“Mortgage rates have increased more than 100 basis points since early May, and we anticipate that trend to continue, albeit gradually, during the next year,” Doug Duncan, Fannie Mae’s chief economist, said in a report Tuesday. He also expects economic growth to slow from the, “surprising” pace seen last quarter.

Regionally, home builder confidence increased the most in the Midwest and West and more moderately in the Northeast and South. Housing starts and building permit numbers for August will be released by the Commerce Department on Wednesday.

(Read more: Map: Tracking the recovery)

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC.

Article source: http://www.cnbc.com/id/101040159

During the next several years, as the housing market crashed and then began to eke its way back, Fannie and Freddie drew $188 billion from the Treasury. They were in turn forced to pay 10 percent stock dividends back. Then in 2012, the Treasury announced that that agreement would be replaced by a quarterly sweep of every dollar of profit that each institution earned in the future.

(Read more: Map: Tracking the recovery)

The move was designed to, “help expedite the wind down of Fannie Mae and Freddie Mac, make sure that every dollar of earnings each firm generates is used to benefit taxpayers, and support the continued flow of mortgage credit during a responsible transition to a reformed housing finance market,” went the 2012 release.

By 2012, with the housing market rebounding and newly originated loans faring better than any in history, Fannie Mae and Freddie Mac began turning annual profits. By 2013, those profits were growing dynamically, and the two are now nearing the amount they originally drew from the Treasury, although the payments do not go to pay back the draw. The Treasury still owns the preferred stock. The money simply goes to the government.

Now, as individual investors in Fannie and Freddie stock cry foul, launching lawsuits against the government and demanding their share, lawmakers are under increased pressure to find a fitting end for the conservatorship and the entities. The question is whether or not to put a government backstop into the market yet again.

“The construct of a government-guaranteed, mortgage-backed security is absolutely going to be needed,” said David Stevens, CEO of the Mortgage Bankers Association. “You can’t have a functioning housing finance system where private capital just leaves it in the next recession. You need to have constant liquidity provided to the U.S. system, and that comes from the guaranteed mortgage-backed security.”

Confidence is key going forward, and investors are unlikely to pour money back into the mortgage market without a guarantee that in another catastrophic crash there won’t be some government backstop. One of the leading bipartisan proposals in Congress, introduced by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., does create an investor and borrower-funded backstop. It will make loans slightly more costly, but the government guarantee on mortgage-backed securities would be there.

“The biggest problem is that Congress wants supercheap mortgages and they want to eliminate taxpayer risk for the housing market, and that’s just a holy grail to get,” said Guggenheim’s Seiberg. “Anything less than 100 percent government backstop is going to raise questions about whether fixed income investors are really going to be there to pick up the slack and to buy those securities.”

Federal regulators are already trying to shrink the portfolios of Fannie Mae and Freddie Mac, even as Congress still debates their future. They have layered on heavy fees to lenders, which have actually made conforming loans (those backed by Fannie and Freddie) more costly than jumbo loans funded by banks. There is also a move to lower the loan limits on conforming loans, which would push banks and investors to take on more of the markets.

(Read more: Jobs report tempers mortgage rates)

Article source: http://www.cnbc.com/id/101018586

During the next several years, as the housing market crashed and then began to eke its way back, Fannie and Freddie drew $188 billion from the Treasury. They were in turn forced to pay 10 percent stock dividends back. Then in 2012, the Treasury announced that that agreement would be replaced by a quarterly sweep of every dollar of profit that each institution earned in the future.

(Read more: Map: Tracking the recovery)

The move was designed to, “help expedite the wind down of Fannie Mae and Freddie Mac, make sure that every dollar of earnings each firm generates is used to benefit taxpayers, and support the continued flow of mortgage credit during a responsible transition to a reformed housing finance market,” went the 2012 release.

By 2012, with the housing market rebounding and newly originated loans faring better than any in history, Fannie Mae and Freddie Mac began turning annual profits. By 2013, those profits were growing dynamically, and the two are now nearing the amount they originally drew from the Treasury, although the payments do not go to pay back the draw. The Treasury still owns the preferred stock. The money simply goes to the government.

