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Thursday, November 03, 2011

Freddie Mac REO and Mortgage Rates

by Calculated Risk on 11/03/2011 01:15:00 PM

First, on mortgages rate, Freddie Mac reported: 30-Year Fixed-Rate Mortgage Averages 4.00 Percent

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average mortgage rates declining sharply as investors rushed to U.S. Treasury bonds amid concerns over the European debt market. The 30-year fixed at 4.00 percent marks the second lowest reading since it hit a record 3.94 percent in the October 6, 2011 PMMS, the lowest in history.
Freddie Mac also released their Q3 financial results today, from the WSJ: Freddie Mac Loss Widens
Freddie Mac posted a wider loss in the third quarter of $4.4 billion, marking its worst quarterly loss in more than one year.
The loss forced Freddie Mac to seek $6 billion in new aid from the Treasury ... The loss brings Freddie's total cost to taxpayers to $56 billion.
And on REO from the Third Quarter 2011 Financial Results Supplement

Here are a few excerpts on REO:

• The pace of REO acquisitions remained slow in 3Q 2011 due to continued delays in the foreclosure process for single-family mortgages. We expect these delays will likely continue into 2012. However, we expect our REO inventory to remain at elevated levels.

• REO dispositions remained high with over 25,000 homes sold, more than 70% of which were sold to owner occupants, or buyers who intend to live in the home.

Freddie REO Inventory• Excluding any post-foreclosure period during which a borrower may reclaim a foreclosed property, the average holding period for the company’s REO dispositions was 201 days for the third quarter of 2011 but varies significantly in different states.

Click on graph for larger image.

This graph shows the REO inventory for Freddie through Q3 2011. There was a slight decline in REO in Q3.

Fannie Mae will report tomorrow and the FHA in the next few days.

Freddie Single-family cumulative foreclosure and
short saleby vintageThe 2nd graph shows the single-family cumulative foreclosure transfer and short sale rates by book year.

The x-axis is by quarter post origination. The worst performing vintages for Freddie Mac are 2006, 2007 and 2008 followed by 2005 and 2004. So far it appears 2009 loans are back to normal and it is too early to tell for 2010 and 2011 loans.

Overall the worst performing mortgage loans were made in 2005 and 2006, but the GSEs were operating under a portfolio cap - and most of the terrible loans were private label and securitized by Wall Street. The portfolio caps were lifted in February 2008.