Mixed Messages in Mortgage Market

On the one hand, Fannie Mae had a pretty terrific March as far as refi’s go, racking up $77-billion worth of business for the best performance in that area since 2003. Fannie executive vice president Tom Lund calls the volume “very encouraging,” and expects the levels to increase. More than half a million people have logged onto Fannie’s website to ask about refi’s under the Obama administration’s “Making Home Affordable” plan.

On the other hand, the Federal Housing Administration is running low on cash in its insurance fund because of soaring defaults. In recent Congressional testimony, Housing and Urban Development inspector general Kenneth Donohue said fund levels are “going in the wrong direction,” although he couldn’t say whether a bailout was down the road.

Then again, data from the Office of Comptroller of the Currency and the Office of Thrift Supervision shows what kind of loan modifications really work: “When modifications decreased monthly payments by more than 10 percent, only about 23 percent of the loans became seriously delinquent six months later. By contrast, some 51 percent of the loans in which payments remained unchanged were seriously delinquent after six months. The comparable number for loan modifications in which payments increased was 46 percent.”

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