Low downpayments make it easier for people to walk away from loans. Low downpayments were a key ingredient in all the fancy new mortgages that fueled the housing boom and then bust over the past eight years.

The government keeps intervening in the housing market to try to shore up prices and to reduce foreclosures.

The FHA will likely need another taxpayer bailout soon.

The LAT says:

The head of the Federal Housing Administration is warning that boosting the minimum down payment borrowers must provide to qualify for home loans backed by the agency could threaten the housing market.

FHA commissioner David Stevens said at a House hearing Thursday that his agency would insure 300,000 fewer loans per year if the mandatory down payment was hiked from the current level of 3.5 percent to 5 percent. That's a 40 percent drop.

The result would a potential "double-dip in housing prices," because fewer people would qualify for loans, Stevens told lawmakers.

The FHA does not make loans, but offers insurance against their default. It has been insuring roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

Only 170,000 have completed the paperwork, while 1.1 million home owners have begun the process.

The program is having a tiny impact on America's high rates of foreclosures.

Las Vegas is hard-hit by foreclosures but fewer than 4,000 homeowners have completed the paperwork for the program.

The LAT says:

To receive a permanent loan modification, homeowners need to make three payments and provide proof of their income, plus a letter documenting their financial hardship. To date, about 90,000 borrowers have dropped out.

The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years.

To entice mortgage companies to participate, the government has set aside $75 billion in subsidies, though less than 1 percent has been spent.

We've had easy money since 2005. It got us into this housing mess. We've kept the Fed policy of easy money to try to get us out of the housing mess. The surge in the stock market is a direct result of easy money.

Soon, the party must end and interest rates must head up.

Fed leaders continue to say that interest rates must stay low.

The Los Angeles Times reports:

Yet once the recovery is firmly entrenched, Fed policymakers will need to raise rates to keep inflation in check. Before they do, they first will want to signal that credit will soon be tightened. The trick is doing so without jolting investors and borrowers, who would face higher rates on certain credit cards, some mortgages and other loans.

How best to telegraph the approach of higher rates is likely to dominate discussions when Bernanke and his colleagues meet Tuesday. In particular, the Fed will decide whether to keep, or water down, its year-long pledge to keep rates at "exceptionally low" levels for an "extended period." Economists generally think "extended period" means at least six more months.

That's about the only good news that I can find in the latest figures.

Freddie Mac says it does not need new federal government subsidies.

The Obama administration is taking its sweet time reforming these drunk on subsidies companies.

The Washington Post reports:

At the hearing, Geithner came under pressure from Republicans to put Fannie Mae's and Freddie Mac's debt on the government books. The companies' more-than-$5 trillion debt is all but guaranteed by the federal government, but is not counted in the U.S. national debt.

Geithner rejected the pressure. "We do not think it is necessary to consolidate the full obligations of Fannie and Freddie onto the nation's budget," Geithner said.

But Rep. Spencer Bachus (Ala.), the top Republican on the House Financial Services Committee, rejected that thinking, calling it "the same sort of financial shell game that has brought governments like Greece to a crisis point."

Big expensive homes have been hard hit by the housing crisis.

Fannie Mae and Freddie Mac have limits on the expenses of homes whose mortgages they guarantee.

Some of those owning these expensive homes have been able to refinance to lower rates.

The Los Angeles Times says:

Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for, say, five years and then adjusts annually. Kelly's new loan is a five-year hybrid adjustable identical to his old one, except that he's paying about 5%, down from 6%.

Banks are also relaxing slightly some of their requirements for jumbo loans. That's an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn't being propped up by Uncle Sam.

The lower rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That's because, by definition, jumbos are too big to be bought by Freddie Mac and Fannie Mae or to be insured by the Federal Housing Administration. Plus, the private market for mortgage-backed bonds dried up when the meltdown hit. So lenders making jumbo loans these days must be willing to take the risk of keeping them in their portfolios.

U.S. Treasury secretary Timothy Geitner says that the Obama administration will wait until 2011 to unveil a plan to reform the GSEs Fannie Mae and Freddie Mac.

We're still in the middle of a housing crisis and the Obama administration does not want to cut out subsidies at this vulnerable time.

The federal government did not want to let these GSEs default on their obligations. China, which has invested billions of dollars in them, would not have been happy.

The market has always assumed that the government will bail out Fannie Mae and Freddie Mac, just as it did.

The Los Angeles Times says:

Geithner also told lawmakers the administration had no intention of including the two entities in the federal budget, even though they were taken over by the government in 2008 as they faced mounting losses from mortgage defaults.

"That's going to be a difficult set of reforms, but we do not believe it's necessary to consolidate the full obligations of those entities onto the balance sheet of the federal government at this stage," Geithner told the House Budget Committee.

Fannie Mae and Freddie Mac are vital players in the mortgage industry, purchasing home loans from lenders and selling them to investors. They own or guarantee about half of all residential mortgages. Had they gone broke in 2008, millions of people would have been unable to get mortgages.

