Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!

This is part one of my update on residential real estate mortgages, whose credit conditions have seen a marked improvement over the past year. Of course (yes, you know  there is always a but), I believe the improvement is the result of the rampant government intervention in the mortgage markets. As we shall see in part two for this update, even with rampant intervention some of the major mortgage institutions are so sick as to appear to be beyond mere assistance. Brace yourself for Financial Meltdown 2.0, open source edition.

Is it really a Housing Double Dip if Conditions Never Stopped Getting Worse?

Many analysts have speculated housing would reenter a “double dip” courtesy of falling home prices, decreasing home sales, increasing housing inventory, and other issues that have not been resolved since the collapse of the housing market began nearly three years ago.  Inevitably, housing policy at the federal level has completely failed to support any regeneration of demand.

Mortgage Rates Can’t Find Rock Bottom: WSJ

  • The Freddie Mac survey of 30 year mortgage rates has shown new record lows in rates for 11 straight weeks
  • 15, 10, and 5 year rates have also continued their free fall as employment data fails to ease fear in the housing market

Figure 1: Courtesy of Freddie Mac

Figure 2: Courtesy of the Kansas City Federal Reserve Branch

Figure 3: Courtesy of the National Association of Realtors

Housing Prices Climb amid Falling Home Sales (the government’s hidden bid at work): CBS

  • Foreclosures continue to increase, July home sales fell by 27%, employment conditions are not getting better, and home prices found a way to rise 7%
  • Robert Shiller claims the San Francisco market is “booming” after climbing 21% since 2009 (but don’t ask about the record drops in 2008)
  • If you are wondering where your unemployed neighbor is spending all of his free time, check and see if there is a distressed homeowners convention in town

Figure 4: Courtesy of the National Association of Realtors

Federal Reserve Still Watching Foreclosure Data: International Market News

  • Average property vacancies have increased from 114 days in 2006 to 954 days in 2010
  • Data is positively skewed thanks for foreclosure forgiveness programs, so when/if “owners” are kicked out or leave their underwater mortgages, the “vacancy turnover” will rise considerably
  • Current homeowners should be very concerned about the effects on their property values as extended vacancies pent up seller demand  and ramping foreclosure inventory drive neighborhood home values lower

One Last Shot at Housing Stimulus: Mortgage News Daily

  • Freddie Mac has announced it will allow refinancing at the record low rates under current conditions at up to 95% LTV
  • Similar programs have proven to be ineffective, and the 95% LTV perk will not be accessible for debtors already underwater (and if you take the 95% loan, you can join the underwater homeowners in as little as 3 months in many locations!)
  • New home financing only blows a larger bubble, as overall housing (over)supply continues to haunt the real estate market

Figure 5: Courtesy of the National Association of Realtors

Previous rants on this topic:

  1. A New Spin on Bank Fraud: Banks Defrauding Their Investors, Auditors and Regulators, Which Also Helps Delinquent Mortgagees
  2. As I Made Very Clear In March, US Housing Has a Way to Fall
  3. Developing Implications on Loan Accounting Law: Mark to Market, Mark to Model, or Mark to Market Crash?
  4. Recent Mortgage Loss and Credit Performance Commentary
  5. Is the Threat to the Banks Over? Implied Volatility Says So