Fannie Mae and Freddie Mac have extended a moratorium, launched on December 15, 2008, on foreclosure suspensions for another three weeks, so mortgage servicers will work on postponing any foreclosures or eviction proceedings until the 31st of this month.

The two mortgage giants have projected that homeowners would avoid bank repossession and eventually qualify for mortgage modifications. The companies don’t have an exact number of how many borrowers that they’ll assist.

The extension on the moratorium should give servicers more time to help at-risk homeowners enroll in the companies’ Streamlined Modifications Program.

The program is aiming to help borrowers who are 90 days or more late on their payments, who own and live in their primary residences, and who have not filed for bankruptcy to reduce mortgage payments to no more than 38% of their income.

This moratorium does not only apply to owners of single family homes, but also multiple family houses that are occupied with renters. It helps cut down the number of foreclosures and it will assist renters to remain in their residences. This makes sense because before if an owner went through foreclosure, their renters got evicted immediately, late on payments or not.

The new policy for renters set by Fannie Mae is the National REO Rental Policy, which allows renters to stay in their homes as long as they have reasonable leases and keep up with their payments.

The extended time period of 3 weeks will give Fannie and Freddie more time to fully enable the new REO rental policy and assure at-risk homeowners with the help that they need.

The more information that the companies explain to the troubled homeowners, the more likely foreclosures and evictions will be prevented.

We’ve seen bailouts happen for the financial industry and for the auto industry, but none for the housing market. But that is slowly changing now. Real estate is 16% of our nation’s economy, and thankfully, it’s getting attention in Washington to receive financial assistance.

What’s on the table as of now for the housing market

Homeowners to get rescued-A bill is being written now to use TARP money to reduce foreclosures substantially. Stopping foreclosures will keep responsible homeowners in their homes, and will prevent neighborhood property values from dropping drastically. The bill will call for 40 to 50 billion dollars of TARP funds to mitigate foreclosures, and hopefully will be implemented by the first of April.

In October, the Hope for Homeowners program was put in place, but due to its costs and requirements, it has helped no one so far. And with the infusion of TARP money, the costs and requirements will be loosened so that the program will actually work to benefit homeowners and lenders.

Bankruptcy law to be reformed-Right now, bankruptcy laws are too strict, so banks are asking for a reform. If the reform is implemented, troubled homeowners will be given the chance to modify their mortgages. This kind of reform will help more homeowners, with all types of credit scores, be able to get a loan because right now mortgage security investors are demanding high interest rates to compensate for the risks, meaning that only a select group of people are able to acquire loans. We need more homebuyers to spur growth and progression in our real estate markets!

Bigger tax breaks for homebuyers-The National Association of Home Builders have been pushing for a temporary tax credit for first time homebuyers  worth up to 10% of the purchase price. A tax credit being a dollar-for-dollar reduction of one’s tax liability. It’s just that the recipients of the tax credit would have to pay back the break over time. The tax credits wouldn’t prevent foreclosures, but could spur economic growth.

Push interest rates down-The interest rate right now on a 30 year fixed loan is 5%, and that’s substantially low. But the National Association of Realtors is pushing for more of a drop, and this is a necessary move in my opinion. This will stimulate more people to consider becoming homeowners. But what we really need is the availability of those low rate loans be much more accessible to the American public.

Finally, we are seeing some progress since the crash of the housing market. Everything important takes time, folks. It took at least 8 years for us to get into this mess, and it’s going to take time to get out. At least we are seeing the start to something positive.

Since 1971, today’s mortgage rate on a 30 year fixed is the lowest ever. The rates have fell down to 5.01%. This is incredible news for able first time buyers and seasoned investors. It has been falling each week for the past 10 weeks.

Last year at this time, a 30 year fixed rate was 5.87%, and last week it was 5.10%. Can we possibly suspect it to go under five percent? I’ve been calling this to happen 2 months ago but all my mortgage lender colleagues claimed that it was impossible. The economy is in rough shape, but the world continues to spin, folks. These dropping property prices and dropping mortgage rates are not going to last forever. There just is no possible way for the United States to crumble and stay down. That’s not how the economy works, the economy goes through cycles, and what’s happening now is no different.

