Items of Interest:
Mortgage Applications Fall to Lowest Level in Six Years -- Mortgage applications headed downward again last week, reaching levels not seen since 2002 as refinance volume continues to shrink and purchase applications remain at historically low levels. The Mortgage Bankers Association said Wednesday morning that its weekly survey of applications found a 1.5 percent decrease in its composite application index, to 419.3 for the week ended Aug. 15. That total was off 34.2 percent compared to year-ago application volume.
The MBA application index is calibrated to March 16, 1990; a reading of 419.3 means that application activity was roughly 4.2 times greater than when the index was first established. Application volume is now off 61 percent from its 2008 peak, recorded in February.
The drop in the MBA index roughly corresponded to results in a separate application index, the MAX series published by Mortgage Maxx LLC and often used by Wall Street prepayment researchers as a forward demand indicator; the MAX index fell 3.3 percent to a reading of 117.3 for the week ended Aug. 15, while a subindex tracking application activity in California fell 4.3 percent.
“With two more weeks left until the unofficial end of summer and mortgage rates threatening six-year highs, little on the horizon suggests any reversal of the current seasonal trend through the end of 2008,” said Mortgage Maxx publisher Paul Descloux...
Rising Cost of Debt Stokes Fears On Freddie's Prospects -- Freddie Mac was forced to offer unusually rich terms to investors in a $3 billion auction of its debt, raising anew concerns about the health of the mortgage giant, a vital prop for the U.S. housing market.
Investors increasingly believe the U.S. government will take steps to rescue Freddie Mac and its sibling, Fannie Mae. The Treasury Department recently received authority from Congress to bail out the two companies, although it stopped short of doing so. Both now play a dominant role in financing mortgages. A rise in the companies' borrowing costs could translate into higher mortgage rates for consumers, prolonging the housing slump...
Seeking Alpha: Will a 7% Mortgage Threat Doom Fannie and Freddie?
Big Picture: Paulson Playing Chicken With Markets: Guess Who Will Win? (GSE Edition)
Fannie's Perilous Pursuit of Subprime Loans -- As It Tried to Increase Its Business, Company Gave Risks Short Shrift, Documents Show
In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board.
Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."
A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.
Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers...
Infectious Greed: Desperately Seeking Subprime
The Big Picture: His Name is Mudd -- I find it amusing that some lying liars argue that the Fannie Mae (FNM) and Freddie Mac (FRE) were "forced" to purchase sketchy mortgages by some government HUD or CRA mandate. As the Washington Post reveals, that turns out to be completely false. Rather, it was a mad grab for growth that sent Fannie into the arms of the most risky mortgages...
Foreclosures likely skewing housing indicator -- Some analysts say market conditions are worse than what the data show
As if the housing market wasn’t scary enough, the record-setting surge in foreclosures could be distorting some of the closely watched housing data used to gauge the market’s health.
The foreclosure glut is making listings of homes for sale a less reliable indicator, because much of the distressed inventory might be left out. In addition, fire-sale prices for such properties may also be skewing volume figures.
Some real estate analysts say this may indicate that housing conditions are worse than they now look, dampening hopes that the troubled market could soon be bottoming out...
Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 percent from about 175,000 in the same month last year and up 8 percent from June, RealtyTrac Inc. said...
- A Bottom in Housing? You've Got to Be Kidding! - video, Big Picture
- Downward Pressure on Rents - Calculated Risk
- Behind the Housing Gloom An Improving Backdrop - The Economist
- Who Will Win--Henry Paulson or the Markets? - Naked Capitalism
- Hip-Hop Homes For Sale - Forbes
- Housing Starts Fall on a Technicality - Adam York, Wachovia
- Banks Have Lost $500bb - Bob Eisenbeis, Cumberland Advisors