Mortgage Market News: Fannie Mae and the Housing Relief Bill
Today there are a couple of points of interest pertaining to the mortgage market. The first bit of news that interests me is further losses by Fannie Mae. The other is on the somewhat-related topic of a technicality in the housing relief bill.
Fannie Mae posts huge losses
It’s not wholly unexpected. Freddie Mac announced large Quarter 2 losses, and a cut to its dividend. So it was rather unsurprising that Fannie Mae is in the same boat. Fannie is cutting its own dividend by 86 percent, and has posted massive losses as well.
The outlook for Fannie Mae (and Freddie Mac — it’s almost as though one analysis works for them both) continues to be bleak. Fannie expects 2008 to end on a rather low note, with credit-related losses peaking. Fannie is also “managing” its balance sheet in order to preserve the small amounts of capital remaining. (In a side note: Fannie and Freddie have terrible capitalization. The decades old assumption of a government guaranty has enabled the company to gain investors that would normally shun such poor capitalization.)
At any rate, Fannie appears to be trying to avoid having to run to the government for help, but the company may be merely delaying the inevitable.
Buying a house and the housing relief bill
The recently passed housing relief bill allows for a tax credit for first-time homebuyers. The idea is that you get 10% of the price or $7,500, whichever is lower. (Seriously? How many of us are buying a $750,000 home right now?) Here’s the other issue, reports Ren at Accounting Solver:
The tax credit has to be repaid 2 years after the purchase. At the tax credit of $7500, the resulting average increase in your tax bill for 15 years will be $500.
Um, wow. Maybe first-time homebuyers would be advised to avoid the tax credit after all, and just focus on the interest rate and property tax benefits that are already offered.
Tags: mortgage market news, mortgage market, home mortgage loan, housing relief bill,
Fannie Mae, Freddie Mac, buying a home
August 8th, 2008 at 10:47 am
[…] Mae reported a stunning loss for Quarter 2. The company insists that it will not need the bailout approved in the recently passed housing […]
August 8th, 2008 at 1:41 pm
[…] voice my agreement with Miranda at Mortgage News, Um, wow. Maybe first-time homebuyers would be advised to avoid the tax credit after all, and just […]