Who will Replace Fannie and Freddie

NEW YORK -- The U.S. Mortgage Bankers Association said on Wednesday it will ask Congress to transform mortgage lenders Fannie Mae, Freddie Mac into several smaller, privately held companies that would issue mortgage securities with a government guarantee.
The proposed framework from the industry group would give successor entities to Fannie Mae and Freddie Mac the authority to create securities backed by certain types of mortgage.
The new companies would guarantee the securities against defaults on underlying mortgages and pay fees into a federal insurance fund that would make good on interest and principal payments to bondholders if the companies were unable to make them.
"The government has an important, limited role to play to ensure a stable flow of funds for mortgages." said Michael Berman, MBA's vice chairman and chairman of the Council on Ensuring Mortgage Liquidity.
The MBA plan calls for government agencies, rather than the new companies, to assume the "mission" of promoting affordable housing that Congress has long assigned to Fannie and Freddie.
The number of new companies would be initially limited to two or three, the MBA said.


Fannie Mae and Freddie Mac were not immediately available for comment.





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Pressures on Mortgage Rates

Mortgage backed securities had another losing day yesterday moving lower in price by .375 in discount. Many lenders did reprice for the worse as the losses held through close. The stock market is one of the driving forces behind bond market losses at the moment as bond traders are taking some of their cues about the long term economic outlook from current stock performance. Sparking the stock market rally was the much better than expected earnings from Goldman Sachs and Johnson and Johnson. If stocks gain, it puts a damper on the safety-oriented mentality that can spur demand for bonds like treasuries and MBS. Although MBS have lost a fair amount of ground recently, bond and stock traders alike are waiting for additional data before a firm trend is likely to develop. This includes several of the more anticipated earnings announcements as well as the scheduled economic data. Of particular importance, according to many market participants, are earnings from JP Morgan, Bank of America and Citi. Once those chips are down and this reasonably busy week of data is over, there is a higher potential for a trend to develop in MBS for better or worse.

On the surface, the economic data yesterday favored the stock market over the fixed income market, but as the markets had time to digest the less superficial aspects of the reports, mitigating factors helped ease bond losses and keep a stock rally in check. Today we get several important data sets that will set the trend for today.

First out this morning is the weekly Mortgage Bankers’ Association applications index which tracks the weekly change in mortgage applications at major lenders. An increasing trend in purchase activity would be seen as a positive indicator for equities as home purchases lead to many other purchases including furniture, flooring, appliances, etc… Also, one would have to feel very confident in their own financial position and job security to purchase a new home, so economic factors relating to consumer confidence are also in play. The report has shown a large decline in purchase activity from last week moving lower by 9.4% and pointing to continued troubles in the housing market. Many economists and talking heads have stated that housing is a critical component of our potential recovery and although reports on housing and mortgages can vary greatly from week to week, this one is certainly not indicating an imminent recovery. On a positive note the refinance activity improved again last week moving higher by 18%. The increase in refinance activity can be attributed to the recent decline of mortgage rates back to the 5% mark.

In other data, the US Department of Labor released the monthly Consumer Price Index(CPI) which measures the price change of a fixed basket of goods and services at the consumer level. One of the biggest enemies of mortgage rates and indeed of bonds in general, is higher inflation. To explain why this is with broad strokes, if inflation decreases the value of today’s money, and fixed income investments pay a guaranteed return of today’s money, then the greater the inflation, the less and less a fixed income investment would return. Of course it’s going to return the amount of money it promises (one hopes), but if you’re planning on getting $1000 back in a year on a fixed income investment and inflation is so bad that, in a year from now $1000 only buys two cheeseburgers, the VALUE of your investment is obviously not as high as it is today when that same $1000 could buy a new TV and a week’s worth of cheeseburgers. Sounds like mortgage blogger paradise to me…
Back to the point, today’s data indicates a slightly higher than expected rate of inflation but most of the increase can be attributed to higher gasoline prices as was the case with yesterday’s PPI report. The headline CPI came in right on expectations at a month over month increase of .7% but year over year CPI posted a -1.4% decline which is the biggest decline since 1950! The core rate, which strips out volatile food and energy prices posted a slightly higher read of 0.2%. The market had anticipated only a 0.1% increase to the core rate. Year over year the core rate has risen by 1.7% which is well within the Fed’s comfort zone for inflation and better than last month’s 1.8% reading. Our economy needs inflation to grow and the Fed would like to see core inflation between 1% and 2%. With the recent decline in oil prices, this trend of higher consumer prices is not likely to continue. Following the release of this report, MBS have continued to move lower which will result in higher consumer borrowing costs.

