “and analysts expect those losses to grow this year.”
I think you get the point. If either company fails, taxpayers could be looking at a steep bill, and the mortgage market would lose its only lubricant, the Times reports. Scary thought.
May 8th, 2008 at 8:07 am
Bailout Alert! According to this article, Bush says he will veto the Frank-Dodd bailout bill.
Please call or email the White House to voice your support of a veto of any housing bailout bills:
Ph: 202-456-1414 or 202-456-1111
Just say, “I am calling to ask you to veto any housing bailout that comes out of Congress.”
Thanks!!!
May 8th, 2008 at 8:47 am
Umm, yes, Fannie & Freddie are nearly insolvent.
May 8th, 2008 at 8:55 am
Fannie and Freddie can only withstand about 0.40% losses (0.80% default assuming 50% recovery) before they go under. Countrywide’s Q1 conforming 60 day+ delinquencies were about 3% already, trending up. CFC’s port is no different from the GSEs except they don’t play games with delinquencies.
The GSEs are insolvent, and their new programs like HomeSaver and 120% LTV loans buy a little time at the cost of a bigger blast radius down the road.
May 8th, 2008 at 9:15 am
If FNMA and FHA go away, who is left to fund loans? To say the future of residential lending is bleak is an understatement…
May 8th, 2008 at 9:51 am
Here’s GOOD loan news from a lender friend of mine:
A few companies have significantly lowered their Jumbo Conforming 30 year fixed rates. The trend will likely continue for all lenders to modify their JC pricing, but for now here is a comparison:
Countrywide: 6.375 1.0 point No change from last week
Wells Fargo 6.250 1.0 point No change from last week
IndyMac Bank 5.750 1.25 points 6.125% -0- points
Wachovia 5.875 1.0 point 6.250% -0- points
The spread between Regular Conforming ($417k and below) and Jumbo Conforming ($417k to $729k) is now about even.
So much for the new “jumbo conforming” loans being considerably more expensive, and difficult to obtain. Just as predicted a month ago, these loans would “settle” into being less expensive than they were at first.
May 8th, 2008 at 10:33 am
Tell me Sig, what did your lender friend tell you the down payment requirement is at these rates? Not to speak of income/employment verification.
May 8th, 2008 at 11:06 am
Well Freddie Mac said late last week that first quarter loans were already showing signs of improvement, so it may not be as bad as we all think.
May 8th, 2008 at 12:02 pm
Brazilians rule!:
> If FNMA and FHA go away, who is left to fund loans?
FHA is federally guaranteed (in oppositie to Fannie and Freddie), so FHA’s losses are our losses, but FHA wouldn’t go away either. One more reason to defend FHA against the onslought of “modernization” of abolishing downpayments etc.
May 8th, 2008 at 2:08 pm
Who’s left to fund loans if the Fannie/Freddie go away, you ask? Um, the same people who have been funding them for the last 10 years: investors. There’s no reason there can’t be a market absent of the GSE’s, other than borrowers might have to have more of a chance of not defaulting to qualify, and lenders will actually have to work for their money, and not just pick up pass-through commission checks for doing nothing.
Some info you may not realize (if you asked the above question):
- Banks have money in deposits, which they loan out to pay interest
- In the absence of sponges to blindly absorb risky loans (IB’s, GSE’s, or otherwise), banks would make less risky loans, but they would still make loans
- Investors are still indirectly funding loans they think will be paid back, just not the ones nobody thought would be paid back
- If Fannie/Freddie fail, the government can make new GSE’s; it’s a very profitable business during good times
May 8th, 2008 at 2:55 pm
The market before the GSEs was filled by local banks doing portfolio lending (the “George Bailey” model). The market was actually more efficient back then as far as the spread of mortgage debt over Treasuries, and at the same time banks were held responsible for the loans they made.
May 8th, 2008 at 6:41 pm
Well, when millions of homeowners owe way more than their home’s worth, securities backed by those mortgages just aren’t that secure.
However, Freddie & Fannie both stuck with the novel ideas of down payments, verifications, and good credit, so they’re not in nearly the do-do that Contrywide, IndyMac, & WaMu are in. (see “How we got into this mess“)
If the Fed could find a way to bail out Bear Stearns, I’ll bet they’ll find a way to bail out Fannie and Freddie if they have to.
May 9th, 2008 at 8:22 am
Fannie and Freddie purchased more subprime and alt-a loans than anyother institution in America. So RealtorDave - you are incorrect, Country, IndyMac and WAMU dont service these loans, they sold them to Fannie and Freddie, who then quit buying them when they didnt perform so County and Indymac had billions of dollars in loans that no one will buy. That is the problem, they both own these crappy loans with no where to go with them put try and collect on them.