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)

Freddie Mac’s acting CFO, David Kellermann, was found dead in his home this morning in what police are calling an apparent suicide. They responded to a 911 call around 5:00 this morning and found Kellermann in the Fairfax County home he shared with his wife and one daughter.

David Kellermann, Image: Newscom

Kellermann was a University of Michigan graduate and attended George Washington University for business school. He worked for Freddie Mac for 16 years before being named CFO last September. Authorities say that Kellermann was not a target of the federal investigation, though friends say that he was under an extreme amount of pressure.

Police haven’t released an official cause of death and won’t say whether or not there was a suicide note. Freddie Mac executives have issued statements expressing their sympathies to the Kellermann family.

Freddie Mac has been dealing with problems for years now. They’ve been criticized for financing mortgages that they knew were risky, creating a real estate bubble. The goverment seized control last year and has given them $45 billion to stay afloat, but Freddie Mac reportedly lost over $50 billion last year alone.

Appointed CEO David Moffet stepped down last month after a mere six months on the job. Both this company and sister company Fannie Mae have recently been under fire from the public for reporting that they’d be payng out large bonuses to employees, even amid financial problems.

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.

Last week, thirty-year fixed rate mortgages hit a historical low of 4.85 percent.

Photo by jencu, courtesy of flickr

This is the lowest rate recorded since the survey began in 1971. The rate is tracked by Freddie Mac’s Primary Mortgage Market Survey.

Even with such an attractive rate, I wonder how many people will be able to take advantage of this. The lowest rate is reserved for borrowers with good credit and adequate cash for a down payment.

Even if people who are looking to buy aren’t able to capitalize on lower rates, this is an opportunity for existing homeowners to refinance at a new lower rate.

Earlier this month, Fannie Mae reported that its refinancing volume grew to over $41 billion in February. This was a huge jump, coming in at over three times January’s volume.

To keep up with rates, visit Freddie Mac’s Weekly Mortgage Market Surveys.

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

Freddie Mac CEO David Moffett announced today that he is resigning his position, effective no later than March 13, 2009. Board chairman John Koskinen says that they intend to name a interim CEO before March 13 to replace Moffett.

Says Moffett in his resignation letter:

David Moffett - Picture via Newscom

“I have enjoyed my time as CEO of Freddie Mac and I wish all the great employees the very best in the days to come.”

Although Moffett leaving is a blow to Freddie Mac, the FHFA expects to continue running like clockwork, which is especially important right now. According to their press release, Freddie Mac has helped more than five million renters and one in six of all homebuyers find affordable housing.

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

Now is a great time to be in the market for a new home, especially if you don’t have to sell an existing house first.

Sure, it’s a lousy time to be a seller — no matter what real estate agents say. But if you’re buying a home? Congratulations, you’ve picked a perfect time.

You probably know the reasons: Housing prices are stagnant or dropping in many, many markets across the country. Sellers are willing to negotiate on everything from prices to repairs to closing dates. There is an overabundance of homes to choose from on the market.

And now, mortgage interest rates are dropping yet again. According to Freddie Mac, interest rates on 30-year fixed-rate mortgages stood at 5.78 percent during the week ended Sept. 18. That’s a dip from 5.93 percent the previous week. It’s also the lowest the 30-year mortgage-interest rate has been in seven months. The interest rate on 15-year fixed-rate mortgages dropped to 5.35 percent from 5.54 percent during the same week.

So maybe it’s time to make your local real estate agent happy: Go buy a house. It’s a great time to do it.

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.