The administration's Republican critics have argued that President Barack Obama should have proposed sweeping changes to Fannie Mae and Freddie Mac last year, when he demanded an overhaul of financial regulations. The administration had been expected to announce its plans this month when it submitted its 2011 budget request.

Why are banks getting blamed for not modifying more mortgages?

Why should they modify mortgages unless they believe it is in their self-interest?

What about the sanctity of contracts? People signed up for certain terms. If they can't live up to them, then they default and the bank forecloses.

The Los Angeles Times says:

In an eye-catching report Wednesday, the nonprofit news outfit ProPublica said 97,000 homeowners have been stuck in trial loan modifications for more than six months under the government's anti-foreclosure program, which was supposed to generate permanent modifications after three months.

What's astonishing is a finding by ProPublica reporter Paul Kiel, who has been bird-dogging this issue, that 60,000 of those 97,000 borrowers have their mortgages with JPMorgan Chase & Co.

Chase has the third largest number of loans potentially eligible for government-sponsored modifications, just behind Wells Fargo & Co. but far back of Bank of America Corp., according to a U.S. Treasury Department report Thursday on the government program. (The report lists Wachovia Corp., now part of Wells Fargo, separately.)

I am so glad that the federal politicians chose to bail out Fannie Mae and Freddie Mac. It is only costing us taxpayers over $200 billion.

That's crazy.

I'd love to see what some free market policies would do for the housing market. Let's stop intervening. Let home prices drop to a level where there's an efficient allocation of resources.

The Los Angeles Times says:

Freddie Mac, which has lost a total of almost $80 billion since the housing crisis started in 2007, is bracing for more pain. The McLean, Va., company said a record 4% of its borrowers are at least three months behind on their payments and facing foreclosure.

Its chief executive, Charles Haldeman, warned Wednesday of a "potential large wave of foreclosures" still to come.

This is a major problem for the federal government, which seized control of Freddie and Fannie in September 2008. The two companies have already siphoned $111 billion from the government to stay afloat. That number is expected to hit $188 billion by fall 2011.

HOME SALES PLUNGED IN JANUARY.

Mortgage applications are at their lowest point in 13 years.

As Ben Bernanke, Fed Chief, said to Congress today, the U.S. economy remains very weak.

The federal government is intervening dramatically in the housing market.

The Los Angeles Times says:

Economists said the 11.2% tumble from December in new home sales — the third consecutive monthly drop announced by the Commerce Department — indicates that Congress' extension of a home buyer's tax credit late last year appears to be having little or no effect on consumer sentiment.

Economists surveyed by Bloomberg News had expected January new home sales to climb.

New home sales make up a much smaller share of the buying activity than sales of previously occupied homes. But the data are carefully watched by economists because construction can give a boost to an economy heading out of recession.

Analysts said the January numbers indicated that residential builders were probably in for a tough year as they continue to compete with steeply discounted bank-owned properties and consumers face depleted household incomes and heavy debt loads.

How are you going to take out a mortgage loan if you don't have a job? Or you fearing losing your job? Or your hours and benefits are getting cut back.

People are scared. I know I am scared. I am out looking for work. I am not seeking to take on any new financial obligations. I want to be free! I don't want to be a slave to a mortgage.

I want to be free to write out in full what I see around me and what I believe. Writing comes first!

The Washington Post says:

U.S. mortgage applications dipped last week, reflecting reduced demand for home purchase loans even as rates on 30-year loans fell to their lowest since December, an industry group said on Wednesday.

The Mortgage Bankers Association's (MBA) seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, decreased 1.2 percent for the week ended February 5.

The MBA said rates on 30-year fixed-rate mortgages, the most widely used loan, fell below 5 percent for the first time since the week ended December 18. Low mortgage rates fueled a slight uptick in demand for home refinancing loans last week, with activity reaching its highest level since the week ended December 11.

Because they follow the dictates of politicians.

Politicians, be they Republicans or Democrats, saw increased home ownership as an absolute good. They ended up sacrificing our entire economy for this false god.

Neither home ownership or any one thing is an absolute good. If you subsidize something, you will get more of it, but the price you pay will likely exceed the benefits.

Fannie and Freddie were theoretically independent agencies until they went broke last year and the federal government, as expected, bailed them out and took them over. All the easier to run the agencies as the politician's playthings.

WASHINGTON (AP) — Government controlled mortgage finance company Freddie Mac said Wednesday it will buy back an unspecified amount of troubled loans contained in securities it has already sold to investors.

The McLean, Va.-based company said Wednesday it would repurchase mortgage loans in which borrowers have missed at least four months of payments. It did not disclose how much it would spend.

Freddie Mac guarantees the mortgage securities it sells. The company said buying the delinquent loans back would cost less than making those guarantee payments.

Freddie Mac and sibling company Fannie Mae have been run under tight government oversight since they almost collapsed in September 2008. They have required $111 billion in federal aid to stay afloat.