Although some parts of the United States economy appears to be recovering, the housing crisis looks like its alive and kicking. Fannie Mae, which along with Freddie Mac has already received approximately $60 billion in federal government bailout funding, said on Friday that they need $19 billion more to stay afloat.

Fannie Mae and Freddie Mac were earlier taken over by federal regulators but continue to struggle. In the first quarter of 2009, Fannie Mae posted a loss of more than $23 billion. Freddie Mac’s numbers are expected to be released next week and those numbers are expected to also be ugly.

Without the bailout, Fannie Mae warned that the company wouldn’t be able to survive. Even with this latest bailout, Fannie Mae said that they won’t stop losing money anytime soon.

With job losses mounting and the economy still a long ways away from being fully repaired, some experts believe that the foreclosure rate could remain high for years to come.

Fannie Mae Headquarters (Image: FutureAtlas.com)

A recent report by the Congressional Budget Office predicts that the financial sector will require much more bailout money than initially estimated. In fact, the report says that the initial estimates were short by more than $165 billion.

Financial Sector Bailout (Image: Flickr)

The new number for the bailout of the financial sector is at approximately $365 billion. In January, that same estimate was less than $190 billion. The Congressional Budget Office blames the increased cost of the bailout on the securities in question now having larger yields.

Two companies that will be eating a lot of federal bailout money are Freddie Mac and Fannie Mae. These two companies, which deal in mortgage financing, will ultimately require more than $80 billion more in bailout funding, according to the latest estimates.

It will be interesting to see what kind of public outcry there will be following the release of this news, especially considering the report that Freddie Mac and Fannie Mae are giving out $210 million in bonuses.

The two largest mortgage finance companies in the United States are planning to hand out $210 million in bonuses to their employees despite taking a combined $60 billion in federal bailout money. This revelation likely won’t sit well with the general public, especially consider the outcry that was heard after it came to light that AIG gave more than $160 million in bonuses.

Home for Sale (Image: Flickr)

The two companies, Freddie Mac and Frannie Mae, combine to finance approximately half of all mortgages in the United States. After massive financial troubles, each company is now run by the federal government. In recent months, they have been even more active - financing more than 60% of new mortgages.

Officials with Freddie Mac and Frannie Mae insist that the bonuses are needed to keep employees with the company. Without their key employees, officials say that the businesses would have no chance of turning around. In addition, officials claim that the bonuses are just a small drop in the bucket for many of the employees who have lost millions upon millions of dollars when the stocks of the two companies plummeted by more than 95%.

Of the $210 million in bonuses, approximately $150 million of it is planned to be distributed in 2009.

One of the cornerstones of economic recovery, say our leaders, has to be refinancing. Homeowners need to be able to refinance to lower interest rates and more affordable payments in order to stem the tide of foreclosure, say our leaders. On top of that, it would be nice if the responsible folks, who want to take advantage of historically low interest rate, could also refinance.

There’s one snag to all of this: Home values have fallen, so a refinance is likely to get rejected when the appraisal comes through. If you have less than 20% equity in your home, then the chances of being turned down for a refinance go up. And with home values plunging, you may not have as much equity as you thought.

No appraisal mortgage refinancing may be the key

One of the ways that some mortgage lenders are trying to comply with the president’s foreclosure prevention plan is by offering no appraisal refinancing. In this type of refinance, an appraisal is not required for approval. Of course, with the latest plan for foreclosure prevention, if your loan is guaranteed by Freddie Mac or Fannie Mae, you should be able to get a refinance if you have less than 20% equity — as long as you don’t owe at least 5% of what your home is worth.

It’s an interesting thought, this no appraisal mortgage refinancing. Howeve, caution should be used. Some mortgage lenders are claiming that asset and income verification won’t be needed, either. And that’s part of what got us into this mess.

image sourse: respres via Flickr

On Friday, Fannie Mae announced they are extending the suspension of all eviction proceeding through March 31, 2009. The company is implementing the Home Affordable Refinance and Home Affordable Modification initiatives as part of the Obama Administration’s Making Home Affordable program, thus causing the extension.

Home Foreclosure - Image: Flickr

Additionally, Fannie Mae has created special foreclosure sale requirement in response to the Making Home Affordable program.

At financialstability.gov, you can learn more about the Home Affordable Refinance and Home Affordable Modification options. On the website, you can use their self-assessment tools to find out if you are eligible for the initiatives.

Also on the government website, there are some great tips on avoiding foreclosure rescue scams. Unfortunately, there are some scams out there preying victim on the desperate.

Contrary to popular belief, the President’s foreclosure prevention plan isn’t just designed to help “losers.” Indeed, in addition to loan modification for those who had an affordable mortgage to begin with, there is help in there for those of use who have stood helplessly by while home values dropped. In order to take advantage of some of the amazing refinancing rates available right now, under the new plan, here is what is required:

• Less than 20% equity in your home.
• Owe no more than 5% of what your home is worth.
• Be making your mortgage payments on time.
• Have good credit.
• Have a loan serviced through Fannie Mae or Freddie Mac.
• Want a fixed rate for a 15 or 30 year loan.