Now, as individual investors in Fannie and Freddie stock cry foul, launching lawsuits against the government and demanding their share, lawmakers are under increased pressure to find a fitting end for the conservatorship and the entities. The question is whether or not to put a government backstop into the market yet again.

“The construct of a government-guaranteed, mortgage-backed security is absolutely going to be needed,” said David Stevens, CEO of the Mortgage Bankers Association. “You can’t have a functioning housing finance system where private capital just leaves it in the next recession. You need to have constant liquidity provided to the U.S. system, and that comes from the guaranteed mortgage-backed security.”

Confidence is key going forward, and investors are unlikely to pour money back into the mortgage market without a guarantee that in another catastrophic crash there won’t be some government backstop. One of the leading bipartisan proposals in Congress, introduced by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., does create an investor and borrower-funded backstop. It will make loans slightly more costly, but the government guarantee on mortgage-backed securities would be there.

“The biggest problem is that Congress wants supercheap mortgages and they want to eliminate taxpayer risk for the housing market, and that’s just a holy grail to get,” said Guggenheim’s Seiberg. “Anything less than 100 percent government backstop is going to raise questions about whether fixed income investors are really going to be there to pick up the slack and to buy those securities.”

Federal regulators are already trying to shrink the portfolios of Fannie Mae and Freddie Mac, even as Congress still debates their future. They have layered on heavy fees to lenders, which have actually made conforming loans (those backed by Fannie and Freddie) more costly than jumbo loans funded by banks. There is also a move to lower the loan limits on conforming loans, which would push banks and investors to take on more of the markets.

(Read more: Jobs report tempers mortgage rates)

Article source: http://www.cnbc.com/id/101018586

Mortgage bankers shed 1,200 jobs, as their refinance business has dropped dramatically due to higher rates. The unemployment rate for young adults rose to 7.8 percent, with just 74.8 percent of them working, according to the Bureau of Labor Statistics. That is the lowest share in a year.

(Read more: Jobs growth misses high hopes; rate drops to 7.3% )

“Without jobs, fewer young adults will buy, rent, or even move out of their parents’ homes, which holds back future household formation and longer-term demand for new construction,” noted Jed Kolko, chief economist for Trulia.

On the other hand, large downward revisions in overall jobs in July kept mortgage rates from rising even further. Conforming loan rates are tied to mortgage-backed-securities, or MBS, which tend to correlate with U.S. Treasuries.

Conforming loans are those backed by Fannie Mae, Freddie Mac or other government agencies. Their limit is $417,000 but can be as high as $625,500 in high-cost housing markets.

Article source: http://www.cnbc.com/id/101014193

“Nonagency jumbo lenders began dipping their toes in the water as early as 2011, and even more so into the end of 2012. Strong loan quality due to tight underwriting combined with competition between large banks and securitzers has led to relatively increased demand. Wells and Chase are keen to compete with securitizers like Redwood or Sequoia in order to capture potential income streams from jumbo clients’ bank business.”

(Read more: Higher mortgage rates may mean easier credit)

In addition, Fannie Mae and Freddie Mac, which back and bundle two-thirds of conventional loans, have been raising the fees they charge to banks, so-called guarantee fees, mostly to protect themselves against default. Guarantee fees have nearly doubled in just the past year.

“As G-fees move higher, this increase gets added into conforming mortgage rates,” said Guy Cecala of Inside Mortgage Finance. “It’s a factor, but not the biggest one, allowing portfolio jumbo lenders to match or undercut conforming mortgage rates.”

The bigger factor, said Cecala, is that 92 percent of jumbo mortgages are made by banks that fund the loans with their deposits and then hold them in a portfolio. Given that the interest paid on consumer deposits in banks is still incredibly low, lenders can still make a profit on mortgages priced at 4 percent or less if they want to. In fact, jumbo loans, by some lenders, can actually cost less than conforming.

