Posts Tagged ‘bailout’

Fannie and Freddie Repaying Taxpayers

August 9th, 2013 Comments off

Taxpayers may yet see a profit from the $187 billion bailout by the federal government of Fannie Mae and Freddie Mac in 2008. To date, Fannie Mae has seen $105 billion of the $116 billion it borrowed from Treasury repaid, including $10 billion from the most recent quarter. Of the $71 billion Freddie Mac received, as of Wednesday it has repaid $41 billion, and expects to earn $29 billion later this year. During the housing bubble years the two firms had become the main source of funding for home loans, and hardly anyone expected a payback, according to CNNMoney. The housing market improvement during the past year is the main reason for their return to profitability. As MHProNews has learned, the record low mortgage rates spurred refinancings, increasing the pairs’ fees.

(Photo credit: Jonathan Ernst/Yahoo!Reuters–Fannie Mae headquarters)

FHA may need Bailout After All

April 10th, 2013 Comments off

For the first time in the history of the Federal Housing Administration (FHA), with its mortgage fund a minus $13.5 billion, the agency may need a government bailout by October, as HousingWire tells MHProNews. FHA Commissioner Carol Galante said, “The President’s budget projects that FHA may need a $943 million credit from the U.S. Treasury in October to make certain sufficient reserves are on hand today to cover projected losses over the next 30 years. FHA is taking every appropriate action to reduce the likelihood that such assistance is needed.” The agency may not make a final decision until Sept. 30, and attributes the financial stress to loans insured up to 2009, and to reverse mortgage programs. Housing and Urban Development (HUD) Secretary Shaun Donovan says the projected $13.6 billion shortage in capital reserves has been reduced to $943 million as a result of FHA recovering older loans, increasing some premiums, and making changes to the reverse mortgage program.

(Image credit: HUD-Gov)

Financial Services Committee Chair: Rein in FHA

March 14th, 2013 Comments off

HousingWire informs MHProNews Chairman of the House Financial Services Committee, Rep. Randy Neugebauer, (R-TX), during a committee hearing on the private mortgage insurance market, noted that the Federal Housing Administration (FHA) continues to risk taxpayer dollars. In regard to FHA and its Mutual Mortgage Insurance Fund, he says, “FHA does not evaluate its risk according to actuarial principles; it does not correlate premiums to risk; it does not spread its risk in a manner supported by its financial resources; and it relies on treating poor results as a quarantined anomaly.” While FHA’s $30 billion in reserves is considered adequate to cover potential losses, House Bill 1028 would eliminate putting taxpayers at risk should a bailout be necessary. Neugebauer says the FHA “should be a complement to the private market, not a direct competitor.”

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Eliminating GSEs could Still Leave Taxpayers Exposed to Risk

March 6th, 2013 Comments off

According to Anthony Randazzo, director of economic research at Reason Foundation, the federal government’s continued belief that everyone should own a home is what created the housing bubble in the first place, and it could happen again. Writing in the Orange County Register, he says with Fannie Mae and Freddie Mac being propped up to the tune of $187 billion, and continuing to offer subsidized insurance to mortgage investors with no upper limit on the size of the loans they may purchase could lead to another meltdown. The Bipartisan Policy Center, which includes two former HUD secretaries and Sen. George Mitchell, proposes phasing out the GSEs within five to ten years and replacing them with a new entity that would not buy mortgages but would offer catastrophic insurance against another meltdown. As MHProNews has learned, that would continue to leave the government on the hook for another bailout, protecting the banks and investors once again.

(Image credit: bankrate)

FHA Bail-Out? 50-50 Odds

February 19th, 2013 Comments off

Federal Housing Administration (FHA) Commissioner Carol Galante, telling the House Financial Services Committee her agency will not likely need Treasury assistance this year, says the FHA has raised its insurance premiums five times since 2009, is raising them again April 1, and is issuing new regulations to reduce losses. The Government Accountability Office (GAO) has the FHA in its sights of “high risk” government programs, and House Financial Services Committee chairman Jeb Hensarling, R-Texas, says FHA’s designation as a high risk is not surprising. “We know the FHA is broke and is quickly approaching bailout-broke.” There are 734,650 seriously delinquent loans in its portfolio, and independent auditors estimate FHA will have to absorb $60 billion in claims by the end of FY 2014, most of which are on loans originated in those underwater days of FY 2007 through FY 2009. However, refinancings fourth quarter year-over-year doubled, totaling $32.7 billion in Q4 compared to $15.4 billion in the same quarter of 2011. FHA is refinancing 50,000 current FHA borrowers a month; and the Congressional Budget Office (CBO) says after updating its estimates, FHA took in $4 billion more than originally estimated. As nationalmortgagenews tells MHProNews, mortgage consultant Brian Chappelle says, “FHA is endorsing the best loans in its history.”

