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the latest SECONDARY MARKET F mortgage portfolio contracted at an annualized rate of 0.8 percent in October, a significant leap from negative 9.4 percent in September. It's also a step up from October 2011, when the company reported negative 5.2 percent growth in its total portfolio. Year-to-date, the portfolio has shrunk at an average annualized pace of 6 percent. FHFA, Case-Shiller Indices Indicate Pricing Gains The portfolio was at approximately $1.97 trillion at the end of the month. The last time the portfolio posted positive growth was in February 2011, when it grew at an annualized rate of 0.1 percent. Freddie Mac reported a little more than $50 billion in purchases and issuances during the month, FOMC Keeps Federal Funds Rate Near Zero A December vote confirmed the committee's current purchase program for mortgage-backed securities and continued the current federal funds rate. T D he Federal Housing Finance Agency (FHFA) reported home prices continued to climb higher in September, with prices gaining by 0.2 percent from August. Showing similar findings, the Case-Shiller Indices posted a monthly increase of 0.3 percent. FHFA's house price index (HPI) also revealed a quarterly price gain of 1.1 percent from the second to the third quarter. Compared with the third quarter of 2011, prices rose 4 percent, reflecting an upward-looking trend. "With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring," said FHFA Principal Economist Andrew Leventis. Yet, even with the consistent price gains, Leventis added, "a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy, and the large number of homes in the foreclosure pipeline." On a quarterly basis, the index also found price increases for 39 states. States that saw significant quarterly increases included Delaware (+5.8 percent), Arizona (5.4 percent), and Nevada (+4.2 percent). Of the nine census divisions observed, the Mountain led with a 3 percent quarterly gain. The Pacific region saw a 2 percent quarterly increase, while the East South Central and Middle Atlantic both struggled with quarterly losses of 0.15 percent. FHFA's report is based on data for Fannie Mae and Freddie Mac mortgages originated during the past 37 years. espite recent improvements in the unemployment rate and housing, the Federal Open Market Committee (FOMC) voted to continue its program of purchasing $40 million a month in mortgagebacked securities and to maintain the target federal funds rate at 0 to 0.25 percent. The FOMC's decision was nearly unanimous, with only Richmond Federal Reserve president Jeffery M. Lacker dissenting. "This exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5 percent; inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2 percent longer-run goal," the FOMC noted in an official statement. "When the committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent." According to the Federal Reserve's own projections, those targets will not be met until 2015. "The conditions now prevailing in the job market represent an enormous waste of human and economic potential," said Fed chairman Ben Bernanke during a post-meeting press conference. The Fed plans to "maintain accommodation as long as needed to promote a stronger economic recovery in the context of price stability," he added. Providing additional commentary, the FOMC stated it "remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions" and "strains in global financial markets continue to pose significant downside risks to the economic outlook." The M Report | 75 se c on da r y m a r k e t Recent industry reports demonstrated continued improvements for the nation's home pricing. A na ly t ic s reddie Mac's total mortgage portfolio continued to shrink in October, but increased purchase and issuance volume pushed the company closer to positive growth for the first time in more than a year-and-a-half. According to the GSE's monthly volume summary, its s e r v ic i ng Recent findings revealed that the GSE is inching closer to positive growth, despite the contraction of Freddie's total loan portfolio. Or ig i nat ion Freddie's Purchase and Issuance Volume Rises up significantly from $39 billion in September and $33 billion the prior year. The last time monthly volume was at such a high level was in June 2009 ($63.2 billion). The company reports $377.6 billion in volume from the beginning of the year through the end of October. According to the GSE, singlefamily refinance loan purchase and guarantee volume reached $37.2 billion during the month, making up 74 percent of its total secondary volume. Freddie Mac's mortgage-related securities portfolio grew slightly for the first time in four months. The company issued $45.2 billion in securities, growing its portfolio at an annualized rate of 0.3 percent. The total number of loan modifications was 6,988 in October, bringing the year's total to 56,671.