According to Housing Predictor, Freddie Mac purchased fewer loans in March and reduced its share of the mortgage market. The number of mortgages Freddie Mac bought in March dropped 4.7% to $2.14 trillion. Citing the bills in Congress to abolish, or at least reform, Freddie Mac and Fannie Mae, Freddie Mac is now on a path to reduce the number of mortgages it buys. The unpaid principal balance of Freddie Mac- and Fannie Mae-related home mortgages in their portfolios fell $4.1 billion as lenders were forced to buy back more mortgages that were determined to be underwritten at low quality levels.

Mortgage delinquencies on single-family homes dropped in March, as did first-quarter homeowner vacancies, as reported by Realtor.org. Delinquencies on single-family homes fell to 3.63% last month compared to 3.78% in February, as reported by Freddie Mac. Meanwhile, overall vacancies remain high, even though the percentage of empty homes dropped in the first three months of the year. The South held the highest rates for the first quarter with 2.8%, followed by the Midwest with 2.7%.

MarketWatch recently reported that the average mortgage rates fell again. According to the latest Freddie Mac survey, the average rate for a 30-year fixed-rate mortgage was 4.78% for the week ending April 28, down from 4.8% in the previous week. Meanwhile, the rate for 15-year fixed-rate mortgages fell from 4.02% last week to 3.97% this week. This week’s rate was at its lowest level since early December 2010.

According to an article in The Wall Street Journal, many who support a government-backed housing finance system are predicting calamity for the housing markets without government mortgage guarantees, yet the Federal Reserve is telling a different story. Reserve data shows that nonbank institutional investors had assets of $28 trillion in the fourth quarter of 2010. The WSJ article went on to explain that about $13 trillion of this amount was invested in fixed income or debt securities, but only $1.8 trillion was invested in U.S. government-backed securities.

Home sales in the Hamptons are dropping. Bloomberg.com reported that the summer playground for wealthy New Yorkers has seen a 22% drop in the first quarter, plunging to 309 transactions from 396 the previous year. This drop was the largest since the second quarter of 2009. The drop isn’t due to lack of demand but, rather, the relentless snow and poor weather that kept Manhattan buyers away from the market.

Reverse Mortgage Daily recently reported that the reverse mortgage market index dropped 18% from peak levels in 2006. The latest data from the Reverse Mortgage Market Index (RMMI) shows that the amount of home equity held by seniors fell to $3.3 trillion at the end of 2010. According to RiskSpan, the growth or decline of the reverse mortgage market largely depends on the senior population growth, housing prices and senior debt levels.

The Home Equity Conversion Mortgage (HECM) is expected to generate $304 million of receipts in 2012, as reported by Reverse Mortgage Daily. This growth is largely due in part to the Federal Housing Administration’s new HECM Saver program, which gives borrowers access to home equity in amounts that are between 10-18% less than it would have been available with the HECM Standard option.

Investors Business Daily reported on April 5 that delinquency rates for nine out of 11 consumer loan categories fell during the fourth quarter in 2010. This was led by a drop in bank card delinquencies, according to the American Bankers Association. Home loan and home equity loan delinquencies held steady. James Chessen, ABA’s chief economist, says he is “feeling hopeful” about further declines in delinquencies as job growth improves.

On the commercial loan front, the Wall Street Journal reported the same day that delinquency rates on commercial mortgage-backed securities hit a record high last month. Data from Trepp LLC, a loan research-service firm, showed that, in March, 9.42% of commercial loans have missed payments. Many of these landlords had taken out these loans during the peaks of 2005-2007, according to the WSJ. Since then, the real estate market tanked and the landlords have been unable to pay off the loans as they have come due.

The stricter lending requirements have already started to make an impact on the homebuying front — and not in a good way. The latest data from the Federal Reserve shows that one out of four mortgage applications were rejected. Lenders are now requiring higher credit scores and down payments from applicants; some potential borrowers who may have one or two blemishes on their credit report are being denied credit. Mike D’Alonzo of the National Association of Brokers said this will reduce the demand for houses. Anthony Sanders of George Mason University says this has resulted in up to 30% of potential homeowners to sit on the sidelines.

U.S. mortgage rates fell to the lowest level in almost two months, according to a Bloomberg article. The average rate for a 30-year fixed-rate loan was 4.76% this week – down from 4.88% last week, based on data from Freddie Mac. After staying at 4.15% the past two weeks, the rate for a 15-year fixed-rate mortgage was 3.97%, according to the Bloomberg article. Experts believe the lower interest rates — a reaction to the crisis in Japan — will spur more refinancing.

