Mortgages and Lending In The Subprime Meltdown [Housing Tracker]

Includes: FMCC, FNMA, THMR
by: Judy Weil

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.

Mortgages and Lending

Fed Loans to Banks, Dealers, AIG Soar to $410 Billion. “Commercial banks and bond dealers borrowed $348.2 billion from the Federal Reserve as of yesterday, an increase of 60% from the prior week… Fed: Loans to commercial banks through the traditional discount window rose about $10B to $49.5B as of yesterday… The total surpassed the previous record after the 2001 terrorist attacks. Borrowing by securities firms totaled $146.6B, up from $105.7B. Under a new emergency program announced Sept. 19, banks borrowed $152.1B as of yesterday to buy commercial paper from money-market mutual funds, more than double a week ago.” (Bloomberg, Oct. 2)

First, Let's Stabilize Home Prices.  “The [government should] allow all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25% (the lowest mortgage rate in the past 30 years), and place those mortgages with Fannie Mae (FNM) and Freddie Mac (FRE). Investors and speculators should not be allowed to qualify... Lower interest rates will mean higher overall house prices… Remove the refinancing option and you can have lower rates without substantial cost to the taxpayer… For borrowers with lower credit scores, the 5.25% mortgage rate… would be less than their current rate. Mortgages on homes that are worth less than the total amount of the loan… could be refinanced into a 30-year fixed-rate loan to be held by a new agency modeled on the 1930s-era Homeowners Loan Corporation.” (WSJ Op-Ed., Oct.2) 

Thornburg’s Future in Doubt. “Thornburg Mortgage, Inc. (TMA) [has] reduced staff by 29 sales and support positions in its home lending division [and] was forced to revise its seemingly never-ending tender offer for preferred shareholders, critical to a rescue it lined up with MatlinPatterson Global Advisors LLC in March that kept the company out of bankruptcy, after it was unable to resolve a string of recent margin calls… Reuters: That survival may well depend on the revised tender offer, which will allow preferred shareholders the right to tender each of their shares, valued at $25 each, for three common shares, taking into account a 1-for-10 reverse common stock split that took effect on Friday.” (Housing Wire, Oct. 1) 

Mortgage Applications Decrease In Latest MBA Weekly Survey. "Mortgage Bankers Association Weekly Mortgage Applications Survey for the week ending September 26, 2008:  The Market Composite Index, a measure of mortgage loan application volume, was 455.4, a decrease of 23% on a seasonally adjusted basis from 591.4 one week earlier… The Refinance Index decreased 34.7% to 1333.9 from the previous week and the seasonally adjusted Purchase Index decreased 10.9% to 304.8 from one week earlier.  The Conventional Purchase Index decreased 9.7% while the Government Purchase Index (largely FHA) decreased 14.1%.” (Originator Times, Oct.1) 

State Discount Mortgage Unit Moves to Increase Interest Rate. “Squeezed by the tightening credit markets, a New York State agency that provides subsidized mortgages to first-time home buyers stopped offering discounted interest rates this week and started looking for new sources of funds. Officials at the State of New York Mortgage Agency said on Wednesday that they had decided this week to raise their interest rates because they were struggling to borrow money to finance the purchase of mortgages. The agency postponed the sale of $250 million in bonds this week because of turmoil in the credit markets, said Priscilla Almodovar, the president and CEO of the mortgage agency.” (NY Times, Oct. 1) 

Online Mortgages - The End of the Era of Loan Officers. “For the first time in history, online mortgage applications have surpassed traditional mortgage loan applications. The shift from traditional over the phone or face to face mortgage applications to online mortgage applications suggests that borrowers are becoming more sophisticated in their search for a new mortgage. Today's future homeowners are starting their home loan search online and are increasingly becoming more confident in completing an online mortgage.” (MarketWatch, Sept. 29)

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