And why are the mortgage rates dropping? It’s because the Federal Reserve’s decision to buy mortgage backed securities from Fannie, Freddie, and Ginnie. On November 25th, 2008, the Fed announced its plan to purchase up to $500 billion dollars of these securities by June 2009. And to compare the amount that the Fed is buying and the available amount of the securities… The amount of available securities is $4.7 trillion dollars.

For other rates, here they are:

15 year fixed rate: 4.62%, which was 4.83% last week

5 year Treasury indexed ARM: 5.49%, which was 5.57% last week

1 year Treasury indexed ARM: 4.95%, which was 4.85% last week (the only rate that rose from last week)

And to make the point clear, do you know what these changes in rates mean for you? If we’re talking about a $200,000 property, a 1.5% difference in rates, equals savings of $184 dollars per month.

Incredible.

Listed below are the 10 worst real estate markets in the United States, with 8 being in California, predicted for 2009. 8 in one state, huh? That’s an incredible hit; almost 25% of a projected change? That’s pretty serious. Arizona, with it’s foreclosures stacking up in Phoenix, is still a valuable investment. With the scare of the economy’s fall, sellers are wanting to liquidate quickly. There are deals out there. Contact us if you’re interested in buying now.

1. Los Angeles, CA
2008 median house price: $375,340
2009 projected change: -24.9%
2010 projected change: -5.1%

2. Stockton, CA
2008 median house price: $248,050
2009 projected change: -24.7%
2010 projected change: -4.0%

3. Riverside, CA
2008 median house price: $256,540
2009 projected change: -23.3%
2010 projected change: -4.8%

4. Miami, FL
2008 median house price: $293,590
2009 projected change: -22.8%
2010 projected change: -6.4%

5. Sacramento, CA
2008 median house price: $225,140
2009 projected change: -22.2%
2010 projected change: 2.3%

6. Santa Ana-Anaheim, CA
2008 median house price: $532,810
2009 projected change: -22.0%
2010 projected change: -3.5%

7. Fresno, CA
2008 median house price: $257,170
2009 projected change: -21.6%
2010 projected change: -3.3%

8. San Diego, CA
2008 median house price: $412,490
2009 projected change: -21.1%
2010 projected change: -2.9%

9. Bakersfield, CA
2008 median house price: $227,270
2009 projected change: -20.9%
2010 projected change: -2.5%

10. Washington, DC
2008 median house price: $343,160
2009 projected change: -19.9%
2010 projected change: -5.7%

When it comes to Tucson, the sun shines more than 95% of the year. And when the northeast becomes cold in September, Tucson is at its greatest. When I say cold, I mean, BRRR, it’s cold out!

It’s November and the weather is at the mid-60s in the early morning, and it gets to about 80 during the afternoon until 5. Perfect weather in Tucson if you ask me. But to those it matters to, Tucson golf is optimal year round. In the summer, you have yourself your clubs and a personal cooler with all your ice-cold drinks. Now? All you need are your clubs and a bottle of water!

The weather is perfect out to hit 18 holes! And there are a handful of great courses to visit in this city. If you’re in the westside, the best place is Starr Pass and at the north, you have numerous courses in the Foothills. There are golf courses with high to low fees, but like I said, tee times in Tucson are good year round!

Enjoy golf in Tucson today!

In a surprise move, FDIC Chairwoman Sheila Bair Friday unveiled details of her plan to have the government help delinquent homeowners.

There are two key elements to the proposal.

First, housing payments for delinquent borrowers would be reduced to 31% of gross monthly income.

To get there, mortgage rates could be set as low as 3% for five years, before increasing at an annual rate of 1 percentage point until they hit the prevailing market rate. Loan terms could be extended as long as 40 years.

Second, to encourage servicers and investors to participate, the government would share up to 50% of the losses if a borrower who had been helped ended up in default anyway. The risk of re-default had been one obstacle to getting lenders on board with systematic modification plans.

In addition, the FDIC would pay servicers who process mortgages $1,000 for each re-worked loan.

The plan is expected to initially help 2.2 million borrowers get new loans; after some borrowers re-default, 1.5 million would ultimately keep their homes, the FDIC estimated.

The plan would cost an estimated $24.4 billion, which Bair has said could come from the $700 billion bailout Congress approved last month.

