Feds Want to Make Fannie and Freddie Foreclosures Rental Properties

The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), announced a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac, and the Federal Housing Administration (FHA).

The RFI’s objective is to help address current and future REO inventory. It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.

The RFI calls for approached that meet a number of objectives including "strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO."

“As we continue moving forward on housing finance reform, it’s critical that we support the process of repair and recovery in the housing market,” said Treasury Secretary Tim Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability.”

HUD Secretary Shaun Donovan said in the press release the move could also alleviate the strain on the affordable rental market. 

S&P Downgrades Fannie and Freddie

Standard & Poor's has downgraded mortgage giants Fannie Mae and Freddie Mac from AAA to AA+ citing the company's reliance on the U.S. The S&P action also included 10 of 12 federal home loan banks. government. Fannie and Freddie were taken over by the government in 2008.

Commercial/Multifamily Mortgage Lending Up 107 Percent from Last Year

Second quarter 2011 commercial and multifamily mortgage loan originations were 107 percent higher than during the same period last year and 52 percent higher than the revised figures for the first quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

“Commercial/multifamily mortgage borrowing and lending continues to rise from the depths of 2009 and 2010,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Greater stability in property fundamentals and prices, and an improving sales market, are providing greater clarity for borrowers and lenders alike. Property values and interest rates – coupled with job growth, consumer spending, household growth and other macro-economic trends that drive demand for commercial real estate – will be keys to how property owners seek and qualify for mortgage financing going forward.”

Second Quarter 2011 Originations 107 Percent Higher than Second Quarter 2010

The 107 percent overall increase in commercial/multifamily lending activity during the second quarter of 2011 was driven by increases in originations for all property types. When compared to the second quarter of 2010, the increase included a 141 percent increase in loans for health care properties, a 125 percent increase in loans for hotel properties, a 116 percent increase in loans for retail properties, a 114 percent increase in loans for multifamily properties, a 54 percent increase in office property loans, and a 34 percent increase in industrial property loans.

Among investor types, loans for conduits for CMBS saw an increase of 638 percent compared to last year’s second quarter. There was also a 150 percent increase in loans for commercial bank portfolios, an 87 percent increase in loans for life insurance companies, and a 58 percent increase in loans for Government Sponsored Enterprises (or GSEs – Fannie Mae and Freddie Mac).

Second Quarter 2011 Originations 52 Percent Higher than First Quarter 2011

Second quarter 2011 commercial/multifamily mortgage originations were 52 percent higher than revised originations in the first quarter of 2011. Compared to the first quarter, second quarter originations for health care properties saw a 161 percent increase. There was an 87 percent increase for hotel properties, a 73 percent increase for retail properties, a 47 percent increase for multifamily properties, a 31 percent increase for office properties, and a six percent increase for industrial properties.

Among investor types, loans for conduits for CMBS saw an increase in loan volume of 210 percent compared to the first quarter, loans for commercial bank portfolios saw an increase in loan volume of 41 percent compared to the first quarter, originations for life insurance companies increased 37 percent from the first quarter to the second quarter of 2011, and loans for GSEs increased by 20 percent during the same time span.

Record Low Mortgage Rates Recorded

Freddie Mac today released the results of its Primary Mortgage Market Survey showing mortgage rates dropping sharply amid falling bond yields and signs of a weaker than expected economy. The 30-year fixed averaged 4.39 percent, its lowest level for 2011. The 15-year fixed and 5-year ARM set new historical record lows averaging 3.54 percent and 3.18 percent, respectively.

The 30-year fixed-rate mortgage (FRM) averaged 4.39 percent with an average 0.8 point for the week ending August 4, 2011, down from last week when it averaged 4.55 percent. Last year at this time, the 30-year FRM averaged 4.49 percent.

The 15-year FRM this week averaged 3.54 percent with an average 0.7 point, down from last week when it also averaged 3.66 percent. A year ago at this time, the 15-year FRM averaged 3.95 percent.