A Peek Inside Successful Lending Shops

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the latest Or ig i nat ion SECONDARY MARKET a plan to wind down the GSEs and reduce the government's role in the mortgage market. se r v ic i ng Fannie Mae Continues to Rake in the Dough Business Is Booming at Freddie Mac s e c on da r y m a r k e t a na ly t ic s The GSE had a banner Q2, pulling in the second-largest profit in company history. F Agency Rate Index Moves Up as First Half of Year Closes Rates continue to heat up in the summer months. T he Federal Housing Finance Agency's (FHFA) index of new mortgage contracts shows interest rates climbing 0.15 percent from May to June. According to FHFA's Monthly Interest Rate Survey, the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders was 3.55 percent for loans closed in late June. As loans are typically locked in 30 to 45 days before a loan is closed, June's data reflect market rates from mid- to 56 | The M Report late May. The contract rate on the composite of all mortgage loans in June was 3.55 percent, up 15 basis points from 3.4 in May. Accounting for additional fees and charges, the effective interest rate in June was 3.67 percent, up 10 basis points over May. Finally, the average interest rate on a conventional, 30-year fixed-rate mortgage ($417,000 or less) was 3.76 percent in June, an increase of 18 basis points. The average loan amount for all loans in June was $282,400, up $1,800 from May. reddie Mac experienced a notable second quarter, posting its second-largest profit ever, the enterprise recently reported. According to Freddie Mac's quarterly earnings report, Q2 2013 net income totaled $5 billion, up about $407 million over the first quarter. It was the seventh-straight quarter of profit for the company. Comprehensive income was $4.4 billion compared to Q1's $7 billion. The GSE also announced its dividend obligation to Treasury will be $4.4 billion this month, bringing its aggregate cash dividends paid to a total of $41 billion. Because dividend payments don't reduce prior draws, Treasury still maintains liquidation preference on $72.3 billion of the company's preferred stock following its bailout in the economic crash. Credit quality also improved, with post-2008 loans representing 70 percent of Freddie Mac's singlefamily credit guarantee portfolio in Q2 (20 percent of the portfolio were relief refinance loans). The earnings report comes at a pivotal time in the company's history, with industry representatives, lawmakers, and even President Obama calling for The GSE isn't posting consecutive record quarterly profits, but it's making gains nonetheless. F annie Mae's secondquarter profits nearly doubled year-over-year, the GSE reported. The company announced net income of $10.1 billion in Q2 2013 compared to $5.1 billion for Q2 2012. It was the sixth consecutive quarter of profit for Fannie Mae. Comprehensive income totaled $10.3 billion, again nearly double that of the same quarter last year ($5.4 billion). According to the enterprise's earnings report, the secondquarter's strong numbers were "driven primarily by continued stable revenues and boosted by a significant increase in home prices in the quarter, which resulted in a reduction in the company's loss reserves." The yearly improvement was also helped primarily by gains on the company's assets recorded at fair value (due to increases in interest rates) and an increase in credit-related income. As of June 30, Fannie Mae's net worth was reported at $13.2 billion, $10.2 billion of which will go to Treasury as dividends, bringing aggregate dividends payments to approximately $105 billion. Under the terms of the GSEs' bailout, each must maintain a reserve of $3 billion, with any amount over that threshold going to the government. Fannie Mae's report came one day after Freddie Mac released its own earnings, revealing a profit of $5 billion, the second largest in its history.

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