The New York Fed has released the monthly Empire State Manufacturing survey which gives market participants a read on the strength of the manufacturing sector around the New York area. Readings below 0 indicate a contracting sector while readings above 0 indicate expansion. The release has indicated a much better than expected reading of -0.55 versus expectations of -4.5. This is a sizable improvement over last month’s -9.4 and contributes to the case for recovery which. As you know, most of data that are good for the recovery are bad for bonds, so this certainly did not help this AM’s situation.

The final data set this morning is the release of Industrial Production down -0.4% versus a consensus of -0.7%. This report shows how much factories, mines and utilities are producing and better than expected readings are generally good for stocks and bad for bonds. In May, this data set posted a drop of -1.1%. But remember, this is still a decline and “less bad” doesn’t necessarily equal “good.”

If you are keeping stats, the economic data, except for purchase applications, is all negative for fixed income. The downward pressure on MBS prices is continuing and so far this morning has posted another .25 in discount drop. This trend may be short-lived as we still have the FOMC minutes later today, jobless claims tomorrow and earnings reports to digest. Like yesterday, for MBS to manage any type of rebound they will need the stock market to move lower. That looks to be a difficult challenge this morning as stock market futures are pointing to a significantly higher open. If the stock market does change course, it will allow for money to flow back into treasuries first than into MBS. Currently, the benchmark 10 year note is continuing to move higher in yield and is trading at 3.54. Just last week, it was trading under 3.30! One reason we feel the current market has not set a firm trend is that the trading volume is extremely low. If market participants really feel the economy has turned, the rally in the stock market would see much higher level of trades. This is a key indicator of the market waiting for guidance but unfortunately the rally in the stock market is at the expense of the fixed income sector.

At 2pm eastern, the Federal Reserve will release the minutes from their last Federal Open Market Committee. Most of the information in the minutes will already be known, but market participants will review it thoroughly for any hints of future monetary policy and outlook on the economy. Matt and AQ will post any relevant details after the release on the MBS Commentary blog.

Early reports from fellow mortgage professionals are indicating the mortgage rates continue to move higher. The par 30 year fixed rate conventional mortgage is in the 5.00% to 5.25% range for the best qualified consumers. In order to qualify you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee. If you are accessing home equity, you should expect to pay higher costs or take a higher interest rate. For consumers seeking FHA or VA loans, expect the rate to be about .25% higher than conventional loans.

