Update On Mortgages And Lending [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Mortgage Trends

Debt Market Distress Spreads. “There is so much mistrust in the markets that banks and funds aren't extending credit to customers even for a few hours during the day, as they usually do. Instead, lenders are waiting until the last possible moment to release funds, creating a logjam at day's end when they wire money to branches, subsidiaries or other accounts. The backup of cash transfers has led the Federal Reserve to keep its money-transmission system open late, said a Fed spokesman.” (WSJ, Sept. 26)

Schwarzenegger Vetoes Subprime Mortgage Reform Bill. “Gov. Arnold Schwarzenegger vetoed a subprime mortgage reform bill Thursday. Assembly Bill 1830 would have barred brokers and lenders from making false statements and steering borrowers to high-cost loans. It sought… tighten restrictions on how they are sold in the first place. Schwarzenegger [signed the] Mortgage Relief Act in July… Schwarzenegger said AB 1830 overreaches and may have unintended consequences. It applies to state entities only… Federally regulated entities would be exempt, putting state businesses at a competitive disadvantage. The bill would have allowed customers to sue… possibly leading to increased litigation.” (Sacramento Business Journal, Sept. 25)

For Mortgage Applications, Which Way is Up? Mortgage Bankers Association: Composite applications (purchase and refinance transactions) fell by a whopping 10.6%... Refinancing application volume fell 11.2%, while purchase application activity dropped 10% from one week earlier. Even FHA loan applications… tumbled by 8.9%... a separate application index maintained by Mortgage Maxx LLC found that applications actually rose slightly during the week of Sept. 19, up 0.3%. The “MAX” index data has traditionally been used by prepayment researchers on Wall Street, as it corrects for multiple applications by one borrower — allowing for a more accurate read on forward demand for mortgages (borrowers may apply numerous times, but will end up with only one mortgage).” (Housing Wire, Sept. 24)

Who Will Originate Mortgages?  “HUD: The Federal Housing Administration has seen a dramatic rise in demand for its loan guarantees, thanks to higher loan limits and relatively low down-payment requirements. In May, FHA was guaranteeing loans at the rate of 818,000 a year -- a nearly 15% share of the market. That compares with 289,000 mortgages guaranteed in 2007, or 4% of the market. But FHA cannot fill the void. The enactment of Treasury Secretary Henry Paulson's bailout plan could help. Once bankers are relieved of their "bad" home loans, they will have more leeway to boost lending. But the volume of these loans may ramp up very slowly as lenders cautiously return to the market.” (Inman News, Sept. 23)

Banks Up Their Holdings In Commercial/Multifamily Mortgages. “MBA analysis of Fed flow of fund’s data: Despite the credit crunch, the level of commercial/multifamily mortgage debt outstanding grew by 1.5% from Q1-Q2, to $3.44 trillion…  Investment groups including commercial banks, life insurance companies, thrifts and government-sponsored entities increased their holdings in commercial/multifamily mortgage securities. Meanwhile, holdings in the commercial mortgage-backed market—the group most affected by the credit crunch—saw their holdings wane.” (Financial Week, Sept. 23)

Fannie-Freddie Rescue Averted Collapse. “In the last year, Fannie and Freddie Mac provided $1.1 trillion in new mortgage credit, while private mortgage-backed securities issuance fell from $900 billion to nothing, according to the Federal Reserve's Flow of Funds data. Blogger Brad Setser for the Council on Foreign Relations:  "A surge in agency (Fannie and Freddie) issuance has offset a total collapse in 'private' MBS issuance," -- private MBS refers to mortgage-backed securities that did not have a guarantee from the secondary mortgage entities. "Agency lending has been absolutely essential," he writes.” (Inman News, Sept. 22)

                                                           

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