Freddie Mac weighing share issue to raise $10 billion
Freddie Mac announced today that it has taken a preliminary step toward issuing stock by becoming a registrant with the Securities and Exchange Commission. SEC registration has been a longtime goal for the company, which was hampered by the need to restate several years of earnings in the wake of a 2003 management and accounting scandal. Freddie Mac officials restated a previous commitment to federal regulators to raise $5.5 billion of new core capital through one or more offerings, which will include both common and preferred securities.
Before Freddie Mac’s announcement, the Wall Street Journal reported that Freddie Mac might raise up to $10 billion in capital by issuing new shares. Freddie Mac and its sister company, Fannie Mae, saw their share prices rebound this week in response to a Bush administration plan to provide a "capital backstop" for the government-chartered companies in the form of a line of credit and the ability to purchase equity. Treasury Secretary Henry Paulson has said Fannie and Freddie have no immediate plans to borrow from the government, and a sale of new shares might eliminate the need for a government bailout, the Journal reported.
Freddie Mac’s core capital of $38.3 billion as of March 31 is equal to 1.8 percent of the $2.15 trillion of mortgages the company owned or guaranteed at the time, the Journal said. Regulators would require a bank with similar obligations to have $91 billion in capital to be considered well-capitalized, the Journal said.
California sees most FHA guarantees on big loans
The Federal Housing Administration guaranteed 966 loans in California in June above the old $362,790 cap — more than any other state in the nation, according to statistics released by HUD Region IX (which includes California, Arizona, Nevada and Hawaii). Maryland had the second-greatest number of FHA endorsements of loans above the old limit: 450. In California, the Los Angeles metropolitan statistical area (MSA) saw the most number of FHA endorsements on loans greater than $362,790 in June — 262 — compared with just 16 in the San Francisco MSA.
The Bush administration and Congress temporarily raised FHA loan limits in March to up to $729,750 in high-cost markets. The temporary increase in FHA loan limits is set to expire at the end of the year. Legislation pending in the House would maintain the current higher limit, while the Senate proposes capping FHA loan guarantees at $625,000 (see story). HUD Region IX had previously reported that after the limit was raised, loan endorsements in eight MSAs increased 62.5 percent from March to May.
Within Region IX, the use of seller-funded down-payment assistance during June was greatest in Phoenix, where the higher loan limits do not apply. FHA guaranteed 1,524 loans for first-time home buyers in Phoenix in June, and 808 loans that involved seller-funded gifts. HUD wants to end the use of seller-funded down-payment assistance for FHA-guaranteed loans, claiming the higher default rates on those loans will put the FHA Mutual Mortgage Insurance Fund in the red (see story).
NYC code changes distort June housing starts
A 9.1 percent increase in the rate of housing starts from May to June appears to be a blip driven by builders rushing to beat new building codes taking effect in New York City on July 1. Permits jumped 73 percent in the Northeast and housing starts were up 103 percent — producing a surge in national statistics that caught some housing analysts by surprise, the New York Times reported. Outside of the Northeast, housing starts declined 4 percent, the Times said. The Wall Street Journal and blogs including MyNewPlace also attributed the boost in permits and starts in the Northeast to New York City. Housing starts were down about 26.9 percent year-over-year in June, the U.S. Census Bureau and HUD announced Thursday, while building-permit authorizations fell about 23.9 percent (see story).
Golden State goes ‘green’ with building standards
The California Building Standards Commission this week made California the first state in the nation to integrate less environmentally disruptive ("green") building standards into its building codes. The codes, developed by the state Department of Housing and Community Development, will be phased in over the next three years. The commission said that while the new mandatory building standards advance California’s green-building movement, the new measures are intended to not drive up home prices. The standards address issues such as energy efficiency, water conversation, air quality, moisture control and resource conservation. The California Building Industry Association and U.S. Green Building Council, in statements Thursday, expressed support for the new standards.
Apartment rate rising slower than inflation
The latest quarterly survey by apartment data company RealFacts found that apartment rental rates are rising at a slower pace than inflation. Average rents throughout the country increased by 0.6 percent in the second quarter and were up 2.5 percent from the previous year. Among the highest of quarterly rate of rental increases were Tulsa, Okla., at 3 percent and Oklahoma City at 1.3 percent, with Seattle, San Jose and Salt Lake City also toward the top of the list. Salt Lake City had the highest year-over year rental rate increase, at 10.4 percent, followed by Tulsa at 8.8 percent and Oklahoma City at 8.3 percent. San Francisco, Seattle, San Jose and Portland also had rental rate increases above 5 percent, year-over-year in the second quarter.
Overall rent is gradually increasing, yet the rate of increase declined considerably, RealFacts reported. The annual rate of increase was 3.6 percent in December 2007 and 4 percent in June 2007. Meanwhile, the Web site Inflation.com reported that the inflation rate for May was 4.2 percent.
What’s your opinion? Leave your comments below or send a letter to the editor.