McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.07 percent with an average 0.7 point for the week ending February 26, 2009, up from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.

The 15-year FRM this week averaged 4.68 percent with an average 0.7 point, unchanged from last week when it averaged 4.68 percent. A year ago at this time, the 15-year FRM averaged 5.72 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.06 percent this week, with an average 0.7 point, up from last week when it averaged 5.04 percent. A year ago, the 5-year ARM averaged 5.43 percent.

One-year Treasury-indexed ARMs averaged 4.81 percent this week with an average 0.6 point, up from last week when it averaged 4.80 percent. At this time last year, the 1-year ARM averaged 5.11 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Mortgage rates were little changed this week amid mixed data reports of a slowing economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Both the core Producer Price and Consumer Price Indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967.

"Lower house prices and affordable mortgage rates have yet to spur housing demand. For instance, house prices declined by 8.7 percent for the 12 months ending in December 2008 and were down 10.9 percent from their highs set on April of 2007, according to the Federal Housing Finance Agency's purchase-only monthly home price index. However, existing home sales (excluding condominiums and co-ops) fell 4.7 percent in January to 4.05 million units (annualized), the slowest pace since July 1997."

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Source: Freddiemac, Primary Mortgage Market Survey® (PMMS®), www.freddiemac.com

Sales of existing homes unexpectedly fell in January to the lowest level in nearly 12 years as buyers delay their purchases in anticipation of government programs to help revive the U.S. housing market.

The National Association of Realtors said Wednesday that sales of existing homes plunged 5.3 percent to a seasonally adjusted annual rate of 4.49 million units in January from 4.74 million units in December.

January sales were the weakest since July 1997 and analysts say that sales will decline further as they believe that the bottoming out will happen later this year.  Sales had been expected to rise to an annual rate of 4.79 million units, according to a survey of economists compiled by Briefing.com.

"Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus," said Lawrence Yun, the chief economist of NAR, in a statement. But sales are expected to pick up in the coming months as prices continue to fall and interest rates ease, Yun added.

The median sales price for existing home fell to $170,300 in January, down 14.8 percent compared to last year’s figure the second-largest year-over-year price decline recorded and the lowest median sales price since March 2003.

Despite the decline in sales, the inventory of unsold homes dropped 2.7 percent to 3.6 million existing homes from 3.68 million in December.  At the current sales pace, it would still take an estimated 9.6 months to sell down 3.6 million homes, up from 9.4 months in December, the report said.

"The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years," Yun said.

Foreclosures have flooded the market more particularly in the distressed Sun Belt states like California, Florida, Nevada and Arizona. NAR estimates that about 45 percent of sales nationwide are foreclosures or other distressed properties.  

U.S. home prices declined at a record annual rate in the fourth quarter of 2008. Housing indices, 10-city and 20-city, continued to drop at an increasing pace according to an industry report released Tuesday.

The S&P Case-Shiller National Home Price Index showed a record 18.2 percent decline during the last three months of 2008, compared with the same period in 2007. This is the largest drop in its 21-year history.

Case-Shiller's index of 20 major metropolitan areas plunged at a record rate of 18.5 percent.

"The broad downturn in the residential real estate market continues," said David Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement. "There are very few, if any, pockets of turnaround that one can see in the data."

All 20 metro areas in the 20-city index registered declines, with eight cities suffering more than 20 percent drop. National home prices have fallen 26.7% since they peaked during the second quarter of 2006.

Sun Belt cities suffered  Karl Case, the Wellesley economist who, with Yale economist Robert Shiller, co-developed the index, pointed out during a news conference following the index's release that the markets experiencing the steepest falls also enjoyed the biggest run-ups during the boom.

"Those markets were driven by subprime lending expansion from the summer of 2003 on," he said. "After the [Federal Reserve's lowered interest rates] to fight against the recession of 2001, subprime took off like gangbusters."

Sun Belt cities particularly Phoenix, Las Vegas and San Francisco bore the worst declines. Phoenix off by 34 percent, Las Vegas down by 33 percent and San Francisco declined 31.2 percent. Also in the Sunbelt, Denver performed best with 4 percent decline while Dallas dropped 4.3 percent.

The prices in nation’s three largest housing markets particularly New York, Los Angeles, and Chicago plunged 9.2% percent, 26.4 percent and 14.3 percent respectively.

