Home Insurance Trouble

Fannie Fees Fail to Offset Record Low Lending Rates: Mortgages

Jan. 18 (Bloomberg) -- Ben S. Bernanke's success in pushing mortgage rates to record lows is enabling Congress to fund last month's payroll tax cut extension by siphoning money from Fannie Mae and Freddie Mac, while homebuyers still benefit from the cheapest borrowing costs in history.

The legislation mandated that Fannie Mae, Freddie Mac and the Federal Housing Administration charge more to guarantee home-loan debt, starting with an increase of 0.1 percentage point at Fannie Mae and Freddie Mac in April. It will force further increases of as much as 0.45 percentage point over the next two years at the two U.S.-supported companies, according to Nomura Securities.

Increases of twice that amount would leave 30-year home- loan rates at levels unseen before 2009 after Federal Reserve Chairman Bernanke kept the short-term lending benchmark near zero and bought $1.25 trillion of mortgage bonds. The greater fees suggest that Congress and President Barack Obama's administration are willing to bet the housing recovery is far enough along to withstand the rise.

“Rates are so low right now, that additional cost is marginal, said Mark Goldman, a mortgage broker at C2 Financial Corp. in San Diego. ‘‘The only impact it will have is on people who have a visceral reaction to being singled out to fund the extension of the payroll tax cut.''

The average rate on a typical 30-year mortgage fell last week to a record low 3.89 percent, according to surveys by McLean, Virginia-based Freddie Mac. The average over the past decade has been 5.69 percent, with the high in the period of 7.18 percent reached in 2002 as home prices were rising.

Buffett Recovery

Warren Buffett, the billionaire chairman and chief executive officer of Berkshire Hathaway Inc., has said that housing will recover from its six-year slump.

‘‘We're creating more households every day than we are houses and we will come into balance,'' he told Charlie Rose in a September interview.

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