Lowest rates off limits to many in state
Home loan rates are near their lows for the year, reflecting optimism over government efforts to help the housing markets, but analysts see little help for the worst-off borrowers and people with jumbo mortgages.
Freddie Mac, the government-backed mortgage giant, said Thursday that the average rate on a 30-year fixed mortgage had dropped to 5.53%, down from 5.97% last week and the lowest since the week of Jan. 24, when it was 5.48%.
Analysts attributed the decline to the Federal Reserve’s commitment last week to buy $600 million of mortgage securities and other debt issued by Freddie Mac and its sister company, Fannie Mae.
Meanwhile, the financial industry is promoting a proposal to have the Treasury Department buy additional mortgage securities backed by Fannie and Freddie in an attempt to force rates as low as 4.5%.
Financial publisher HSH Associates of Pompton Plains, N.J., said the average rate offered by U.S. lenders on a 30-year fixed-rate loan had topped 6% since May for the best borrowers -- people with good-to-excellent credit, fully documenting their earnings and assets, and buying single-family homes that they intended to live in.
But HSH said that changed after the Fed announcement last week, with rates dropping to an average of 5.54% on Thursday, the company’s data show.
Refinancers and to a lesser extent home buyers jumped in, according to the Mortgage Bankers Assn., which said Wednesday that home loan applications last week jumped 51% over the previous week.
But Fannie and Freddie aren’t allowed to buy loans above $729,750 even in the priciest areas of the country, many of them in California.
Without government support for such loans, rates offered for them Thursday averaged 7.21%, HSH Vice President Keith T. Gumbinger said. That was 1.67 percentage points above rates for Fannie and Freddie loans.
What’s more, a struggling homeowner whose mortgage debt exceeds the value of underlying property won’t be able to refinance to take advantage of the lower rates.
Having the Fed or Treasury buy Fannie and Freddie securities “does not directly help jumbo mortgage borrowers, and it especially won’t help the majority of delinquent, upside-down or poor-credit homeowners who are going into foreclosure,” said Greg McBride, senior financial analyst at rate tracker Bankrate.com.
Addressing that issue Thursday, Fed Chairman Ben S. Bernanke urged the government and lenders to take more action to prevent foreclosures, which he said were causing “adverse consequences for both those directly involved and for the broader economy.”
At a conference in Washington, Bernanke described several “promising” courses of action, including improving Hope for Homeowners, a program passed by Congress this year.
The government initially projected the program would help 400,000 struggling borrowers avert foreclosure over three years, but last month cut its estimate to a tenth of that number.
The program requires lenders to reduce borrowers’ loan balances, restoring their home equity, so they can refinance into loans insured by the Federal Housing Administration.
The Fed chief suggested Congress consider reducing the insurance premiums lenders must pay under the program.
Bernanke also said the government could encourage large-scale modifications of loans to make them more affordable by offering to share losses on the restructured loans with lenders that agree to use streamlined processes.
And finally, Bernanke said, the government could consider directly buying bad mortgages at their depressed value and overseeing refinancings, either directly or through contractors.
“Steps that stabilize the housing market will help to stabilize the economy as well,” Bernanke said.
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maura.reynolds@latimes.com
