Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. The company purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets.
The average rate on 30-year fixed mortgages tumbled 21 basis points in the last week, falling from 5.69 percent to 5.48 percent, while the average 15-year fixed mortgage dropped 26 basis points, from 5.21 percent to 4.95 percent. The last time the 30-year fixed was this low was March 25, 2004, at 5.4 percent. The 15-year fixed hasn't been this low since April 1, 2004, when it averaged 4.84 percent.
Freddie Mac also announced that adjustable-rate mortgages (ARMs) fell sharply this week to lows not seen since 2005. The five-year Treasury-indexed hybrid ARM sank from an average 5.4 percent to 5.13 percent, and the average one-year ARM dropped from 5.26 percent to 4.99 percent.
In a statement published on Freddie Mac's Web site, Frank Nothaft, the mortgage company's vice president said: "When the Federal Reserve cut the target federal funds rate by three quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut: It is the largest cut since October 1984, and also the first time in more than six years that the Fed took such action outside of a scheduled Federal Open Market Committee meeting. The last time the Fed decided to ease the target federal funds rate in an unscheduled meeting was immediately after Sept. 11, 2001. As a result, mortgage rates continued trending down for the fourth consecutive week across loan products."
Congressional stimulus package
Working with the industry's mortgage giants, congressional leader's last week struck an agreement on a stimulus package that includes a one-year rise in the loan limit for Fannie Mae and Freddie Mac, to $729,750. USA Today reported on Friday: "Currently, Fannie and Freddie can buy only mortgages that are $417,000 or less. Jumbo loans [those more than $417,000] have higher rates because they're viewed as riskier for investors, and that's hurt borrowers in places like California, where the median home costs about $489,000. The stimulus package also raises the dollar amount on loans insured by the Federal Housing Administration (FHA), which helps out first-time and working-income families, to $729,750 from $362,790. Congressional leaders hope that the plan will help millions of homeowners refinance to take advantage of the falling interest rates.