Freddie Mac’s 2012 Outlook: Housing to Slowly Gain Ground

Freddie Mac released its U.S. Economic and Housing Market Outlook with five projections for 2012.

Frank Nothaft, Freddie Mac’s vice president and chief economist, said there are indications that the economy and housing market are slowly gaining ground. “Sustained and increased job growth beyond the average monthly payroll gains of 130,000 so far this year ending in November are essential,” he said in a statement.

Nothaft also expects mortgage rates to remain low through the middle of 2012, and for rentals to continuing leading housing market improvements.

“All told, next year will be another bumpy ride,” he said.

Five outlook highlights:

Economic growth will likely strengthen to about 2.5 percent in 2012.
The U.S. unemployment rate will decline but likely remain above 8 percent.
Mortgage rates will likely remain very low, at least through mid-2012.
Housing activity will be better in 2012, but not robust.
Expect less single-family originations but more multifamily lending in 2012.

Source: Freddie Mac

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Freddie Expands REO Winter Sale to More States

Six more states — now bringing the total to 33 — will participate in a winter sales promotion as Freddie Mac’s HomeSteps looks to unload its high REO inventory.

The six states added are Alaska, Kansas, Kentucky, Missouri, Oregon, and Washington. To view a complete list of all states participating in the winter promo as well as eligibility requirements, visit www.HomeSteps.com/smartbuy.

“We’re expanding our winter promotion to focus additional incentives to encourage strong sales activity in our ‘cold weather’ states over the next several months.” HomeSteps executive Chris Bowden said in a statement.

HomeSteps’ Winter Sales Promotion for buyers includes paying up to 3 percent of the final sales price toward a buyer’s closing costs for offers received between Nov. 15 and Jan. 31, 2012. (To qualify, escrow must be closed on or before March 15, 2012.) Selling agents may also be eligible for a $1,000 selling bonus through the program.

Source: “Freddie Mac Adds Six More States to REO Winter Promo,” HousingWire (Nov. 22, 2011)

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Watchdog Highlights Fannie, Freddie Staffing Shortfall

A study by the Federal Housing Finance Agency’s Office of Inspector General finds that regulators lack the staff to effectively oversee Fannie Mae and Freddie Mac and consequently have dialed down scrutiny of the government-sponsored enterprises.

The report singles out the FHFA’s monitoring of housing inventory owned by the GSEs.  Despite a surge in foreclosures that has boosted Fannie Mae’s inventory sixfold in the past four years, the study states that “FHFA has yet to conduct a targeted examination” of how the companies manage seized properties.

Source: “Staffing Woes Harm Fannie and Freddie Oversight, Government Watchdog Says,” Bloomberg (09/23/11)

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Congressman Introduces Bill to Scale Back GSEs

Rep. Jeb Hensarling, R-Texas, introduced a bill on Thursday to scale back Fannie Mae and Freddie Mac and privatize the government-sponsored enterprises within the next five years.

“What we’re trying to do is have a market-based system that doesn’t put people into homes that ultimately they can’t keep,” or require taxpayers to do pricey bailouts, Hensarling says.

Hensarling’s bill calls for eliminating the government’s role in Fannie Mae and Freddie Mac and the mortgage market. It also calls for the maximum size of loans across the country backed by Fannie and Freddie to drop to $417,000; loans, in general, currently range from $417,000 to $729,750.

Last month, the White House called for the phasing out of Fannie Mae and Freddie Mac and proposed three options on how. Congress has differed on its approach and the Hensarling bill is the first shot at legislation to wind down the GSEs, which is likely to spark other legislation in the coming months.

The Hensarling bill isn’t expected to go far, though, according to industry experts. Even if it does pass the GOP-led House, analysts say it’s unlikely the Democratic-led Senate will take up the bill.

Fannie and Freddie guarantee about $5 trillion in mortgages and were taken under government conservatorship in 2008.

Source: “Hensarling Unveils U.S. Bill to Wind Down Fannie, Freddie,” Dow Jones International News (March 17, 2011)

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Fannie, Freddie Probe Focuses on Disclosure

The Securities and Exchange Commission has notified several former Fannie Mae and Freddie Mac officials that it will recommend civil enforcement actions for their roles in corporate misconduct leading up to the financial meltdown.

