Bank of America and Freddie Mac and Fannie Mae mortgage bonds were the big winners from a Federal Reserve housing study that circulated through Congress this week, Bloomberg News reported, while mortgage bonds backed by high-cost debt lost in a massive market-shakeup. [more]

As the Federal Housing Administration prepares to release its annual financial report next week, there’s growing concern that the agency could run out of money and seek a taxpayer bailout for the first time ever.

The Wall Street Journal cited a report by University of Pennsylvania professor Joseph Gyourko that estimated the agency stands to lose $50 billion in the coming years because of the larger role it has taken in mortgage loan originations since the housing bust. Gyourko said the FHA is underestimating the potential impact of prolonged high unemployment and fallout from the homebuyer’s tax credit in its internal calculations. Comments

From left: President Barack Obama and Utah Senator Orrin HatchThough critics have long panned sections of the U.S. tax codes that subsidize housing and mortgages as overly expensive and unfairly benefiting the wealthy, policy makers at a Senate Finance Committee hearing were wary of changing any law that could do more harm to the fragile housing sector, the Wall Street Journal reported.

The mortgage-interest deduction tax code deducts taxes from mortgage interest and property taxes and excludes home sellers from the capital gains tax on most sales. Some say it facilitated the housing bubble and the Congressional Budget Office has estimated that gradually abolishing it would save about $215 billion by 2021. Other research has shown eliminating the code would have a minimal affect on the nation’s homeownership rate. [more]

Source: CoreLogic

Nearly a quarter of Americans with residential mortgages are in negative equity and that number is barely improving, according to second-quarter data released today by analytics firm CoreLogic. In the second quarter, 10.9 million homes were worth less than their mortgages, or 22.5 percent of all residential properties with a mortgage. That’s down ever-so-slightly from the 22.7 percent recorded in the first quarter. Another 2.4 million borrowers had less than 5 percent equity, or near-negative equity.

The report notes that the widespread negative equity situations are keeping many Americans from refinancing their mortgages to capitalize on record-low rates. Nearly 75 percent of all underwater borrowers are paying more than the market rate for their mortgage, compared to 53 percent of above-water mortgage borrowers. – Adam Fusfeld [more]

New York judges are beginning to take a stricter interpretation of the “good faith effort” banks are required to make under a 2009 state law passed to offer support to distressed homeowners, according to the New York Daily News.

The law states that banks must try to negotiate with distressed homeowners so that they can modify the loans and keep their property. But those homeowners are increasingly complaining that they can’t get modifications. Since November, 2009 judges have found at least seven cases where banks, including Wells Fargo, HSBC, Bank of America and Deutsche Bank, failed to act in good faith, and in one case the judge ordered the mortgage debt wiped out (although that was later reversed by an appeals court). [more]

Drastic changes are needed to stimulate a housing recovery according to a New York Times editorial, which urged President Barack Obama to push forward plans for principal reductions on home mortgages and easier refinancings.

The editorial argued that the overall economy won’t improve until the “tens of millions of Americans… crushed by the overhang of mortgage debt” get some relief. Because nationwide housing prices have declined 33 percent since the market’s peak, 14.6 million homeowners are underwater on their mortgages. Lowering interest rates, the argument goes, simply is not enough. [more]

Mortgage applications decreased 5 percent for the week ending July 22, according to weekly data from the Mortgage Bankers Association. Refinancing also decreased 5.5 percent from the previous week.
The refinance share of mortgage activity decreased to 69.6 percent of total applications from 70.1 percent the previous week. The adjustable-rate mortgage share of activity increased to 6.1 percent from 5.8 percent of total applications from the previous week.
— Miranda Neubauer [more]

How big a deal is the upcoming cutback in mortgage limits for Fannie Mae, Freddie Mac and the Federal
Housing Administration? Will buyers and sellers who depend on jumbo-sized loans find themselves in a
financing squeeze after Oct. 1, when the limits plunge in key markets around the country?
Housing and realty lobbies are pushing hard on Capitol Hill for a continuation of the $729,750 high-cost
area maximum, but one industry is delighted by the prospect and is gearing up to fill the gap.
From small community banks to megabanks, the message is the same: Bring on the switch to lower
limits. [more]

It’s difficult to make grand predictions for the mortgage market, following the volatile activity during the throes of the recession, but Ron Gitter, a real estate attorney and blogger at coopandcondo.com, thinks there’s one movie that could unravel the mystery: “Jason and the Argonauts.” Like Jason’s quest for the golden fleece, Gitter said in a Huffington Post opinion piece, the mortgage market faces several challenges on its quest for stability, notably Fannie Mae and Freddie Mac’s changing roles in the secondary market and an interest rate that has nowhere to go but up. “The one-two punch of higher interest rates and the inevitability of changes coming to Fannie and Freddie only further slow the process of the elusive real estate recovery,” Gitter said. “For those of us on the ground, getting deals done seems to get more difficult every day.” [Huffington Post]

Eighteen different military families are alleging that JPMorgan Chase illegally foreclosed on their homes, making harassing calls and overcharging on their mortgages. In this video from MSNBC, a JPMorgan spokesperson admits that it “clearly made mistakes,” but residual outrage is still rippling through the political community. [more]