Fannie Mae announces relief for investors
Fannie Mae announced that its new Payment Reduction Plan (PRP) will provide forbearance for borrowers who are ineligible for the Home Affordable Modification Program (HAMP). The mortgage principal and interest payments will be reduced by up to 30% for borrowers qualified for PRP, which replaces Fannies HomeSaver Forbearance program. PRP reduces the payments by 30% rather than the previous 50% under HomeSaver Forbearance, because permanent solutions are closer to 30%, Faith said. Faith added that non-owner-occupied properties became eligible under PRP, and owners will receive new options and support for their investment properties and second homes even though they do not fit under the HAMP umbrella. The US Treasury Department provides capped incentives to servicers for the modification of eligible loans on the verge of foreclosure through HAMP. The PRP will grant transitional support for borrowers who do not qualify for HAMP while more permanent mortgage solutions ar e determined, according to Brian Faith, a vice president at Fannie Mae.
Home prices rise - Case-Shiller
The Standard & Poor's/Case-Shiller home price index of 20 major cities climbed 1 percent from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February. It shows a widespread turnaround with prices rising month-over-month in 15 metro areas since June. "If the increases are consistent across the markets, this is key," said Susan Wachter, Wharton School real estate professor, before the index was released. "Then we're seeing the formation of a bottom." However, rising unemployment and more foreclosures could stifle the rebound. Another unknown is whether a temporary federal tax credit for first-time buyers will be extended to help boost sales. The real estate industry is lobbying Congress to extend the credit past the Nov. 30 deadline. Top Democrats in the Senate are pressing a plan that would prolong the credit but gradually phase it out over the next year.
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Freddie Mac announced today that its mortgage investment portfolio grew by an annualized 7.3 percent rate in September, while delinquencies on loans it guarantees accelerated. The portfolio increased to $784.2 billion, for an annualized 3.4 percent decrease year to date, and delinquencies, which increase stress on the company's capital, jumped to 3.33 percent of its book of business in September from 3.13 percent in August and 1.22 percent in September 2008. The multifamily delinquency rate accelerated slightly in September to 0.11 percent from 0.10 percent in August. A year earlier it was 0.01 percent.
2010 is shaping up for a weak recovery The Federal Reserve is in no rush to pull back its extensive economic life support measures. Chicago Federal Reserve President Charles Evans said: We have to think about our exit policy and are looking at it very carefully, but at the moment, that's not our first order concern, at the moment, its policy accommodation. I think that the recovery is going to be very unsatisfactory in 2010. Evans, who will vote on the Fed's policy-setting panel in 2010, said he expects unemployment to rise above ten percent. The Fed has cut rates to near zero and pledged to hold rates there for an extended period. Its next policy-setting meeting is Nov. 3-4 and it is not expected to signal any movement toward an exit then. High unemployment and low inflation rates both indicate that policy accommodation is in order, and with economic growth, household spending will be restrained and businesses will face weaker demand for their goods and services, Evans said. "It is not going to feel l ike a recovery for some time.
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