“It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures,” the Federal Deposit Insurance Corp. said in a statement Friday.

Unless Bair’s proposal gets the Treasury Department’s blessing, it would have to be approved by Congress or wait for review by the Obama administration.

Power struggle

Bair’s move Friday sets up a public power struggle not often seen within an administration.

The FDIC continues to discuss the plan with Treasury Secretary Henry Paulson, who Wednesday said it was one of several under discussion. Supporters took that to mean it had little chance of moving forward.

Bair, however, is more optimistic.

“I don’t think it’s dead,” Bair told National Public Radio this morning. “I think we’re still talking. He didn’t close the door completely. It’s just where the money comes from is really the issue we’re debating.”

The FDIC chairwoman has long wanted the government to take a more active role in helping troubled homeowners. She initiated a similar plan at IndyMac, one of the largest mortgage lenders, after the agency took it over in mid-July.

Bush administration officials, however, have resisted her efforts, instead unveiling a plan Tuesday to streamline modifications of loans held or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

Though he praised Bair’s proposal, Paulson backed away from supporting it this week. A Treasury spokeswoman Friday referred questions to Paulson’s comments from Wednesday.

“As we evaluate the merits of any new proposal, we also will have to identify and justify the means to finance it,” Paulson said. “We must be careful to distinguish this type of assistance, which essentially involves direct spending, from the type of investments that are intended to promote financial stability, protect the taxpayer, and be recovered under the TARP legislation.”

Congressional Democrats, however, have continued to press for increased assistance to homeowners. They have publicly backed Bair, which could give her proposal the support needed for adoption.

“[The Fannie/Freddie plan] should not be considered a replacement for the guarantee program authorized by the recently-enacted financial rescue law which the FDIC has agreed to operate,” Sen. Christopher Dodd, D-Conn. said Tuesday, after the mortgage finance plan was announced.

Acknowledging that many Americans who are paying their mortgages may be angry that their neighbors are getting help, Bair said that foreclosure hurts everyone in a neighborhood by bringing down home values.

“These escalating foreclosures are creating more and more downward pressure on home prices, which is having a very negative impact on our economy,” Bair said on National Public Radio Friday. Americans should realize “it’s in [their] economic self-interest to get this situation stabilized.”

No principal reduction

Borrowers who are at least 60 days late on payments would qualify for this program.

Servicers would have to systematically review all the loans in their portfolios to determine whether they would recover more value by modifying the mortgage rather than foreclosing on the home.

But unlike some other government programs, the FDIC proposal would not reduce the principal to bring it in line with the home’s current value. Instead it would allow part of the principal to be deferred free of interest to the end of the loan.

Borrowers who sell or refinance before paying off the debt would have to pay the principal at that time or work out a short-sale with the bank, where the servicer agrees to forgive the outstanding balance.

Some consumer advocates consider principal reduction key to assisting borrowers in areas where property values have plummeted, leaving many with mortgages greater than their home’s worth – or “underwater.”

Under the Hope for Homeowners program implemented last month, mortgages would be written down to 90% of the home’s current market value and borrowers would be refinanced into 30-year fixed-rate mortgages insured by the Federal Housing Administration.

The FDIC’s program, on the other hand, would not be as beneficial for so-called underwater homeowners. For situations where the mortgage is worth more than the home, the government’s loss-sharing arrangement would gradually decline to 20% before ending for homes where the loan-to-value exceeds 150%.

The loss-sharing arrangement would last for eight years. Only mortgages below the conforming loan limits for Fannie Mae and Freddie Mac – up to $625,500 depending on location – qualify.

The agency is not pursuing principal reductions because it can achieve affordable monthly payments without them, Gray said.

Also, it’s easier to convince investors to agree to a workout if the loan balance is not changed. When the principal is lowered, the value of loan modification over foreclosure is reduced.

IndyMac as a model

At IndyMac, agency officials have already modified 5,000 troubled mortgages, achieving affordable payments through interest rate modifications in 70% of the cases. Another 20,000 delinquent borrowers are in the process of having their income verified.

Taking over IndyMac allowed the FDIC to put into practice its call for a streamlined system to mortgage modifications, a move other servicers have since followed. Until then, loans were being adjusted on a case-by-case basis, which overwhelmed servicers and increased the flood of foreclosures.

