Mortgage rates rise as White House future for Fannie, Freddie

The firms are stabilizing and their loan portfolios for the past couple of years are holding steady, with only a small number of defaults as most of the bad loans taken on during the housing boom are moving off the books. 

House Republicans are pressing to eliminate Fannie and Freddie and let the private sector take over the loans without loan guarantees. Some groups representing smaller banks have expressed concern that the move would allow big banks to dominate the market, making housing more expensive at a crucial time in the market's slow recovery. 

Housing is already getting more expensive following record-low loan rates in November. The current rates reflect the rising yields on 10-year Treasury notes, which hit a nine-month high this week. 

Housing market analysts have said they expect that it will take at least two more years to get through the heaviest load of foreclosures before the market stabilizes. Some have predicted an increase of 20 percent for repossessions this year and price declines of 5 percent as lenders shed bad loans. 

Mortgage applications decreased for the week ending Feb. 4, with applications down 5.5 percent, refinancing down 7.7 percent with the purchase index decreasing 1.4 percent from the previous week, the Mortgage Bankers Association (MBA) said Wednesday. 

"Mortgage rates increased last week as many incoming economic indicators continue to show stronger growth than had been anticipated. Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance," said Michael Fratantoni, MBA's vice president of Research and Economics. "We are at the beginning of the spring buying season, but purchase volume remains weak on a seasonally adjusted basis."

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