(Image credit: CNNMoney)

FHA may be Teetering on the Edge

December 26th, 2012 Comments off

Townhall tells MHProNews the Federal Housing Administration (FHA) continues to make risky loans to borrowers with low credit scores and/or high debt ratios. Based on zip codes, these borrowers have an expected foreclosure rate of 15 percent, accounting for 44 percent of FHA loans to people of low to moderate means. Not only are taxpayers exposed to the possibility of a bailout, but foreclosures and the ensuing blight reduce the tax rate, making it tougher for municipalities to provide services to those neighborhoods. Backing over $1 trillion in U.S. home loans, the FHA may be facing a $16.3 billion shortfall by the end of Sept. 2013, according to an article in The Wall Street Journal. FHA is attempting reforms that may or may not be successful, but time may be running out for an effective correction to be made.

(Image credit: FHA)

Could FHA Topple?

July 10th, 2012 Comments off

HousingWire says seriously delinquent mortgages insured by the Federal Housing Administration hit 713,104 in May, the highest since the beginning of the year, but 23 percent higher than May 2011, and more than double the seriously delinquent loans from Fannie Mae and Freddie Mac—3.5 percent versus 9.4 percent for FHA. In addition, of FHA-backed loans modified in 2011, more than double the number for Fannie and Freddie re defaulted within 12 months. The $1 billion settlement from Bank of America over the Countrywide fiasco saved it from a Treasury Dept. bailout; it also raised insurance premiums to further its funding. FHA insured 18.9 percent more mortgages in May 2012 than a year ago, and 4.9 percent more than the prior month. With a stalled economy and sluggish job growth, has learned a rise in delinquent mortgages could deplete the resources of the FHA.

(Image credit: Federal Housing Administration)

30-Year FRM Drops Again

June 13th, 2012 Comments off

HousingWire tells Zillow reports the 30-year fixed rate mortgage (FRM) dropped three basis points from 3.59 percent last week to 3.56 percent. The rate for a 15-year FRM hit 2.95 percent, while a 5-1 adjustable-rate mortgage (ARM) landed at 2.68 percent. Zillow Mortgage Marketplace Director Erin Lantz said she anticipates the record low interest rates to stabilize this week in spite of the proposed bailout of the Spanish banking system. However, she said there may be some movement after this weekend’s elections in Greece.

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Buffett’s Berkshire Shopping at Bankruptcy Court

June 13th, 2012 Comments off

Berkshire Hathaway has offered to purchase the loan portfolio and mortgage division of Residential Capital LLC, known as ResCap, which filed for bankruptcy last month, according to Bloomberg BusinessWeek. A subsidiary of Ally Financial Inc., which make loans to auto buyers and finances auto inventories, and which itself is owned 74 percent by the U.S. government as the result of the auto industry bailout, Rescap was highly leveraged due to mortgage defaults. Berkshire has matched another suitor’s bid of $2.4 billion for the mortgage unit, and slightly outbid Ally for the loan portfolio, $1.45 billion to Ally’s $1.4 billion. As in other instances of not engaging in bidding wars, Berkshire will wait until June 19 for the court to approve its offer. Ally may actually pay $1.6 billion under the Chapter 11 bankruptcy re-organization plan for Rescap, which was called GMAC Inc. before the auto industry bailout of 2008. Berkshire Hathaway is familiar to as the owner of manufactured housing producer Clayton Homes, which operates its own lending unit.

(Image credit: AndyEnstallblog)

30-year FRM Rises Above Four Percent

March 23rd, 2012 Comments off

According to HousingWire, Freddie Mac says the 30-year, fixed rate mortgage (FRM) rose from 3.92 percent last week to 4.08 percent this week, the first time it has averaged above four percent since last October. One year ago it was 4.81 percent. The 15-year FRM edged up from 3.16 percent last week to 3.30 percent, but still below the 4.04 percent from a year ago. Five-year hybrid adjustable-rate mortgages (ARMs) rose from 2.83 percent to 2.96 percent this week, still below the 3.62 percent of a year ago. Freddie Mac Chief Economist Frank Nothaft says, “Bond yields rose over the past two weeks in part due to an improving assessment of the state of the economy by the Federal Reserve better than expected results of commercial bank stress tests and the likelihood of a second bailout for Greece.” Meanwhile, Nothaft says, homeowners have lowered their financial obligations ratio (debt payments as a share of disposable income) to the lowest level since Q2 1994.

)Image credit: bankrate)