The Federal Housing Finance Agency (FHFA) has released a 2012 Conservatorship Scorecard, which provides the implementation roadmap for the new FHFA Strategic Plan announced in February. The scorecard includes specific objectives and timetables for Fannie Mae and Freddie Mac in support of the Strategic Plan.
FHFA also announced details on the new 2012 executive compensation programs at Fannie Mae and Freddie Mac. The 2012 pay program reduces top executive pay by nearly 75 percent since conservatorship, eliminates bonuses, and establishes a target for new CEO pay at $500,000. In setting this new compensation framework, FHFA concluded that further material reductions or uncertainty around compensation would heighten safety and soundness concern.
http://www.fhfa.gov/webfiles/23438/ExecComp3912F.pdf
The New York Times
The guarantee fee – a hidden fee inside the interest rate quoted on a home mortgage – has been mandated by Congress to increase this spring, and other increases are likely later to take place later this year and next.
Making sense of the story
- The guarantee fee has been charged by government sponsored entities like Fannie Mae and Freddie Mac for more than three decades. The fee does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry. According to a Fannie Mae spokesman, the fee “gets incorporated into the underlying rate the borrower pays.”
- An interest rate is usually made of up three parts: The largest goes to the bank or the investors who buy the loan; the smaller portion is for the mortgage servicer that collects monthly payments; and then there’s the guarantee fee. Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.
- The guarantee fee will rise 10 basis points on April 1; the increase was included in the two-month extension of the payroll tax reduction last December. A basis point is equal to one one-hundredth of 1 percent, or 0.01 percent.
- One way to avoid the guarantee fee is to use a lender that does not sell off its loans – for instance, a community bank or a credit union.
- In addition to offsetting risks, the fees provide a primary source of revenue for Fannie Mae and Freddie Mac. Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose.
Read the full story
http://www.nytimes.com/2012/03/04/realestate/mortgages-a-hidden-fee-is-set-to-rise.html?_r=1&ref=realestate
The New York Times
With interest rates at or near record lows, many borrowers are seeing little reason to pay points when buying or refinancing a home. Some are even opting for what’s known as “negative points,” agreeing to a slightly higher rate to help pay closing costs.
Making sense of the story
- Paying points enables a borrower to “buy down” the interest rate on a mortgage in exchange for an upfront fee. The trend away from points partly reflects borrower sentiment that rates are already low enough, according to industry experts.
- A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, in addition to other mortgage fees, taxes, and escrow amounts. Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance, instead of 4 percent, the rate is 3.75 percent.
- The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s. The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.
- The primary advantages of paying points are a lower rate and monthly payment. To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in close costs.
- Many mortgage professionals suggest following this rule: If the borrower plans to live in the home for at least five years, paying points will help the homeowner to reap savings.
- Some borrowers are even going for negative points, which is also called a lender rebate or points in reverse. In exchange for accepting a higher interest rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.
Read the full story
http://www.nytimes.com/2012/02/26/realestate/mortgages-points-lose-favor.html?_r=1&ref=realestate
Calif. median home price: January 2012: $268,280 (Source: C.A.R.)
Calif. highest median home price by region/county January 2012: Marin, $694,440 (Source: C.A.R.)
Calif. lowest median home price by region/county January 2012: Tehama, $110,000 (Source: C.A.R.)
Calif. Pending Home Sales Index: January 2012: 102.4, an increase from the revised 93.1 recorded in January 2011
Calif. Traditional Housing Affordability Index: Fourth quarter 2011: 55 percent (Source: C.A.R.)
Mortgage rates: Week ending 2/23/2012 30-yr. fixed: 3.95% fees/points: 0.8% 15-yr. fixed: 3.19 fees/points: 0.8% 1-yr. adjustable: 2.73% Fees/points: 0.6% (Source: Freddie Mac)
Calif. median home price: January 2012: $268,280 (Source: C.A.R.)
Calif. highest median home price by region/county January 2012: Marin, $694,440 (Source: C.A.R.)
Calif. lowest median home price by region/county January 2012: Tehama, $110,000 (Source: C.A.R.)
Calif. Pending Home Sales Index: December 2011: 91.6, an increase from the revised 82.5 recorded in December 2010
Calif. Traditional Housing Affordability Index: Fourth quarter 2011: 55 percent (Source: C.A.R.)
Mortgage rates: Week ending 2/16/2012 30-yr. fixed: 3.87% fees/points: 0.8% 15-yr. fixed: 3.16 fees/points: 0.8% 1-yr. adjustable: 2.84% Fees/points: 0.6% (Source: Freddie Mac)
