Surprise…used home sales increased in February!  Sales of existing homes grew 5.1% to an annualized rate of 4.72 million, the largest monthly increase in sales since July 2003. While sales are still comparatively slow, the market may finally be coming back to life because prices are so low, prices which are are expected to keep falling throughout the calendar year. 

And we have to remember, the majority of homes in the foreclosure funnel are not yet for sale, credit is nearly non-existent and unemployment is rampant. Not a formula for great hope…

About half of the buyers in February 2009 were first-time homebuyers jumping in to snap up a good deal. The median sales price of $165,400 is down more than 15% from the median sales price of $195,800 a year ago.

Hope springs eternal.

Looks like mortgage rates, currently about 5% on 30-yr loans, may drop even lower since the Fed decided this week to buy an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.  Remember, this will be in addition to the 500 billion in FM/FM securities it’s already committed to buy. And, the Fed will double its purchases of Fannie Mae and Freddie Mac debt to a staggering $200 billion.

Now we are all wondering, who really owns the loans?

AIG is the largest government bailout so far, having received $180 billion in government funds.

But Freddie Mac may top that, having already received $14 billion in government aid, then losing $50 billion 2008, and recently asking for an additional $31 billion to keep going.

It may require far more to save Freddie Mac from collapse because it now owns approximately 30,000 homes at a cost of about $3,300 per house per month to maintain, in addition to losses on each individual mortgage loan.

And it ain’t over yet.

FICO credit scores assigned by the three national credit agencies usually range from about 300 to about 850. Historically, borrowers who rated above 760 got the best mortgage rates, those between 760 and 700 got financing, but at a little higher interest rate or with points, and those under 630 paid the highest rates, if they got financing at all.

New guidelines pack a nasty punch for borrowers in all classes. Those with a FICO score of 699 seeking a 75% loan will be required to pay a 1.5 percent “risk fee” at closing. Even borrowers with  a FICO score between 700 and 739 will be required pay a risk fee .25 - .75 point, depending on the lender. Prospective borrowers with lower credit scores may find themselves paying thousands of dollars in risk fees for the privilege of obtaining a mortgage.

State foreclosure moratoriums in FL and NY have expired, resulting in increased foreclosure-related filings.For example, in NY February 2009 filings were up 23% over January 2009, but down 18% over the same period one year ago. In FL however, 2009 foreclosure-related filings in February were up 43% over February 2008.