Broker's Blog

With Fannie Mae and Freddie Mac

I was just discussing with a colleague of mine all of the different rumors regarding housing and mortgage lending which are reported as fact, and what the real figures are. Ironically, he received an email today with links to both Fannie Mae and Freddie Mac 2009 2^nd quarter statements. They are full of information regarding profitability, loan portfolio allocation, delinquency rates, geographical housing depreciation/appreciation, modification info, and forecasts. I particularly like how Texas is positioned as one of the strongest housing markets in the country (see page 4 of Fannie Mae report and page 12 of Freddie Mac report)! It is also nice to see that both agencies are improving profitability. Delinquency rates also appear to be lower than they are frequently reported in the mainstream media. I encourage anyone wanting a deeper understanding of the current state of affairs within the agencies (which secure the majority of all residential mortgage loans) to thumb through the documents (links attached, below).

Fannie Mae: http://www.fanniemae.com/ir/pdf/sec/2009/q2credit_summary.pdf

Freddie Mac: http://www.freddiemac.com/investors/er/pdf/supplement_2q09.pdf

With the Federal Reserve and Interest Rates

I mentioned in yesterday’s blog that the Federal Reserve is easing out of the Mortgage Backed Security Market by the end of March. The following is a link to a brief NASDAQ article which mentions the same:

http nasdaq://www..com/newscontent/20090923/Federal-Reserve-slowing-pace-of-mortgage-securities-program.aspx

Rates are still floating in the neighborhood of historic lows. There was a significant decline in MBS pricing this morning, but rates are still very strong, for the time being. Below is a graph of Mortgage Backed Security pricing over the last 30 days. A decrease in price (red) represents and increase in rates, while an increase in price (green) indicates a decrease in rates. (This graph is provided by www.mortgagemarketguide.com ).  Kiplinger forecasts rates in the 6+% range for 30yr fixed conforming mortgages by March 31, 2010.

With Cash on the Sidelines

Yesterday, I mentioned that there was a large amount of capital sitting on the sidelines which could help boost demand for mortgage backed securities (and bonds/stocks, too). A fellow blogger (thanks, Trey) filled me in on a Bloomberg article from September 28 by Lynn Thomasson and Michael Tsang which discusses the “enormous stockpile of liquidity” which is on the sidelines. To read the article in its entirety, please click on the following link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a98FvdWy6eLA

As always, thank you for taking the time to read this update…I look forward to your comments. -Marshall