Article source: http://www.cnbc.com/id/100962728

(Read more: What you need to know if Fannie and Freddie go)

“Consumers have taken the interest rate rise in stride. Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track from its dip last month,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “These results are consistent with our own analysis of previous housing cycles, which finds that interest rates and home prices are not strongly correlated.”

(Read more: Taking your calls now: Obama sells housing agenda via Zillow)

Another survey from home builder PulteGroup found 43 percent of move-up buyers indicating they are planning to buy a new home within the next five years, with 76 percent saying they believe they can sell their current home within the next two years for enough to move up. Pulte targets the move-up buyer.

Mortgage applications to purchase a newly built home rose 14 percent month to month, according to the Mortgage Bankers Association, but new home buyers may be less sensitive to rates, as builders can buy down mortgage rates as part of the deal.

It all prompts the question: With rates still historically low, does a 1 percentage point jump in rates really matter?

Article source: http://www.cnbc.com/id/100952350

She also added that the president was part of a LinkedIn town hall meeting with CEO Jeff Weiner and a Facebook chat with CEO Mark Zuckerburg, although those were not specifically about social media companies but about the broader economy.

(Read more: Higher mortgage rates, easier credit?)

Zillow employees have contributed to the campaigns of several Democrats, including Obama, although the company does not have a PAC, according to the Center for Responsive Politics.

Rascoff, in an interview on CNBC’s “Squawkbox,” said the interview makes “perfect sense” and is part of Zillow’s mission to empower its users, which now number 60 million.

“It’s an unprecedented opportunity to connect our audience at Zillow directly with the president,” he said. “We are a fantastic platform to connect directly with consumers.”

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Editor’s note: Posts from Zillowblog.com are sometimes republished on NBCNews.com.

Article source: http://www.cnbc.com/id/100946724

“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”

The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.

(Read more: Map: Tracking the US real estate recovery)

“History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages,” wrote Mark Palim in a Fannie Mae commentary.

Article source: http://www.cnbc.com/id/100890224

The bill instructs lenders with loans backed by Fannie Mae, Freddie Mac and the Federal Housing Administration, (which is about 90 percent of the market) to account for expected energy cost savings.

Those savings must then be factored into how much the borrower can afford in a monthly mortgage payment, so the energy savings are essentially subtracted from a borrowers expenses.

“You would be amazed at how a few dollars can make a difference in a transaction, $50 in a monthly payment, because people calculate their purchase and what to borrow based upon what it’s going to cost them per month,” argued Isakson.

The bill also tells lenders to add the value of expected energy savings to the value of the home in the appraisal. Since mortgage amounts are based on a percentage of the value of the home, this would allow borrowers to get a bigger mortgage.

(Read more: Housing starts stall, optimism doesn’t)

That’s where homeowners, like Tamara Lyons in Darnestown, Md., who already have green technology in their homes, will be able to make more money when they sell. The value of green will be in the appraisal.

“A lot of my neighbors feel that it’s too much of an initial investment, and they don’t want to put that money down,” explained Lyons, “But, if they see that it’s going to add to the value of their home for resale purposes I think it would definitely make the idea more sexy and more appealing.”

The legislation could also benefit companies that are investing heavily in green product development.

“Certainly companies like Dow or Home Depot who have been working on selling and highlighting their energy-efficient products. Insulation manufacturers … the whole host of manufacturers who make the products that go into the homes that make them more energy efficient,” said Stephen Cowell, CEO of Conservation Services Group.

“So we have a host of technologies and this would give manufacturers, builders, retailers and retrofit companies all an opportunity to begin reaching consumers to say ‘if you take advantage, if you put these products in, you can increase your home’s value’ because it’s now available to a broader range of homebuyers in the marketplace.”

Article source: http://www.cnbc.com/id/100899584

“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”

The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.

(Read more: Map: Tracking the US real estate recovery)

“History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages,” wrote Mark Palim in a Fannie Mae commentary.

Article source: http://www.cnbc.com/id/100890224