Payments on the modified IndyMac loans, which are being adjusted to between 31% and 38% of income, are lowered by $380 on average, Bair told lawmakers last month.

A total of 65,000 borrowers, or 10% of IndyMac’s loan portfolio, were delinquent when the government took over. The agency is reaching out to another 20,000 delinquent borrowers, while the remaining 20,000 borrowers are not eligible for help for a variety of reasons, including that they no longer live in the home, have turned in the keys or are already in the foreclosure process.

The agency is adjusting both loans that IndyMac owns and those it services that have been bundled into securities and sold to investors. According to the FDIC, officials are not having trouble convincing investors – who are often accused of blocking modifications – that they’ll recover more if the loan is adjusted rather than if it goes into foreclosure.

“You demonstrate to investors that modifications are the better alternative,” Gray said.

Consumer advocates support Bair

Consumer advocates have repeatedly said the economy and housing market won’t recover until more is done to help stem the tide of foreclosures. They don’t feel the current foreclosure mitigation efforts undertaken by the Bush administration and by banks are sufficient.

The FDIC plan, however, will do more to help troubled homeowners and do it more quickly, they said.

“Chairman Bair’s proposal has the potential to have an impact of the size and scope necessary to get ahead of the foreclosure crisis and put the economy back on its moorings,” said John Taylor, head of the National Community Reinvestment Coalition, an association of more than 600 community-based organizations.

Credits: CNNMoney.com

I was sitting between two local television journalists at a recent press conference, and I couldn’t help but listen in on their conversation.

“What did you do Saturday?” asked one handsome face of the other.

“I covered the Green Festival.”

“Uhh!” the first handsome face retorted. “I am so sick of all that green stuff!”

If it hadn’t occurred to me before, it surely did then: This mainstream green fad is merely that, a fad. The “Green Teams” and the newscast fillers featuring all those little simple steps you can take to become more environmentally friendly will go away, to be replaced by some other graphics-friendly issue that can be summed up in a 30-second spot.

Fortunately, the real work in the greening of America is going on behind the scenes, in the trenches of local government and in the nonprofit sector.

Here in the arid west, there is perhaps nowhere better to apply green principles than in our homes. Think about the average desert home: approximately 2,000 square feet (up from an average of 1,000 square feet in 1950), an energy-sucking machine, made from materials hauled in from somewhere far away. At least we have a lot of room to stretch our legs.

When we use energy, we use water. Each kilowatt hour of thermoelectric generation, according to a Pima County white paper on green building, requires approximately 25 gallons of water. So it behooves us to reduce the amount of energy used in this region that is so famously dry.

In May, Pima County began a program to do something about this–and now, Habitat for Humanity’s local chapter is joining in the effort. The group, which builds homes for low-income residents using volunteers and donations, is taking small steps to make their newest projects comply with the county’s regional Green Building Program. The program is similar to the U.S. Green Building Council’s 14-year-old LEED ( Leadership in Energy and Environmental Design) green-building rating system , except that it takes into account the unique aspects of the local environment.

“The overall concept of the regional system is to have a system that reflects our climate and region,” says Rich Franz, an architect with the Pima County Development Services Department. “Water and, to a lesser extent, energy are more important in our regional system than LEED. That is because water is key for us–water equals energy; energy equals water.”

The regional system gives credits for water-saving landscaping, decreased indoor water use, and not having a swimming pool, a fountain or a garbage disposal, among other things.

Concurrently, Pima County has been awarded a LEED for Homes providership by the USGBC. This allows builders to voluntarily take part in the various LEED programs with the county’s assistance.

On the southeast side of Tucson, Habitat for Humanity volunteers are building a small home in a middle-class subdivision that looks pretty much like all of the other homes around it. It’s not made of straw bale or adobe; it’s hooked up to the grid, and there are no solar arrays casting shadows. In fact, the green aspects of the home are quite subtle. They include stub-outs for a gray-water line, a frame-in for a future photovoltaic solar system (but not the system itself), water-saving landscaping features, a dedicated space for recycling, prep for a solar water heater and other small steps.

Nonetheless, the home is much greener than it would have been had the local Habitat group not started discussing, about a year ago, ways to make their homes more energy- and water-efficient. This is the first Habitat project to be built under the county program.

