Home for the Holidays: Fannie, Freddie Give Struggling Homeowners a Break

Includes: FMCC, FNMA, IYR, KME
by: Richard Suttmeier
If you have a Fannie Mae (FNM) or Freddie Mac (FRE) backed home mortgage and face foreclosure or eviction, you can stay home for the holidays at least through January 3rd. If you have a Citigroup (NYSE:C) mortgage and are in default, you will get a 30-day suspension from foreclosure and eviction. This affects around 4,000 struggling homeowners.
A year ago, while Obama’s $75 billion loan modification program was on the drawing board, most major lenders suspended foreclosures while the details were being hammered out. Since this program only helped about 4% of the estimated four to seven million expected qualified homeowners foreclosures picked up again after the grace period ended.
The unwinding of Conservatorship of Fannie and Freddie must begin in 2010 - Many say that GSE mortgages and debt are backed by the full faith and credit of the United States, but this is not an explicit guarantee. Here’s the statement still shown on the Fannie Mae website:

Fannie Mae debt securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae.

The unwinding the Conservatorship of Fannie Mae and Freddie Mac will be come a huge issue in the second half of 2010, as portfolios must be reduced by 10% by the end of the year.
More Problems for Commercial Real Estate - Sources say commercial real estate mortgage defaults have more than doubled in the third quarter year over year, and are projected to reach 19% by the first quarter of 2011. JP Morgan reported that property sales financed with commercial mortgage-backed securities plunged 95% from a record $237 billion in 2007, as the real estate bubble was beginning to pop. This lack of securitization is a factor in the decline in commercial real estate values, which are down 55% from their peak. This is a sharper decline than home values. In some major cities such as San Francisco, office rents are down 37% year over year in the third quarter. The vacancy rate is up 14% with 1.4 million square feet emptied in the first nine months of the year.
The daily charts for Gold, Crude Oil, the Dollar Index and the Euro
Gold was oversold and below the 50-day simple moving average at $1111.6 Friday morning. My quarterly pivot remains at $1135.
Crude oil is positive with the 21-day at $74.44. The weekly chart remains negative with lower highs for nine consecutive weeks now. The 200-week simple moving average is resistance at $75.74.
The euro is extremely oversold with the 200-day simple moving average as support at 1.4179. The weekly chart remains negative confirming the Thanksgiving bottom for the dollar.
The Weekly Chart for the Dow shows the failed test of the down trend that goes back to October 2007. Next week Ascending Wedge support is 10,211 with the down trend resistance at 10,475.
Disclosure: No Positions