Fannie and Freddie Dramatically Step Up MBS Purchases

Responding to increased federal pressure to help lower mortgage rates, both Fannie Mae and Freddie Mac significantly increased their purchase of their own mortgage securities last month. According to new numbers released by both government-sponsored enterprises, combined MBS holdings jumped $47.5 billion in November. That was up from an already high $42.5 billion in October.

Together, Fannie and Freddie now hold $1.6 trillion in their retained portfolios. Significantly, the GSEs’ increased MBS purchases come at a time when their own issuance of mortgage securities has been declining. Freddie’s purchase of about $42 billion in its own MBS last month exceeded its new production by nearly three fold. That means that Freddie is not only buying up all
the available supply of its new MBS but also a sizeable amount from bank and other investors’ portfolios.

Mortgage Rates Drift Slightly Higher Approaching New Year

After reaching record low levels right before Christmas, 30-year mortgage rates crept back up to slightly over 5 percent this week, according to the Inside Mortgage Finance weekly survey of rates. Today’s average 30-year conforming mortgage rate was 5.09 percent with .4 points. This compared to an average conforming loan rate of 4.84 percent and .5 points  the lowest ever recorded by Inside Mortgage Finance on December 12.

While low mortgage rates have stimulated a lot of refinance applications, it’s unclear what they will do for actual mortgage originations in the weeks and months ahead. Based on October and November mortgage activity, it appears that total originations in the fourth quarter will be down 15-20 percent from the third quarter’s already dismal $300 billion level.

Mortgage Lenders Watch Servicing Replenishment Rate Hit Record Low

Mortgage originators, reluctant to ramp up their lending activities in the current depressed housing market, are having a tough time keeping pace with servicing runoff. According to new numbers compiled by Inside Mortgage Finance, mortgage servicers overall managed a replenishment rate of just 11 percent in the first three quarters of 2008.

The replenishment rate is new originations as a percentage of total servicing outstanding. This year’s rate compared to a
replenishment rate of 22 percent in 2007 and a 29 percent rate in 2006. Of the top 10 servicers, Washington Mutual and Bank of America had the lowest replenishment rates while Wachovia and Chase had the highest rates. The record low replenishment rate helps explain why the volume of mortgage debt outstanding has declined for the first time ever this year.

Lenders Balk at Taking Responsibility for Broker RESPA Disclosures

Mortgage lenders increasingly are balking at the prospect that they will need to take responsibility for the mortgage disclosures brokers make under a new Real Estate Settlement Procedures Act, or RESPA, regulatory regime. Lenders argue it’s impossible to regulate brokers who generally make RESPA-required disclosures before they decide who
they will sell a mortgage to.

Department of Housing and Urban Development officials will be responding to this and other lender RESPA complaints at an Inside Mortgage Finance-sponsored audio conference that will be held at 3 pm EST today.

Click here for more info.

Delinquencies and Foreclosures Continue to Rise

According to the Inside Mortgage Finance Large Servicer Delinquency Index, 7.20 percent of home mortgages were in some stage of delinquency or foreclosure as of the end of September. That was up 110 basis points from the previous quarter.

Foreclosure starts on subprime adjustable-rate mortgages actually fell 16 basis points from the previous quarter to 6.47 percent in the third quarter of 2008, according to the Mortgage Bankers Association. However, the group cautions that indications that subprime foreclosures are leveling off could be misleading as servicers implement foreclosure prevention efforts.

Loan Mod Efforts Increase Along with Re-Defaults

Fannie Mae this week expanded its loan modification encouragement while further guidelines for Freddie Mac and non-agency mortgages are expected Dec. 15. However, the Office of the Comptroller of the Currency questioned servicers’ current mod efforts.

Among other changes, Fannie provided specific direction to servicers to provide foreclosure-prevention assistance as soon as a borrower demonstrates the need for help, even when a borrower is current but default is reasonably foreseeable. The OCC, meanwhile, revealed that 58.0 percent of the mortgages modified in the first quarter of 2008 re-defaulted within eight months.