DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

Fannie Mae’s recent report indicated that the portfolio balance remained stable at $779.4 billion in August 2009.  The August stabilization follows a July pullback of 18.2% and lowered the year-to-date decline to –1.5%.  Meanwhile, Freddie Mac reported a stunning decline of 30% in its August portfolio size as volume fell to $779.4 billion.  Year-to-date decreases at Freddie Mac have settled at –4.7%.

 

Congress has mandated that Fannie Mae and Freddie Mac trim their portfolios by 10% per year beginning in 2010.  Trimming is to continue until portfolios settle at $250 billion each.  Both funds have used the opportunity to elevate credit requirements to boost the quality of the two troubled portfolios.

 

Fannie Mae’s delinquency rate rose sharply by 23 basis points in August.  Fannie Mae loans that required mortgage insurance or the “credit enhanced” borrowers are incurring the greatest number of foreclosure actions.  “Credit enhanced” delinquencies rose to 10.83%.  Non-credit-enhanced delinquencies also increased to 2.47%. 

 

Delinquencies among non-credit enhanced borrowers are most troublesome as delinquencies are rising at a faster rate than the credit-enhanced failures.  Investors will note that delinquencies in multi-family loans are 400% above year-over-year figures.

 

The Obama Administration has countered these trends with aggressive loan modification programs for Freddie Mac and Fannie Mae borrowers.  New incentives have been added to the loan modification plans.  Lenders who process loan modifications for Freddie Mac and Fannie Mae loans receive $1,000 per year for three years while the homeowner who remains current with the new modification receives a $1,000 principal reduction for each of the first three years. 

 

While Fannie Mae and Freddie Mac have been pressured, the rise in Ginnie Mae activity is surprising.  Ginnie Mae’s fund has quadrupled in size as credit demands have eased and loan limits have increased beyond $729,000.

This entry was posted on Friday, October 16th, 2009 at 1:02 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.