Domestic Housing Market, ETFs Seek Help
November 14th at 11:00am by Tom Lydon
Real estate exchange traded funds (ETFs) and the housing market need a helping hand.
The FDIC is breaking with the Bush Administration and is now proposing a $24 billion plan to help 1.5 million Americans stay in their homes.
The Federal Deposit Insurance Corp. is proposing the government funding to help 1.5 million Americans avoid foreclosure. The FDIC posted the plan on its Web site two days after Treasury Secretary Henry Paulson rejected the idea of using money from the $700 billion bailout of the financial industry to pay for such a proposal, reports Alan Zibel for Associated Press. The Treasury has declined to comment.
The agency’s plan would guarantee 2.2 million modified loans – mainly risky loans made to borrowers with weak credit or small down payments – through the end of next year. Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable.
Freddie Mac (FRE) is asking for an initial injection of $13.8 billion from the government after posting third-quarter losses of $25.3 billion.
Alan Zibel for Associated Press reports the mortgage finance company is making the first request to tap the $200 billion promised by the Treasury Department to keep it and sibling company Fannie Mae (FNM) afloat after the two were seized by federal regulators more than two months ago.
The loss was mainly because of a $14.3 billion charge to reduce the value of tax assets, but also was driven by $9.1 billion in writedowns on mortgage securities, and $6 billion in credit losses because of soaring mortgage delinquency rates and foreclosures. Fannie Mae reported on Monday a $29 billion loss in the third quarter.
The mortgage company claims the economic turbulence is also affecting prime loans made to strong borrowers with good credit.
Real estate ETFs have taken a beating right alongside the market, so any plan put through by the government could help move them back into positive territory:
- Vanguard REIT (VNQ): down 39.6% year-to-date
- SPDR Dow Jones Wilshire REIT (RWR): down 40.8% year-to-date