Changes in Home Appraisal Guidelines

The National Association of Home Builders (NAHB) is pleased with one underwriting guideline adjustment made last week by government sponsored enterprise, Freddie Mac.
Freddie Mac's Bulletin 2009-18 announced several changes to the GSE's underwriting guidelines. The changes deal mainly with the documentation required for income and asset verification, make "condominium hotel" loans ineligible for purchase, and eliminated Form 70A, Energy Addendum as a required attachment to appraisals.
More notably, Freddie Mac made several "Best Practices" recommendations for selecting appraisers and reviewing their products. One of these contained the statement that Freddie does not require appraisers to use Real Estate Owned, foreclosures or short sales in selecting comparable sales but rather that appraisers must "certify that comparable sales chosen are those most similar to the subject property." These should include distressed sales if they are representative, something many industry professionals have been requesting since the Home Valuation Code of Conduct was enacted on May 1, 2009.
In a press release on Monday, NAHB Chairman Joe Robson said that this was "a step in the right direction," but that this modification needed to go further. He called for additional changes that would allow appraisers the option of expanding both the geographic area and the time frame for comps in cases where local and recent contracts are heavily skewed toward distressed sales.
He cited a recent survey by NAHB that found that 26 percent of builders have seen signed contracts fall apart because of appraisals that do not reflect the contract sales price. Of these, 54 percent said that the questionable appraisals were actually coming in at less than the cost of building the home.
In addition, 60 percent of those responding to the survey knew of problems in their market areas caused by inadequate appraisal values. The biggest problem reported resulted from the use of foreclosures and distressed sales as comparables.
The NAHB's position is that such sales should not be used without appropriate adjustments to reflect the cost of improving them to a point where they are a valid comp and a reasonable alternative for the home buyer.
"Home builders are increasingly concerned that inappropriate appraisal practices are needlessly driving down home values," Robson said. "This, in turn, is slowing new home sales, causing more workers to lose their jobs and putting a drag on the economic recovery.
The NAHB further stated that current appraisal practices are causing other problems for builders by depressing the availability of acquisition, development, and construction funds. The low values being assigned to land and subdivisions have caused banks and investors to cut lending to builders, require additional collateral, or even call performing loans.
"If the spigot for housing production loans is cut off, there can be no housing recovery, and this has major implications for the economy as a whole," said Robson.

Bad Implications for Housing Recovery

The American Bankers Association's (ABA) today released Consumer Credit Delinquency data. The ABA report said that the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 0.1 percent to a new record high of 3.23 percent of all accounts being delinquent.
Closed-end installment loans are extensions of credit to a borrower in which all funds are dispersed at the time of the loan closing. These loans have scheduled periodic repayment plans based on the amount of principal that was lent and the interest rate that was charged by the lender. Most real estate and auto loans are forms closed-end installment loans, also known as closed-end credit. The ABA's overall delinquency rate includes direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal, and recreational vehicle loans.
The delinquent balances on those accounts rose from 3.16 percent to 3.35 percent of total balances due. The ABA defines a delinquency as payment that is 30 days or more overdue.
The weak labor market has been blamed for the record rate of delinquencies on credit card debt and home equity loans as job losses topped 2 million in the first quarter of 2009 leaving over 14.5 million Americans unemployed. ABA Chief Economist James Chessen said:
"When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we're going to see higher job losses in the next year, and I expect elevated delinquencies."
Chessen added that the unemployed may be using bank cards to bridge a temporary income gap, especially with less home equity to fall back on as housing prices continue to fall. Bank card delinquencies rose 23 basis points to 4.75 percent of all accounts, compared to 4.52 percent in the previous quarter. The balances on those delinquent accounts rose dramatically, up 108 basis points to 6.60 percent of the value of all outstanding bank card debt, marking a new record.

Illustrating the detrimental loss of consumer credit and its affect on housing was the home equity category of the report. Home Equity loan delinquencies rose 0.49 basis points to 3.52 percent of all accounts, a record high. The Home Equity Line of Credit category rose 43 bps to 1.89 percent of all accounts.
With continued job losses and longer periods of unemployment expected, further credit delinquencies are anticipated, especially if consumers are becoming increasingly reliant on credit cards to "make the ends meet". Credit issuers are thus likely to freeze or close accounts in anticipation of this event. With a loss of credit, consumers will be forced to make a decision on whether to make their housing payment or buy groceries to feed their family. Clearly this would lead to further housing delinquencies and eventually more foreclosures.
This draws attention to yet another roadblock to the Obama Administration's efforts to increase consumer spending via lower monthly housing costs. Because loans sold to the government sponsored enterprises, Fannie Mae and Freddie Mac, are subject to risk based loan level price adjustments, borrowers whose FICO scores are under 680 have a higher cost of borrowing than a consumer whose FICO score is over 680. The rising rate of delinquencies means more consumers will see their FICO score drop below 680 which implies more homeowners be subjected to higher housing finance costs. Not a positive omen for the prospects of a housing recovery.
Here is a look at the rest of the categories.....
Delinquencies rose for the following categories:
Direct Auto Loans from 2.03 to 3.01%
Mobile Home Loans from 2.96 to 3.70%
Personal Loans from 2.88 to 3.47%
Recreational Vehicle Loans from 1.38 to 1.52%
Delinquencies dropped for the following:
Auto Loans Made through Dealers from 3.53 to 3.42%
Marine Loans from 2.35 to 2.04%
Property Improvement Loans from 1.75 to 1.46%