I could qualify to refinance my home. I have less than 20% equity (we’ve only been in the house for a year and a half), I have good credit, I didn’t take on more than I could handle and I’ve been paying consistently. Indeed, the President’s plan may reward me for being somewhat responsible. I could save thousands of dollars by refinancing to a lower rate — and maybe save more by going to a 15 year loan.

There are possibilities out there for those who have made good financial decisions. You just need to know where to look. For this program, you should start by asking your mortgage lender.

image source: sxc.hu

Fannie Mae took its first dip into the $200 billion pool created by the federal government by asking for $15.2 billion. The company, which regulators took over in September, is the biggest mortgage-finance entity in the United States.

House for Sale - Image: Flickr

Currently, Fannie Mae has a net worth in the negative billions of dollars and its stock price have plummeted all the way to less than 50 cents. To put it in perspective, Fannie Mae’s stock value was approximately $35 at this point last year.

Combined with Freddie Mac, a fellow government-controlled mortgage-finance business that has already requested $13.8 billion in capital, the two businesses either guarantee or own nearly half of the home-loan market in the United States - a market that is estimated to total $12 trillion. However, in the last six quarters, Fannie Mae and Freddie Mac have net losses that total almost $100 billion.

Despite the struggles, President Barack Obama has targeted both Fannie Mae and Freddie Mac as integral components in easing the country’s housing crisis. By assisting these two companies, Obama hopes to avoid foreclosures for millions of American citizens.

Source: Bloomberg.com

It finally happened yesterday: The U.S. House of Representatives approved a sweeping measure that provides aid to U.S. homeowners facing foreclosure and assistance to mortgage giants Freddie Mac and Fannie Mae.

Even Pres. Bush dropped his earlier threats to veto such a bill.

The aid package may be good news for homeowners in danger of losing their residences, but it’s also a sign of just how serious the housing crisis is. I’ve interviewed plenty of real estate professionals who’ve continually insisted that there is no crisis, just a normal slowdown in housing appreciation. But if there is no crisis, then why would the federal government, which usually hates to do most anything, approve such sweeping measures?

The legislation’s main goal is to prevent more than 400,000 U.S. homeowners from losing their residences to foreclosure. It does this by allowing them to refinance into lower-cost government-insured mortgages. The legislation also allows the federal government to temporarily increase its lending to the government-chartered, but privately owned, Fanine Mae and Freddie Mac. Members of Congress understand that it would be catastrophic for either Freddie or Fannie to go under.

It’s impossible to predict what impact this legislation will have. But Congress really had little choice but to do something. The housing crisis isn’t lessening. And it’s hurting just about everyone. Maybe this really is a time when government action is not only appropriate, but needed.

When you travel across the country, as my family and I did the last two weeks, you hear a mishmash of radio stations. Some stay in range for a mile or two, some for half a state. This gave me a good chance to hear what people from Chicago to southern Virgnia had to say about the state of the housing market.

The verdict? Not surprisingly, it wasn’t pretty.

I heard phone calls on talk radio from people on the verge of losing their homes to foreclosure. I heard experts theorize on the financial problems being faced by Freddie Mac and Fannie Mae, the country’s two mortgage giants. I heard other experts blame the failure of large bank IndyMac largely on that company’s mortgage unit.

Basically, no matter what station we drove into, the news was the same: The housing slump is deep, and it’s hurting everyone.

My hope is that something good does eventually come out of our country’s housing troubles: Maybe the next time there’s a big housing boom, we’ll all be careful — homebuyers, sellers, real estate agents, mortgage lenders, government officials — and take steps to prevent homes from rising in value too quickly and to stop mortgage lenders from giving away money too easily.

We’ve all seen the pain that our current housing slump is causing. Let’s hope we’ve also learned some lessons.

As housing foreclosures across the country continue to rise, a small, but growing, number of homeowners are turning to their employers for help.

And, though this may be surprising depending on where you work, some employers are stepping up to help their workers avoid losing their homes.

Repoter Sarah Needleman wrote about this for the Wall Street Journal. You can read her interesting story here. In it, she writes about a woman who nearly lost her single-family home in Miami to foreclosure. But her employer loaned the woman $5,000 interest free, allowing her to catch up on her mortgage payments.

Fannie Mae, which, of course, is in the mortgage-loan business, earlier this year set up a confidential e-mail hotline for any of its employees who are struggling to make their mortgage payments. Other companies have begun running free onsite seminars designed to help their employees better manage their money.

This is all good news. Companies should take care of their employees. After all, without their employees, where would these companies be?