Federal Home Loan Mortgage Corp (OTCBB:FMCC) reported that due to robust refinance activity and home sales, the estimate of mortgage originations for 2015 and 2016 have been increased to $1.45 trillion and $1.3 trillion, respectively. The mortgage company expects 2015 to be the best year in terms of home sales, since 2007.
2Q2015 Refinance highlights
Federal Home reported that cash-out refinances surged to 34% in 2Q2015 from 27% in the first quarter of 2015. A year ago, the figure stood at 22%, and during the housing industry boom, in 3Q2006 it was 89%. Majority of refinancing borrowers have decided to shorten loan tenures. Out of the total borrowers who repaid a thirty-year fixed-rate mortgage in 2Q2015, 40% decided to opt for a 15 year or 20 year loan, against 39% in the first quarter.
The expert view
Sean Becketti, the Chief Economist of Freddie Mac, said that statistics alone cannot confirm whether housing segment in a particular market or the U.S. as a whole is overrated. At best, affordability figures provide indications of a potential danger. Considering this, they are more or less like the indications posted in national parks that highlight the status of a forest fire. They get hint when the danger is prominent, but they cannot project for sure when or if someone will inadvertently drop a game in the wrong spot.
The highlights
In August Insight and Outlook, Federal Home Loan Mortgage Corp (OTCBB:FMCC) experts also highlighted low down payment mortgage plans like company’s ‘Home Possible Advantage’ that extends affordability for creditworthy borrowers. They assessed actual losses on this plan to losses on 20% down payment loans for the ten year period from 2003 to 2013, a period that covered the housing crisis. Thirty year fixed rate mortgages with 3% down payments were17% riskier compared to 20% down payment loans in the assessed period.
In last trading session, the stock price of Federal Home consolidated and closed flat at $2.25.