“The industry is going in this direction, and a lot of the things that are incorporated into the green-building model make sense,” says Patrick Pitman, Habitat Tucson’s assistant director of construction. “What we wrestle with at Habitat is finding the right balance with how green we can be and still not raise the threshold on price; if you go full-blown green, there is some cost, but there are things we can do that make sense and don’t have a high cost.”

Pitman says that Habitat learned a few years ago that trying to build on the extreme end of green technology wasn’t going to pay off. The group built a rammed-earth home and a few straw-bale homes in northwest Tucson with a group of UA students–and found that such ultra-green methods were too expensive and too difficult for volunteers to work with.

“Our volunteers like wood,” he says. “We like to keep it simple and affordable, but we are continuing to tweak our product to find the green criteria we can incorporate into the build and still be in the sweet spot in terms of cost and affordability.”

According to local green builder Francis Massland, a member of the Habitat committee, that “sweet spot” is liable to get bigger as green-building technologies become more affordable. Moreover, there are a lot of inexpensive things that price-conscious homebuilders like Habitat (and the rest of us) can do now–from using different techniques to apply stucco, to installing a heat shield on the roof, to planting trees in front of windows–that will save energy and water.

“Green may be more expensive on day one, but it is always cheaper on day 1,000,” he says.

Despite only being in place since May, and despite a precipitous drop in new-home permits, the Pima County regional Green Building Program appears to be off to a robust start.

About 10 percent of the residential projects filed with Pima County are currently participating in the program, says Ric Hicks, a plan examiner and green-building expert with Pima County Development Services.

Hicks said there are currently four model-home plans for three different builders that comply with the program. One of those builders is Habitat for Humanity; another is the nonprofit Chicanos por la Causa. Also under review is a multifamily project with 348 units that could be part of the program. Additionally, Hicks said, several builders in town are looking to build homes under the LEED for Homes program, including an assisted-care community, a shopping center in Oro Valley and even a few fire stations.

“I speak to individuals every day, whether on the phone or in person, who want to know more about the program or want to enroll in our program,” Hicks said. “There is a lot of interest in our community, and it’s growing.”

Credits: Tucson Weekly

Monday is the last day to comment on the city’s proposed Grant Road alignment for widening the thoroughfare to three lanes in each direction between Oracle and Swan roads.

Construction on the three-phase project is not to begin until at least 2013 and will last through 2026.

The construction phases will be from Oracle to First Avenue, First Avenue to Tucson Boulevard, and Tucson Boulevard to Swan Road – but not necessarily in that order.

The Tucson Department of Transportation has contacted owners of properties that could be affected by the project – including partial or full takings.

The Grant Road Task Force, which has worked with transportation officials on the project for the past 18 months, is to recommend a final proposed alignment later this month.

The preferred alignment is to go to a vote of the City Council in January.
A map of the proposed alignment is on display at the Pima Association of Governments, 177 N. Church Ave., fourth floor.

It can be viewed online at www.grantroad.info.

Credits: Tucson Citizen

Mortgage giants Fannie Mae or Freddie Mac may back 30 million mortgages. But that doesn’t mean that the new foreclosure prevention program announced this week by the Bush administration will rescue every troubled borrower on their books.

The Federal Housing Finance Agency (FHFA), which took control of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) in September, together with Hope Now, the coalition of lenders, servicers, investors and community groups, designed the plan to help some of the most at-risk homeowners.

“Foreclosures hurt families, their neighbors, whole communities and the overall housing market,” said James Lockhart, director of FHFA in a release. “We need to stop this downward spiral.”

The plan, which begins on Dec. 15, is open to borrowers with loans owned or backed by Fannie and Freddie who are at least 90 behind with their mortgage payments. But in reality, qualifying for the program will probably be a lot more complicated than meeting these two requirements. In the end, it’s probable that only a relatively narrow swath of people will benefit from the initiative.

About 1.22% of Freddie’s 12 million loans are 90 days or more late, while 1.7% of Fannie’s 18 million loans are that far past due. That’s a total of more than 450,000 borrowers, however it’s unlikely that all or even most of them will get help.