delinquencies are still on the rise with Fannie

Fannie Mae, the mortgage goliath taken under government control last September, yesterday announced that its portfolio expanded by an annual rate of 35.1% in May, marking a stark contrast to the 19.2% decline in April.

In its summary of monthly highlights, the agency said it provided nearly $72 billion of liquidity to the market, mostly in the form of Mortgage-Backed Securities ($67.7 billion). Fannie also securitized more than $61 billion of whole loans within their investment portfolio.

Fannie, the largest funder of U.S. home mortgages, began accepting refinance mortgage originations in April, as part of its ‘Making Home Affordable’ Program. This helped their refinance volume increase to $57 billion in May.

“We expect that our refinance volumes will remain above historical norms in the near term, but may fluctuate from month-to-month based on a number of market factors,” the press release stated. Looking ahead, Fannie said the MHA Program “will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build.”

Fannie’s total portfolio of mortgage holdings grew from $770.1 billion to $789.6 billion in the month, and they are expected to expand it to $900 billion later this year, before reducing activity early next year.

Meanwhile, delinquencies are on the rise: Fannie said the pace of serious delinquent payments ― 90 days or more delinquent ― on single-family Fannie-sponsored mortgages soared 27 basis points to 3.42% in April. Just one year prior, the rate was 1.22%.

For multi-units, the serious delinquency rate was up two-tenths to 0.36%, quadrupling the rate from last year.

Delinquencies are expected to continue as the unemployment rate approaches double-digits.

Card Issuers Choke Firms With Rate Hikes, Limit Cuts

March 17 (Bloomberg) -- Susan Woodward isn’t renewing the lease on her music boutique and internet cafe in Jackson Hole, Wyoming, after nine years. The reason: doubling interest rates on her credit cards.

“My business is seasonal, so we count on credit to stock the store at the end of the slow season and prepare for the busy season,” said Woodward, who canceled her Citibank and Capital One credit cards in February after learning that rates would climb to 19 percent from 10 percent. She said she always made timely payments and kept low balances.

Almost three-quarters of U.S. companies with fewer than 500 employees are experiencing a deterioration in credit or credit- card terms at a time when half of them depend on credit cards as a primary source of financing, according to a December survey of 250 firms by the National Small Business Association, a trade group with more than 150,000 members.

The increase in credit-card costs has forced some business owners to stop using their cards, and at the same time declining credit limits are cutting their access to cash, said Todd McCracken, president of the Washington-based NSBA. Twenty-eight percent of small businesses in NSBA’s December survey said they had their card limits or lines of credit lowered in the second half of 2008.

There were about 27 million companies with fewer than 500 employees in 2007, according to estimates by the Small Business Administration’s Office of Advocacy.

Loans Drying Up

Bank loans are drying up as an estimated 70 percent of U.S. banks have tightened standards for small-business loans, based on a Federal Reserve January survey of senior loan officers.

Financial institutions may slash $2.7 trillion in credit- card lines by the end of 2010, according to a report published last week by Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group LLC in New York. Small-business owners often use business and personal credit cards, with 41 percent relying on a combination of both, based on data compiled by the NSBA.

“Small businesses in particular are getting squeezed on multiple credit fronts,” said Alan Blinder, an economics professor at Princeton University and former vice chairman of the Federal Reserve. “Some businesses are forced to turn to very expensive forms of credit or not get credit at all.”

