Secondary Market

In a blog post published late last week, Urban Institute’s researchers assert, “A market composition change—not lower lending standards—explains the decrease in average credit scores for conventional and FHA [Federal Housing Administration] mortgages. “Despite rising home prices and gradual housing recovery, the mortgage lending rules have remained tight, inhibiting housing demand and economic growth,” they continue.

In a release issued this week, Freddie Mac announced it has opened up its “full menu” of relief policies for homeowners whose homes were damaged or destroyed by late April storms that swept across parts of the South and the Great Plains.

Worst-case scenario: In the event of repeat of the 2008 economic downturn, the federal government’s main mortgage buyers, Fannie Mae and Freddie Mac may need another $190 billion bailout to keep them solvent.

Federal Reserve leaders concluded their April meeting on Wednesday, revealing they have again voted to scale back the Fed's monthly asset purchases. Beginning in May, the committee will add only $20 billion in mortgage-backed securities per month rather than the previous pace of $25 billion. Additionally, longer-term Treasury securities will be scaled back to $25 billion per month rather than $30 billion.

One way the federal government has accounted for local market differences is through the conforming loan limit: the maximum amount of a home loan that Fannie Mae and Freddie Mac can guarantee. However, according to Trulia chief economist Jed Kolko, this current system falls far short of reflecting the actual differences in local home prices and ends up favoring borrowers in lower-cost markets.

Freddie Mac’s mortgage portfolio has declined in each of the first three months of this year with the fastest annualized decline in March, according to the GSE’s latest monthly volume summary. Freddie’s mortgage portfolio declined at an annualized rate of 2.9 percent in March. The last time the GSE’s portfolio grew was in December, when it demonstrated an annualized growth rate of 0.4 percent.

The Federal Housing Finance Agency (FHFA) announced last week the latest in a string of settlements with major banks over residential mortgage-backed securities sold to Fannie and Freddie before the economic meltdown. The most recent agreement, struck with Barclays Bank, calls for $280 million in payments to the GSEs.

According to Fitch Ratings' latest quarterly index, prepayment rates among U.S. residential mortgage-backed securities (RMBS) have declined to the lowest levels of the post-crisis era. Fitch Ratings' director Sean Nelson ...

In its weekly Primary Mortgage Market Survey, Freddie Mac reported the 30-year fixed-rate mortgage (FRM) averaging a rate of 4.34 percent (0.7 point) for the week ending April 10, a decline from 4.41 percent last week. A year ago at this time, the 30-year fixed was down nearly a full percentage point: 3.43 percent. Bankrate.com’s weekly national survey showed similar rate changes.

Citigroup announced this week it has agreed to pay approximately $1.13 billion to settle repurchase claims on residential mortgage-backed securities (RMBS). According to the bank’s announcement, Citi has agreed to make a binding offer to the trustees of 68 Citi-sponsored mortgage trusts that issued a combined $59.4 billion in RMBS from 2005–2008.