Despite the drops in home prices which will improve the affordability, home sales in January remained to be very weak with existing homes selling at an annual rate of less than 5 million units, down by more than 40 percent from the June 2005, the peak.

Same goes with January new home sales, only about 331,000 units, on an annual rate, were sold. The lowest sales recorded since 1963, the year Census Bureau started tracking home sales.

15-Year Fixed-Rate Mortgages Gain in Popularity With Low Interest Rates

McLean, VA – Freddie Mac (NYSE:FRE) announced today that in the fourth quarter of 2008, 97 percent of prime borrowers who originally had a conforming adjustable-rate mortgage (ARM) chose a new conforming fixed-rate mortgage when they refinanced, up from a revised 85 percent in the third quarter. Furthermore, 99.7 percent of borrowers who had a fixed-rate loan refinanced into another long-term fixed-rate loan, up from a revised 97 percent in the third quarter.

"The very low interest rates for fixed-rate loans compared with ARM rates in the fourth quarter, combined with worries that rates may rise in the future when the economic recession ends, enticed refinancing borrowers to seek the security of long-term fixed-rate mortgages," said Frank Nothaft, vice president and chief economist for Freddie Mac. "When borrowers can lock in a rate of 5 percent or less for 15 years or longer, it’s hard to find a reason not to take it.

"During much of the fourth quarter, initial interest rates on hybrid ARM loans were close to or above interest rates on 15-year and 30-year fixed-rate mortgages. In that pricing environment, fixed-rate loans appear very attractive to borrowers. As a consequence, nearly all borrowers who refinanced chose a fixed-rate loan."

The Refinance Product Transition Report indicates that only 3 percent of borrowers who initially had a hybrid ARM refinanced back into that product, down from 15 percent who chose to refinance back into another hybrid ARM in the third quarter. But overall, hybrid ARMs were more popular in 2008 among borrowers who initially had such loans than they were in 2007. Seventeen percent of hybrid ARM borrowers refinanced back into a hybrid ARM in 2008 versus 14 percent in 2007. In contrast, refinancing borrowers who initially held 1-year ARMs chose fixed-rate mortgages over any ARM product more often in 2008 than they did in 2007.

These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans and the latest loan is for refinance rather than for home purchase.

Source:  FreddieMac, www.freddiemac.com

Most rate locks are intended to protect homebuyers from rate increases while their loan application is processed.  Those refinancing their mortgage can also benefit from rate locks.

Rate locks keeps borrowers from being under the mercy of mortgage lenders the rates move. That means that a 5.6 percent rate when you begin the loan application process may rise to 6 percent by the time the loan closes.

Aside from the interest cost, an increase in interest rates may cause you to pay more points that you have to put more cash down payment. An increase in interest rates may mean higher monthly payments so as to keep your monthly payments in line with what you can afford or what the lender will allow.

So if you are in the process of purchasing or refinance a mortgage and thinking of rate locks, here are some tips that can be helpful.

1. Take time to compare terms and rates. The mortgage industry has many players competing against each other. Lenders are trying to outdo each other in providing favorable rates and terms.
2. Make sure that the mortgage lenders and/or brokers you are dealing with are licensed.
3. Get the rate lock commitment in writing and make sure that you have a copy of the commitment from the mortgage lender, bank or credit unions and not the broker or agent.
4. Only mortgage lenders, banks, or credit unions are authorized to issue rate lock commitments. Mortgage brokers are not allowed to issue rate lock commitments.
5. However, a mortgage broker can arrange a rate lock in writing from the actual underwriting lender. Always ask for a copy of the rate lock commitment from the underwriting lender.
6. Provide all documentation to your lender or broker in a timely fashion. Throughout the mortgage application process, provide all required documentation to your lender or broker in a timely fashion and well before the rate lock expires.
7. Once you lock-in a rate, stay  in close contact with lender or broker often throughout the mortgage application process and make sure that the application is progressing smoothly and quickly as you expect.
8. Pay attention to deadlines. A lender is expected to honor a rate lock but if you fail to complete your home purchase or don't refinance before the rate lock term expires, you'll have to pay any increased rate, along with any other increased costs. However, some leeway or exceptions are given if the borrower is not at the fault.