Bloomberg also reported that mortgage applications fell the week ending March 11. According to the Mortgage Bankers Association, mortgage applications dropped 0.7%. The purchase application index declined 4% last week from two weeks ago, but the refinancing gauge was up 0.9%, Bloomberg reported. Look for the refinance index to increase, thanks to lower interest rates.

The New York Times reported that more people are turning to adjustable-rate mortgages (ARMs) as lenders are providing more conservative ARM products by eliminating “teaser” rates that adjust every six months, or the “pick-a-pay” and “option” features that allow borrowers to pay less than the monthly interest, only to be socked with a huge bill later on. The most popular ARMs are the 5/1 ARMs and 7/1 ARMs, in which the initial interest rate is fixed for the first five or seven years — after which many homeowners consider selling or refinancing their home — then adjusted annually at a capped rate toward a maximum level. The NYT article said the cost savings compared to a 30-year fixed-rate loan are significant. For example, someone borrowing $500,000 with a 5/1 ARM at 3.5% would save $42,507 over the first five years, compared to a fixed-rate loan of 5.25%. A 7/1 ARM at 4.125% would save $38,330 over the first seven years.

On Long Island, the number of home repossessions for February was 717. RealtyTrac data reported in Newsday showed that there were 340 new cases in Nassau County last month and 377 in Suffolk. The Newsday article also showed that, based on data from the Empire Justice Center, a nonprofit organization, Long Island had more than 26,079 homes in the foreclosure process last fall and another 20,985 loans at least 90 days past due. Since October 2010, the number of repos has declined.

Rates for 30-year mortgages have increased slightly. Freddie Mac reported this week that the average rate for 30-year fixed-rate mortgages was at 4.88%, up from 4.87% last week. The 5/1 ARM showed a slight increase from 3.72% last week to 3.73% this week. The 15-year rate remained unchanged at 4.15% and the one-year adjustable rate mortgage was at 3.21%, down from 3.23% the previous week.

According to Bloomberg, mortgage applications in the U.S. were up last week. Bloomberg reported that the Mortgage Bankers Association’s index of loan applications was up 16% for the week ending March 4 — the biggest gain since June 2010 — over the previous week. The MBA further noted that the purchase index rose 13% last week compared to the previous week (the most since November 2010) and the refinancing gauge jumped 17%. Economists say more people were looking to purchase or refinance their homes as unemployment eased up and more companies sought to hire more people.

An article in the San Francisco Chronicle stated that Republicans have introduced a bill to kill the Home Affordable Modification Program (HAMP). When HAMP was announced in February 2009, the Obama administration predicted that it would help 3-4 million homeowners avoid foreclosure under this voluntary program. As of December 31, 2010, only 522,000 homeowners participated in the program.

Good news and bad news for the housing market: The good news is that The National Association of REALTORS reported today that existing home sales in January increased 2.7% from the previous month. The NAR reported a seasonally adjusted rate of 5.36 million units in January, compared to the downwardly revised figure of 5.22 million units in December. In addition, last month’s figure was 5.3% higher than the January 2010 figure of 5.09 million units. This is the first time in seven months that existing home sales were higher than the previous year. (Existing-home sales are completed transactions that include single-family homes, townhouses, condominiums and co-ops.)

Now the bad news: The Commerce Department said new home sales in January dropped by 12.6% to a seasonally adjusted rate of 284,000 units, compared to 325,000 units in December. Meanwhile, the pending home sales index also fell, from 91.5 in December to 88.9 in January. The drop in home sales could be attributed to tighter credit, high unemployment and declining consumer confidence, despite the tax cuts that went into effect this year.

Economists in a Reuters poll predict that home prices will fall by 2.3% in 2011 and then begin a slight recovery next year. Many see a rise in distressed home sales and foreclosures as the reasons for the drop in home prices. Distressed home sales hit a one-year high of 37% of all existing home sales, according to the Reuters article.

A recent Bloomberg article quoted Alabama Republican Congressman Spencer Bachus as saying a bill to overhaul Freddie Mac and Fannie Mae should be done “within three to four months.” The bill calls for Fannie and Freddie and the rest of the $11 trillion U.S. mortgage market to be weaned from its reliance on the federal government. However, the Washington Post reported that Treasury Secretary Timothy Geithner said reducing the federal government’s role will adversely affect the housing market as the costs will be passed on to the taxpayers.

Fitch Ratings announced on Wednesday that it is unveiling a new model to determine potential losses from securities backed by U.S. home mortgages. The new home price model will help predict which borrowers will end up “underwater” — that is, owing more than what their home is worth. This system will help investors who buy mortgage-backed securities. Fitch plans to seek comments on its new modeling system for the next 45 days from investors.

