FORT WORTH, Texas – Sunday’s federal takeover of Fannie Mae and Freddie Mac has immediately pushed home loan rates downward by easing liquidity in the market and freeing the two secondary mortgage giants to buy mortgages.
“What happened at Fannie Mae and Freddie Mac over the weekend was a positive thing for consumers; people who are thinking about buying a home and people who are buying a home,” said David Motley, president of CU Members Mortgage, a division of Colonial Savings that provides mortgage services for almost 900 credit unions.
By shoring up the two mortgage giants, the federal government has lowered the prices on mortgage securities, allowing credit unions and other lenders to pass on the benefits to borrowers, he said. He estimated rates on 30-year mortgages dropped from three-eighths of a point to a half point. “That’s big, that’s huge,” Motley told The Credit Union Journal.
Claire Ippoliti, vice president of lending at Philadelphia FCU, which sells mortgages to Fannie Mae, said she hopes the government action will ease some of the pressures on Fannie that has prompted it to charge a premium, called an Adverse Market Delivery Charge, on purchases of even highly rated mortgages, and tightened underwriting standards for its My Community underserved mortgages.
The premium charges, also assessed this spring by Freddie Mac, last month were doubled by both companies to 50 basis points.
The pricing is a major determinant of whether credit unions will sell their mortgages on the secondary market, which basically means to Fannie or Freddie, or hold them in portfolio. According to CUNA, credit union sell about one-third of all new mortgages on the secondary market.
“From what I’ve read,” said Ippoliti, “we should see some of these price bumps go down,” she said.
Philadelphia FCU, in a market that has seen few disruptions in real estate prices, has kept pace with last year’s mortgage lending with $25 million of home loans in the first half of the year. Of those, $5 million worth were sold to Fannie Mae.
Confidence was the key word being circulated in the markets as the move appeared to guarantee all of Fannie and Freddie’s debt. “Our hope is it will add more confidence to the market and it will rebound,” said Jay Murray, president of MidAtlantic Corporate FCU.
