Saturday, August 09, 2008

Michigan Moratorium Now Coalition Builds for Sept. 17 Lansing Demonstration Amid Further Losses by Mortgage Industry


Get involved in building the Sept. 17 demo for a moratorium on foreclosures. There are activities going on in Detroit and AROUND THE STATE. - David Sole

Weekly Detroit Coalition organizing meetings will start this Monday,
Aug. 11, at 7 PM, at the office on the 4th floor of the Central United
Methodist Church. Outreach and all day-to-day organizing activities in the metro area and throughout Michigan will be discussed and planned at these meetings. Please join us and help win the passage of Senate Bill 1306 and a moratorium on foreclosures. Everyone who wants to contribute is welcome.

This weekend, a number of Coalition activists will be going to different cities (Saginaw, St. John, Jonesville) to build for the Sept. 17 demonstration in Lansing.

If you have some time available, please call 313-319-0870 or 313-877-4344, and find out how you can help.

The next Moratorium NOW! Coalition meeting will be on Saturday, Aug. 16, 2008, at 1 PM, on the 4th floor of the Central United Methodist Church, 23 E. Adams, Detroit.

The main agenda items will be organizing activities to build for the Sept. 17 demonstration in Lansing that will demand the immediate passage of Senate Bill 1306. Outreach will be organized for the African World Festival, Aug. 15 - 17, at Hart Plaza, the Jazz Festival, Aug. 30 - Sep. 1, also at Hart Plaza, and at the Labor Day Parade in Detroit, on Sept. 1.

We want to have a huge presence at the Labor Day Parade and need your support and participation. If you have any other suggestions or events that we should leaflet, especially in cities and towns outside of Detroit, let us know.

Mike Shane

Fannie Mae posts big loss

It cuts dividend, raises loan fees


WASHINGTON -- Fannie Mae is making bold cutbacks that will send shock waves through the mortgage market, after posting a quarterly loss Friday that was three times larger than Wall Street expected.

To slow its financial decline, the mortgage finance giant slashed its dividend to 5 cents a share from 35 cents a share and said it will eliminate loans for borrowers with solid credit scores, but little proof of income or small or no down payments.

The company also is raising its mortgage fees, which will be passed onto borrowers as higher interest rates or closing costs.

With Fannie Mae and its sibling company Freddie Mac becoming more risk-averse, fears are building that mortgage rates will keep climbing, making it harder for people to afford a mortgage or refinance their home, and spur even more foreclosures.

"We are already in that spiral," said Chris Mayer, real estate professor at Columbia Business School.

Volatility and disruptions in the capital markets worsened in July. And though Fannie Mae's losses should still peak this year, said CEO Daniel Mudd, he couldn't predict how long the housing recession will last or how low prices will fall.

Disappointed stockholders sent Fannie Mae's shares down 9.1%, or 90 cents, to $9.05 Friday.

Investors worry that Fannie and Freddie will be overwhelmed by losses and require government aid. Fannie Mae and Freddie Mac are the biggest buyers of U.S. home loans from banks and other lenders.

Together they own or guarantee nearly half of outstanding U.S. mortgage debt.

Under the bill signed by President George W. Bush last week, the government may boost lines of credit to the companies or buy their stock.

Mudd, however, said the company has no plans to use that financial lifeline. "We're going to manage our way through it," he said.

While Fannie and Freddie generally had higher standards for lenders than the subprime mortgage companies that started failing at the end of 2006, the duo lowered their standards during the housing boom and bought securities linked to riskier loans.

Even as the subprime mortgage market collapsed, the industry -- backed by Fannie and Freddie -- kept making risky so-called Alt-A loans. They made up about 15% of all loans in the first half of 2007, up from 13% in all of 2006, according to the trade publication Inside Mortgage Finance.

For Fannie and Freddie, these Alt-A loans made up roughly 10% of their portfolios but accounted for more than half of their losses in the second quarter. The souring loans were concentrated in California, Florida, Nevada and Arizona.

For homebuyers who don't have stellar credit and a big down payment, there are few options these days but loans insured by the Federal Housing Administration. Those loans require a minimum of 3.5% down and full proof of income.

What's more, Fannie Mae's new fees will price more borrowers out of the market. For a borrower with less-than-perfect credit, such fees could hike closing costs by $3,000 for a borrower with a $300,000 mortgage, said Patrick Cunningham, a vice president with Home Savings & Trust Mortgage in Fairfax, Va.

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