Loan Costs Up 37% Nationally, Fate of Fannie & Freddie, PPI Hotter Than Expected

Loan Costs Up 37% Nationally
Loan costs are up 37% nationally this year, and 41% in Illinois, according to Bankrate Inc. Lenders absorbed a certain portion of this increase as the government began requiring lenders to provide more accurate good faith estimates of closing costs or face penalties. Nationally, average estimated closing costs rose to $3,741 from $2,732. The most expensive state was New York, where costs averaged $5,623, and Texas, where costs averaged $4,708. It includes lenders’ origination fees and title and settlement fees. It does not include property taxes, recording fees or homeowners insurance.

Fate of Fannie & Freddie
Freddie Mac announced that it will be asking for an additional $1.8 billion cash infusion from the Treasury Department after reporting a 2nd quarter loss of $6 billion. ($6 billion is better than the $8 billion lost during the 1st quarter, but still…) These numbers include stock dividends payable to the US Treasury. So I guess Freddie pays a dividend, and then basically asks for it back in order to continue functioning? There continues to be conjecture about Fannie/Freddie’s fate. The latest comes from an ex-Fed Governor, William Poole, and is worth a skim. Ultimately, of course, if those companies leave the US mortgage market, and are replaced by private investors, it will have a huge impact on both small and lenders.

PPI Hotter Than Expected, Other Economic News
Yesterday we learned that U.S. home builder sentiment fell for a third straight month in August to its lowest level in nearly 1-1/2 years, pointing to a weak housing market as the economic recovery loses steam, and our 10-year yield dropped to a 16-month low, closing below 2.60%. $1.8 billion in MBS’s were sold, mostly 3.5’s and 4%. Fannie 4’s finished the day better by about .125.

We have learned this morning that the Producer Price Index was +.2 in July, ex-food & energy it was +.3%, and year over year it was +4.2%. Housing Starts were +1.7% versus a revised number last month. We find the 10-yr yield sitting around 2.60% and mortgages roughly unchanged. Ahead of us we have industrial Production and Capacity Utilization.

And we have the Treasury hosting a summit on how to repair the mortgage-finance system. Some consensus points have emerged, including that any rewrite should include an explicit government guarantee for mortgage investors against a catastrophic collapse. The press wants answers now, but hammering out the details will take months or years.