Federal Home Loan Mortgage Corp (Freddie Mac)

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Fannie and Freddie, the Big Mortgage Backers, Face Climate Risks

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Fannie Mae and Freddie Mac know increasing floods and wildfires are a problem. Dealing with them, however, would require trade-offs.As sea levels rise and natural disasters become more intense, homes in low-lying coastal areas or tinder-dry mountains are starting to lose value.That’s a problem for the finances of Fannie Mae and Freddie Mac, the government-sponsored enterprises that back half of the nation’s outstanding mortgages — and keep the residential real estate market liquid by buying mortgages from banks and repackaging them into securities.In the first year of the Biden administration, financial regulators seemed to recognize the risk, identifying the mortgage market as one of the main channels through which climate change could destabilize the financial system.Since then, reports have been published, comments gathered and summits held. But when it comes to insulating the two enterprises and borrowers from climate-related catastrophe, the Federal Housing Finance Agency — which regulates Fannie and Freddie — has issued only vague guidance.“It came out and I thought, where’s the rest of it?” said Carlos Martín, director of the Remodeling Futures Program at the Harvard Joint Center for Housing Studies.The issue comes with risk for taxpayers as well, since the federal government took Fannie and Freddie into conservatorship in 2008 after the financial crisis. Fannie and Freddie have reserve capital buffers, but large losses could force the government to intervene.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    30-Year Home Mortgage Rate Falls to 6.47%

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    The key mortgage rate had its biggest one-week decline of the year, falling to the lowest level in 15 months.Mortgage rates have fallen to their lowest level in more than a year, a balm for prospective home buyers and sellers in a challenging real estate market.The average rate on 30-year mortgages, the most popular home loan in the United States, dropped to 6.47 percent this week, Freddie Mac reported on Thursday. That rate has been steadily easing since April, when it rose above 7 percent — a relief for not only buyers, but also potential sellers who have felt locked into lower rates on their existing loans and have kept their houses off the market.The decline, from 6.73 percent a week earlier, was the biggest this year.Mortgage rates stood at around 3 percent in late 2021. They began climbing when the Federal Reserve started raising its benchmark rate to combat inflation, reaching levels not seen in two decades.“The decline in mortgage rates does increase prospective home buyers’ purchasing power and should begin to pique their interest in making a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.The decline in mortgage rates could also allow existing homeowners to refinance, Mr. Khater said. The share of market mortgage applications that reflect refinancing was the highest in more than two years, according to Freddie Mac.The Fed is expected to start lowering interest rates in September after holding them at 5.3 percent for the past year. Investors increasingly anticipate that the initial cut will be half a percentage point.While the Fed’s benchmark rate and mortgage rates aren’t directly connected, a Fed rate cut could indirectly put even more downward pressure on mortgages. The 10-year U.S. Treasury yield, which underpins borrowing costs, dropped this week as panic ensued after a weaker-than-expected jobs report, contributing to the mortgage-rate movement.Sales of existing homes slipped 5.4 percent in June from a year earlier, according to the National Association of Realtors — a sign of continued sluggishness in the housing market. Homes sat on the market longer, and sellers received fewer offers.The lower mortgage rate could encourage some homeowners to get into the market, said Julia Fonseca, an assistant professor of finance at the University of Illinois at Urbana-Champaign. But as of March, nearly 60 percent of mortgage holders had rates of 4 percent or less, she added, still far from the current cost of borrowing.“It’s a step — but it’s a small step,” Ms. Fonseca said of the latest drop. “We’re moving in the direction of lowering borrowing costs and less lock-in, but we still have a ways to go if we consider how low these rates that people have locked in actually are.” More

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    What the Fed’s Rate Hike Means for Mortgages

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    What does the Fed’s decision to raise its key interest rate by three-quarters of a percentage point mean for mortgages? [Here’s what the Fed’s decision means for credit cards, car loans and student loans.]Rates on 30-year fixed mortgages don’t move in tandem with the Fed’s benchmark rate, but instead track the yield on 10-year Treasury bonds, which are influenced by a variety of factors, including expectations around inflation, the Fed’s actions and how investors react to all of it.“We are seeing rates move up pretty briskly and a lot of that has to do with forward-looking expectations with where things are headed,” said Len Kiefer, deputy chief economist at Freddie Mac. “Maybe inflation will be stickier than the market thought.”Mortgage rates have jumped by two percentage points since the start of 2022, though they’ve held somewhat steady in recent months. But with consumer prices still surging, mortgage rates are on the rise once again — by some estimates, reaching as high as 6 percent.The closely watched rate averages from Freddie Mac won’t be released until Thursday, but they already began to tick a bit higher last week: Rates on 30-year fixed rate mortgages were 5.23 percent as of June 9, according to Freddie Mac’s primary mortgage survey, up from 5.09 percent the week before and 2.96 percent the same week in 2021.Other home loans are more closely tethered to the Fed’s move. Home equity lines of credit and adjustable-rate mortgages — which each carry variable interest rates — generally rise within two billing cycles after a change in the federal funds rates. More

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    Mortgage Rates Hit 4 Percent for First Time in 3 Years

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    Mortgage rates topped 4 percent this week for the first time in nearly three years — and are expected to keep climbing.The rate on 30-year fixed-rate mortgages averaged 4.16 percent for the week through Thursday, the first time it exceeded 4 percent since May 2019, according to Freddie Mac. That was up from 3.85 percent a week earlier and 3.09 percent a year ago.Rates have been ticking up thanks to a 40-year high in inflation, which the Federal Reserve is attempting to rein in by raising interest rates. On Wednesday, the Fed raised its benchmark rate by a quarter of a percentage point, the first increase since 2018, and it signaled that six more similarly sized increases were on the way.Mortgage rates don’t move in lock step with the Fed benchmark — they instead track the yield on 10-year Treasury bonds. That figure is influenced by a variety of factors, including the inflation rate, the Fed’s actions and how investors react to them.“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.“While home purchase demand has moderated, it remains competitive due to low existing inventory, suggesting high house price pressures will continue during the spring home-buying season,” he added.The average rate on 30-year fixed mortgages dropped as low as 2.65 percent in January 2021. More