The Mortgage Bankers Association predicts that residential mortgage lending is expected to shrink to its lowest levels since 1997 as demand for home refinancing plunges due to higher interest rates and stricter lending requirements. The MBA says lenders will underwrite $966 billion on mortgages in 2011, down from $1.505 trillion in 2010 and $1.995 trillion in 2009. In 1997, mortgage originations were at $833 million. However, mortgage bankers expect an increase in loans for home purchases from $473 billion last year to $614 billion this year.

The Washington Post reported Tuesday that more people near the end of last year did “cash-in” refinancing of their mortgages, mostly to qualify for interest rates that were at near-historic lows. In the fourth quarter of 2010, 46% of borrowers who refinanced their primary mortgage brought cash to settlement to lower the balance on their loans, according to Freddie Mac. That is the highest percentage of “cash-in” refinances since the company tracked such numbers in 1985.

Yesterday, Freddie Mac reported that the average rate for a 30-year fixed-rate loan rose to 4.80% this week from 4.78% the previous week. The average rate on a 15-year fixed-rate loan also increased, from 4.05% last week to 4.09% this week. The average rate on a five-year adjustable-rate mortgage rose to 3.70% from 3.69% last week. Last month, the five-year rate was at 3.25%, the lowest rate on record dating back to January 2005. The one-year ARM rate was up slightly from 3.25% to 3.26%.

New home sales reached 329,000 units in December — a 17.5% increase over the previous month at 280,000 units, the Commerce Department reported. The December figure was at its highest level in eight months, but it is 7.6% off the mark from December 2009 figures.

The Mortgage Bankers Association’s index of loan applications fell 13% the week of January 21; both refinancing and purchase applications fell. Refinancing applications dropped 15% to the lowest in 12 months, while purchase applications fell 8.7% to the lowest level since October, the MBA said.

In a December 23, 2010 memo sent to lenders in its network, Fannie Mae announced that it has decided to impose a new schedule of higher add-on fees, similar to what Freddie Mac did just before Thanksgiving. The fee hikes are slated to go into effect this spring. Some potential buyers who have high credit scores and large down payments may be surprised to learn that they are also being targeted for higher “risk-based” fees, according to the Post article.

Let’s say someone wants to buy a house with a $300,000 first mortgage has a FICO score above 800 and just less than 25% cash for a down payment. In 2010, that person would not have to pay a loan fee because their down payment and credit score signified no risk of default. This year, Fannie Mae will tack on an extra quarter of a percentage point of the loan amount (in this case, $750).

If someone has a FICO score of 679 and can put down less than 20% for a down payment, that person would be assessed an add-on fee of 2.75%, or $8,250. Last year, that fee would have been $1,500 less.

In addition, Fannie and Freddie tack on what they call “adverse-market fees” of 0.75% of the loan, just for the privilege of sitting down with the lender. Using the $300,000 example, the cost would be $750. All the fees can be paid up front as part of the transaction costs or financed with a higher interest rate on the mortgage itself.

These fees are part of a multi-layered cumulative risk-based pricing system employed by Freddie and Fannie. Every perceived risk factor in a loan transaction receives its own separate add-on fee, and some fees are based on which type of real estate that is being financed. Condominiums are assessed higher fees than standalone houses (at 0.75% when the down payment is less than 25%). Rental investment properties, manufactured homes and loans with interest-only payment features all get separate fees, all of which mean significantly higher costs.

While Fannie Mae officials declined to comment on the reason for the fee hikes, Edward J. DeMarco, acting director of the agency overseeing Fannie and Freddie, said the add-ons were “necessary” to protect both lenders from “the costs and risks” inherent in the mortgages they buy or guarantee. The Post also reported that DeMarco said Fannie and Freddie “underpriced mortgage risks” during the housing market’s boom years.

Rising mortgage rates may mean that more people will be reluctant to purchase a home at a time when the housing market is still tenuous. The National Association of REALTORS recently reported that pending home sales in November rose 3.5% to 92.2, from 89.1 in October. (Pending home sales reflect the number of contracts and not closings, which normally occur with a lag time of one to two months.) The NAR states it is confident that the trend would continue into 2011.

The rate for a 30-year loan has risen for six of the past seven weeks amid speculation that President Barack Obama’s agreement to a two-year tax cut extension will boost economic growth and inflation. The rate increase means that the monthly cost of a $300,000 loan will go up from $1,462 to $1,585, according to the Bloomberg article.