Independent businesses with fewer than 500 employees created 60 to 80 percent of new jobs annually in the U.S. during the last decade, according to the Washington-based Small Business Administration’s Web site.

Credit Plan

President Barack Obama and Treasury Secretary Timothy Geithner said yesterday the U.S. will free up credit for small businesses by raising federal loan guarantees on Small Business Administration lending and increasing bank liquidity.

“Small businesses are the heart of the American economy,” Obama told a gathering of small-business owners, community banking executives and lawmakers at the White House. He said the measures announced yesterday are a “first step” of a continuing effort to help small business.

The Fed plans to start disbursing funds on March 25 from its Term Asset-Backed Securities Loan Facility program, or TALF, to prop up the market for consumer and small-business loans.

“If it succeeds, the TALF can be an important step in both preserving what’s left of consumer and small business lending and restoring those markets,” Blinder said.

Decrease Balances

If card limits are slashed or interest rates are increased, small-business owners should try to decrease the balances on all of their cards, not just one, so the ratio of debt to available credit is lower, a key in determining credit scores, said Jeff Van Winkle, an attorney in Grand Rapids, Michigan who represents small-businesses owners.

Borrowers should also ask vendors if they will extend credit so they can defer payment to the vendor, without penalty, instead of to the credit-card company, Van Winkle said.

Vendor financing may not be an option for Ralph Soto, who owns a construction company in Lutz, Florida. Twenty percent of the suppliers he uses won’t extend credit or are reducing credit lines, which has prevented him from bidding on certain projects that require up-front funding. Soto, 41, said the rate on his card issued by Capital One Financial Corp. has tripled, forcing him to cancel the card.

“If lenders don’t manage risk, they won’t have the funds to lend to anyone else,” said Ken Clayton, senior vice president of card policy at the Washington-based American Bankers Association. One significant way to manage risk in these economic circumstances is to reduce credit lines, Clayton said.

Risk Environment

Charge-offs, which are loans the banks don’t expect to be repaid, were 7.1 percent on average in January compared with 4.6 percent a year earlier, according to data compiled by Bloomberg. Consumers are falling behind on credit-card payments as U.S. unemployment reached 8.1 percent in February, the highest level in more than a quarter century.

American Express Co., the largest credit-card company by purchases, said yesterday net charge-offs rose to 8.7 percent of loans in February from 8.3 percent the previous month.

New York-based Citigroup Inc. may cut credit lines by $600 billion and Charlotte, North Carolina-based Bank of America Corp. by $500 billion, according to Whitney. She estimated New York-based JPMorgan Chase & Co. and American Express would decrease lines by $300 billion and $100 billion, respectively.

Rate Increase

Some customers will have their interest rates increased to reflect the current risk environment, said Pam Girardo, a spokeswoman for McLean, Virginia-based Capital One. Customers were notified in writing with a minimum 45-day notice and can opt to decline the changes and close the account, she said. A Citigroup spokesman, Samuel Wang, declined to comment on the specifics of Woodward’s case.

Woodward, 41, said three other stores along the main square in Jackson Hole are already empty, an unprecedented sight in her more than 20 years living there.

Since American Express reduced Jim MacRae’s credit limit from $25,000 to $1,500 and San Francisco-based Wells Fargo & Co. almost halved his business line of credit, he has been forced to require more than a 50 percent deposit from customers who buy office furniture from him. He can no longer afford to keep inventory in stock and sales have dropped by about 80 percent, he said.

“The stimulus package isn’t giving the companies I sell to the feeling that everything is going to be okay,” said MacRae, 59, who lives in Newport Beach, California. “Instead of buying office furniture, they’re laying people off.”

Tax Credit Forms and Rules Now in Place

The Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 Act aka the stimulus act.

The Department and the Internal Revenue Service which will manage it announced on Wednesday that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.

The credit is available to homebuyers who purchase a home before December 1 of this year. In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008 return due in April.