The probe is focusing on disclosures by the firms regarding subprime loan exposure, which critics say was played down. It remains to be seen whether the companies themselves will be included in the enforcement action, given that U.S. taxpayers will bear the burden of any charges.

Source: “Fannie, Freddie Probe Focuses on Disclosure,” The Wall Street Journal, Nick Timiraos and Jean Eaglesham (03/14/11)

Fannie, Freddie Pressed to Reduce Mortgages

The Obama administration is pressuring Fannie Mae and Freddie Mac to write down “underwater” home loans through fledgling FHA and Treasury programs.

The aim of the initiatives is to reduce loan balances, which Fannie Mae and Freddie Mac have been reluctant to do because it would deepen their losses.

However, the Obama administration wants to reduce the threat to the housing market posed by homeowners believed to be at risk of default should their personal finances or home prices worsen.

Source: Wall Street Journal, Nick Timiraos, Alan Zibel (12/08/10)

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Freddie Asks Fed for Another Bailout

Freddie Mac, which lost $3.5 billion in the third quarter and is looking for the federal government to bail it out one more time, says it will be a “considerable time” before the housing market recovers.

CEO Charles Haldeman said, “As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties.”

Supporters of Freddie and its sister Fannie Mae have asked the Treasury Department to reconsider the terms of its dealings with the companies, particularly the 10 percent dividend they must pay in exchange for federal funds they receive as payment for preferred shares.

The NATIONAL ASSOCIATION OF REALTORS® supports the move, saying, “Eliminating a punitive dividend is a step that should be taken now, regardless of how the GSEs may be restructured in the coming years.”

Source: The Street.com, Colin Barr (10/03/2010)

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Cost of the Fannie, Freddie Bailout

The government estimated last week that the bailout of Fannie Mae and Freddie Mac is likely to cost U.S. taxpayers $154 billion. This is more than originally estimated, but less than what the government called a worse-case scenario.

Fannie and Freddie have already withdrawn $135 billion. They are expected to seek another $19 billion by 2013 to offset mortgage crisis losses.

“It cost a lot less than what people feared, largely because the economy has stabilized,” Moody’s Chief Economist Mark Zandi says.

Source: USAToday, Paul Dividson (10/21/2010)

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Fannie and Freddie Offering Hard-to-Beat Deals

Beginning this week, Fannie Mae and Freddie Mac are trying to sell off 150,000 foreclosed homes by offering low down payments, no requirement for mortgage insurance, and up to $30,000 added to the mortgage for renovations. In addition, the real estate practitioner selling the property gets a $1,500 bonus.

In some neighborhoods, these properties undercut the average listing by $100,000.

Fannie and Freddie already have repaired the biggest problems with the property including roofs, plumbing, and electrical work.

Buyers who plan to live in the properties get a 15-day chance to view the homes before investors can purchase them. Investors with cash will likely snap up any properties remaining at the end of the grace period.

“Our goal is to recover as much as we can to offset our loss and not to be low balling properties just to move them,” says a Freddie Mac spokesperson. “We absolutely have no motivation to be leading a downward spiral in home prices.”

Source: Smart Money, Anna Maria Andriotis (09/28/2010)

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Higher Conforming Loan Limits Due to Expire

Unless Congress intervenes, the maximum amount the Federal Housing Administration as well as loans backed by Fannie Mae and Freddie Mac can back will return to $417,000 in most areas and $625,500 in a high-cost areas.

Over the last two years, the government raised the limits in some high-cost areas to $729,750.

If Congress doesn’t extend higher limits, home prices would “drop precipitously” because it would be “impossible to finance homes in most parts of Los Angeles and certain other major cities,” said Rep. Brad Sherman, a California Democrat and member of the House Financial Services Committee,

But many economists support the end to higher limits. “We need to think how we are going to exit from a Fannie-and-Freddie world, and this is a very small step toward that exit,” said Richard K. Green, director of the University of Southern California’s Lusk Center for Real Estate. “Dialing it back to $625,500 is a perfectly reasonable thing to do.”

Source: The Wall Street Journal, Nick Timiraos (09/23/2010)

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