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30- 15-year mortgage rates hold steady for second week

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WASHINGTON (10/31/11)--Average rates on 30- and 15-year fixed rate mortgages again held steady for the second week straight, Freddie Mac reported.

Thirty-year mortgages averaged 4.1% during the week ended Oct. 27, and 4.11% during the week ended Oct. 20, and 4.23% this time last year. Fifteen-year mortgages remained at 3.38% for the second straight week. Those types of mortgages averaged 3.66% this time last year.

Thirty- and fifteen-year mortgages reached record lows of 3.94 % and 3.26%, respectively, in the first week of this month, and rates have not increased significantly at any point during the month.

Freddie Mac Chief Economist Frank Nothaft said the fixed mortgage rates followed other long-term interest rates that also remained stable. Housing market indicators were mixed, with consumer confidence soft, house prices largely flat, and new home sales up from very low levels, he added.

Five-year Treasury indexed hybrid adjustable-rate mortgages (ARMs) rose last week, averaging 3.08%. The prior week's average was 3.01%. However, one-year Treasury-indexed ARMs decreased slightly last week, averaging 2.9%. Those ARMs averaged 2.94% during the previous week.

For the full release, use the resource link.

Inside Washington (10/28/2011)

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  • WASHINGTON (10/31/11)--Eighteen members of the House and Senate sent letters Thursday to Treasury Secretary Timothy Geithner and to federal regulators on the Financial Stability Oversight Council (FSOC) expressing concern that Bank of America has moved trillions of dollars in derivatives from its subsidiary Merrill Lynch into a subsidiary insured by the Federal Deposit Insurance Corp (FDIC). The lawmakers are concerned with a reported increase in so-called 23A exemptions, referring to the section of the Federal Reserve Act that separates insured banking from investment activities. In the letter, lawmakers questioned the transfer of an undisclosed amount of derivatives from Merrill Lynch, a securities trading subsidiary, to Bank of America, a retail bank subsidiary. The transfer reportedly happened following threats of further credit downgrades that would have forced Merrill Lynch to post an additional $3.3 billion in collateral. "Regulators must stop treating transactions like this as a private matter," said Rep. Brad Miller (D-N.C.) said. "This kind of transaction raises many issues of obvious public concern. If the bank subsidiary failed, innocent taxpayers could end up paying off 'exotic' derivatives." The questions Miller and Brown and other members seek answers to include whether investigators determined if the transfer occurred to avoid the requirement to post additional collateral in light of the credit downgrade for the company. The lawmakers also want to know if the risk of the derivatives was determined and whether the newly-insured derivatives pose a risk to the financial system …
  • WASHINGTON (10/31/11)--U.S. Rep. Elijah Cummings (D-Md.) issued a letter Thursday urging U.S. Rep. Darrel Issa (R-Calif.), chairman of the House Oversight and Government Committee, to force regulators to provide "engagement letters" between mortgage servicing companies and independent firms hired to review past foreclosure abuse (American Banker Oct. 28) The engagement letters from the 14 largest mortgage-servicing companies governed the contracts they had with consultants hired to review foreclosure actions. Federal regulators began investigating mortgage servicers last year after widespread problems were found with foreclosure practices. Cummings requested copies of the letters from regulators in May but did not receive a response. Cummings, the leading Democrat on the committee, said he was concerned the consultants performing foreclosure reviews had set their own terms, could have resulted in conflicts of interest …

CUNA seeks CU cost impact of NACHA processing plan

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WASHINGTON (10/31/11)--The Credit Union National Association (CUNA) has asked credit unions for information on the costs and impact of the Electronic Payments Association (NACHA) plan to create a new network-wide premium same-day automated clearing house (ACH) expedited processing and settlement (EPS) service.

NACHA has proposed amending its operating rules to enable EPS ACH entries to be processed and settled on the same day they are originated, while preserving existing ACH processing and settlement features for non-EPS entries. Under the proposal, credit unions and all other Receiving Depository Financial Institutions (RDFIs) would be required to both receive and settle EPS transactions.

The proposal sets specific timelines for payment file transmissions and fund availability, and also proposes new per-entry EPS dollar limits of $25,000 or $100,000.

NACHA has said the proposal would aid financial institutions by easing the flow of funds, increasing customer use of direct deposit, reducing counter-party settlement risks on received ACH credits, and mitigating risks.

CUNA in its comment call said credit unions would incur increased costs, including implementation costs, if the proposal is approved. Credit unions that only perform one ACH pickup per day will also incur new costs for the additional pickup, CUNA adds.

CUNA has specifically asked credit unions whether the EPS service should be made network-wide, or if credit unions and other institutions should be allowed to opt-in to the service.

Credit unions may also comment on the drawbacks, and advantages, that a move to this new structure would create.

For the full comment call, use the resource link.

Legislators from both sides urge mortgage housing action

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WASHINGTON (10/31/11)--The future of the U.S. mortgage market, and how to deal with the glut of foreclosures currently choking the housing market, were both taken on by members of Congress late last week.

Rep. Scott Garrett (R-N.J.) on Thursday introduced the Private Mortgage Market Investment Act. Garrett's legislation would require the Federal Housing Finance Agency (FHFA) to develop underwriting standards and securitization agreements and abolish the risk retention standards set forth by the Dodd-Frank Act. The legislation would also provide new disclosures for mortgage investors and securities purchasers.

The Obama administration is still considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Administration officials have said that each of these proposals would shrink the government's role in the mortgage market.

A hearing on Garrett's bill has been scheduled for Nov. 3 in the House Financial Services subcommittee on capital markets and government sponsored enterprises.

Homes that have gone into foreclosure were also addressed last week, as 33 senators, including Jack Reed (D-R.I.) and Tim Johnson (D-S.D.), encouraged the Obama administration to speed up its research into how best to deal with real estate owned (REO) properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).

The FHFA in recent weeks has sought outside opinion on how best to maximize value to taxpayers and increase private investment in the housing market while disposing of these properties. The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) are also participating in the initiative. 

Among the approaches being considered are converting government-held homes into rental units or affordable housing. The senators in a joint letter called on administration officials to consider the most effective ways to stabilize neighborhoods and housing values as they develop ways to better deal with the government-owned vacant homes. The letter also seeks specific details on what suggested strategies seem the most promising, and what the next step will be for the FHFA and other agencies.

For more on Garrett's bill and the letter to the administration, use the resource links.