The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns. The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances.

The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.




For the purpose of this credit, a first time homeowner is defined as one who has not owned a home for the 36 months ending on the date of purchase.

The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000 for married taxpayers filing jointly. Above those income levels the credit is phased out gradually.

Homeowners who purchased a house between April 8 and December 31, 2008 are not eligible for the new credit. They are covered by the earlier legislation and can claim the $7,500 repayable credit.

Treasury Secretary Tim Geithner said in a press release from his department, "The expansion of the first-time home buyer tax break as part of the President's recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers. We view our economic recovery plan, our financial stability plan, and now this homeowner affordability plan as three legs of the same stool - an integrated whole that represents our immediate response to the current crisis."

Forms and instructions for claiming the credit on 2008 tax returns are available at www.irs.gov. The form number is 5405.

Freddie Mac says it will ask for about $30B to $35B

McLEAN, Va. (AP) — Mortgage finance company Freddie Mac said Friday it will need an additional $30 billion to $35 billion in government aid as it copes with losses on loans the company backed during the U.S. housing bubble.

The company disclosed in a Securities and Exchange Commission filing late Friday that it expects its government regulator, the Federal Housing Finance Agency, to make the request from the Treasury Department.

It comes on top of the $13.8 billion the company received last year after it was seized by the government. Sibling company Fannie Mae has yet to request any such aid but has warned it may need to do so.

Federal regulators seized control of both companies in September after they faced mounting losses from the housing market's bust. An agreement with the Treasury Department allows the government to invest up to $100 billion in each company.



The actual amount of the request will reflect the amount of losses the company sustained in the fourth quarter, Freddie Mac said in the filing.

The request suggests that losses are continuing for Freddie Mac, which posted a loss of $25.3 billion for the third quarter. In that report, Freddie Mac said that rising unemployment rates, tightening credit and deteriorating economic conditions caused the number of delinquent loans to rise, including prime loans made to borrowers with strong credit.

Meanwhile, Freddie Mac also disclosed that it settled a dispute with JP Morgan Chase & Co., which will now collect payments on mortgages previously handled by failed thrift Washington Mutual. The agreement settles a dispute with JPMorgan, which purchased Washington Mutual in late September for $1.9 billion.

Keep Your Home. Know Your Loan.” campaign promotes free housing counseling

HUD KICKS OFF SIX-CITY FINANCIAL LITERACY CAMPAIGN TO HELP TROUBLED HOMEOWNERS AVOID FORECLOSURE AND RESCUE SCAMS

NEW YORK - U.S. Housing and Urban Development Secretary today announced HUD's latest effort to prevent foreclosure by launching an aggressive consumer education campaign in six cities. HUD's "Keep Your Home. Know Your Loan." campaign will kick off in Chicago, Detroit, Los Angeles, Miami, New York and Phoenix. Preston launched the public awareness initiative at Neighborhood Housing Services, a New York City agency that offers clients free mortgage delinquency and default resolution counseling.


HUD's financial literacy campaign builds on the Department's continuing commitment to support its 2,600 housing counseling agencies across the country. In 2008, demand for HUD-approved counseling increased significantly. Meanwhile, the number of foreclosure rescue scams has also increased in response to the nation's housing crisis.

"This campaign is a call to action for families at risk of losing their homes," said Preston. "We want people to pick up the phone and call a HUD-approved housing counseling agency before they reach a point of no return.
Keeping your home may be as easy as dialing
(877) HUD-1515."

Many troubled homeowners seek help late in their financial crisis thereby limiting their loan modification options. HUD's campaign will target homeowners who are three-to-six months from defaulting on their mortgage, facing a reset on their adjustable-rate mortgage, or are experiencing a family crisis such as unemployment or skyrocketing health care costs in 2009.

The "Keep Your Home. Know Your Loan." campaign will include print, radio and television public service announcements, as well as a tool kit for non-profit counseling agencies that will support the effort. In each PSA, consumers are directed to call HUD's toll-free counseling hotline (877-HUD-1515) to arrange free face-to-face meetings with a counselor near them. Since most HUD-approved counseling agencies lack the resources for marketing and outreach, the Department is launching this campaign to help consumers earlier in their financial crisis and to fight the explosion of "pay-to-play" loan modification scams.

HUD's support for housing counseling agencies has grown significantly, from $20 million in 2001 to $50 million in 2008. In addition, federal support has now grown exponentially with $360 million in additional funds in 2008 specifically for foreclosure prevention counseling. HUD has requested another $65 million to support local housing counseling agencies in FY 2009.

Research finds HUD-approved housing counseling is effective to prevent foreclosure. A recent HUD study noted a 55 percent increase in the number of clients receiving foreclosure prevention counseling between 2006 and 2007. Of the approximately 136,000 families that completed this counseling during 2007, 45 percent were able to remain in their homes while 14 percent ultimately lost their home through foreclosure. This report also found that in the years leading up to the current crisis, more than 55 percent of low-income families seeking to buy their first home did not seek out pre-purchase counseling. This lack of counseling likely left them unprepared to make one of the biggest financial commitments of their lives and may have contributed to some of today's high rates of default and foreclosure.

Challenge: In light of the economic conditions, including declining home values and the increase of resetting mortgage rates, many Americans are facing significant challenges that are contributing to the alarming rate of foreclosures. HUD-approved Housing Counseling Agencies can help homeowners navigate their financial challenges. However, counselors have more options to assist clients when homeowners call early in the process before they are in crisis.

Response: Over the next 6 months, the U.S. Department of Housing and Urban Development is launching a national consumer education campaign urging homeowners to seek free, HUD-approved housing counseling advice. The campaign is a call to action for homeowners and target communities and demographic groups that are most at-risk.

Campaign goal: Provide marketing and outreach materials and technical support to assist housing counseling and non-profit agencies that provide services to homeowners. The hope is to target current homeowners to assist them in keeping their homes by:

Informing them of their loan terms and associated financial options;
Encouraging them to seek assistance early – call to action; and
Educating consumers on how to improve general financial literacy.
Components: The campaign provides a 'tool kit' which includes print, radio and TV PSAs, to support community, non-profit agencies that provide housing counseling services.

Partners: HUD is urging community, cultural, faith-based and political advocates to become involved in the campaign. In addition, HUD is seeking homeowner associations, real estate brokers and other members of industry to take an active role.

Target cities: Six cities were chosen for the launching of the campaign which are New York, Miami, Chicago, Detroit, Los Angeles, and Phoenix.

Campaign brand and hotline: Keep Your Home. Know Your Loan.

Call 1 (877) HUD-1515 for one of HUD's 2300 approved Housing Counseling Agencies in your local area. Visit http://www.hud.gov/keepyourhome.

Fannie Mae Announces National REO Rental Policy

Renters in Fannie Mae-Owned Foreclosed Properties
Eligible to Stay in Their Homes

WASHINGTON, DC -- Fannie Mae (FNM/NYSE) today announced the establishment of a new National Real Estate Owned (REO) Rental Policy that will allow qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The company currently has an eviction suspension in place through the end of January which will allow for the new policy to be fully operationalized prior to the suspension concluding.

"Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing," said Michael Williams, chief operating officer of Fannie Mae. "This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates."

The new policy applies to renters occupying foreclosed properties at the time Fannie Mae acquires the property. Renters occupying any type of single-family property will be eligible including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property.

While the company markets the properties for sale, Fannie Mae will manage the properties through a real estate broker or a property management company. The company will not require security deposits to be posted in connection with this program.


Renters in the foreclosed properties will be asked to pay market rate rent under the new leases. Rates may be determined by reviewing local comparable rents, conducting a neighborhood survey, or through other relevant indicators. Rates will also be subject to any legal rent control restrictions. The company will review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable resolution.

On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.