“Some people may be technically eligible but not practically eligible,” due to factors like an extremely low income, according to Keith Gumbinger, of mortgage research firm HSH Associates. “I wish someone would get a clear handle on how many people it could actually help,” he said.

Who gets help

Fannie and Freddie are only targeting homeowners who are more than three months past due on their loans in order to ensure that the most troubled borrowers get help immediately.

Beyond that, borrowers will have to write what’s called a “hardship letter” to illustrate that they fell behind for a good reason – whether it’s a a job loss, divorce or a medical problem. If they can’t show that, they don’t get a fix.

Another condition: Borrowers cannot have too much equity in their homes. If their home’s current market value exceeds their mortgage balance by more than 10%, they’re considered too well off to participate. Instead, these borrowers have the option to tap that home equity, either by refinancing or taking out a home equity loan, to get current with their payments.

And some borrowers are simply too far gone to help according to Brad German, a spokesman for Freddie Mac. Those with a mountain of debt and little income may need a much more drastic modification than any lender would be prepared to issue.

“Borrowers have to have some income,” said Faith Schwartz, director of Hope Now. “The property has to [provide] cash flow somehow for the lender.”

But Schwartz cautions that even borrowers in very bad shape should contact their lenders. They may not qualify for a loan workout, but a bank may be willing to do a short sale or a deed in lieu of foreclosure. In a short sale the lender agrees to let the borrower sell the property for less than what the mortgage is worth and forgive the difference. In a deed in lieu of foreclosure the borrower essentially gives the house back to the bank.

Either of these options will do a lot less damage to a borrower’s credit score.

Finally, not everyone who could benefit from the program will chose to participate. Surprisingly, many borrowers who are in trouble just don’t do anything; they don’t contact their banks and they ignore their lender’s phone calls and letters.

Although the program may not have a massive impact, according to Schwartz it’s still a welcome supplement for the many other plans – FHA Secure, Hope for Homeowners and programs from individual lenders – already in place.

And officials hope that it will provide an easy-to-apply template for other modification programs.

“It’s an important step forward for the industry to establish clear-cut guidelines, that make it easier for servicers to act on modifications and for borrowers to understand what is involved,” said Schwartz.

How it works

Lenders will look at their portfolios for borrowers who qualify, and then send out letters informing them that help is available and asking the borrowers for financial information, such as pay stubs and bills, as well as hardship letters.

Then the banks will use that information to determine if they can keep a borrower in their home by reducing their monthly payment to no more than 38% of their gross income. To do that, they can lower interest rates to as little as 3%, extend the length of the loan or defer some of the loan principal.

“The big thing is reaching the agreed-upon affordability target [of 38% of income],” said Schwartz. “However you have to get there to solve the mortgage delinquency by hitting that benchmark, that’s what you do.

After borrowers complete their workout and make three payments at the lower level, the fix becomes permanent.

Schwartz urges at-risk borrowers to call their lenders as soon as possible rather than waiting for the Dec. 15 start date. The longer borrowers wait, the more they fall behind on their payments, the harder it is to help them.

“We should not discourage anyone from contacting their lenders for help,” she said.

Even if you don’t qualify for this plan, there may be another way your lender can help you, she added. It never hurts to ask.

Credits: CNNMoney.com

Mortgage rates fell for the second week in a row, finance firm Freddie Mac said Thursday, as the weakening economy resulted in the slowest pace of home purchase applications in nearly eight years.

Freddie Mac said 30-year fixed-rate mortgages averaged 6.14% this week. That’s down from 6.20% last week and below the 6.24% rate at this time last year.

Rates for 30-year fixed-rate mortgages have been at 6% or higher for five consecutive weeks. Between the week of Oct. 9 and Oct. 16, the 30-year fixed-rate mortgage posted its biggest weekly jump since April 1987, rising from 5.94% to 6.46%

“Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide,” according to a statement by Frank Nothaft, Freddie Mac vice president and chief economist.

Rates on 15-year fixed-rate mortgages fell to 5.81% from 5.88% last week. A year ago, the rate was 5.88%.

The five-year adjustable-rate mortgage fell to 5.98%, from 6.19% last week. A year ago, the rate was 5.96%.

The rate on a one-year adjustable-rate mortgage rose to 5.33% from 5.25% last week. At this time last year, the rate was 5.50%.

Mortgage applications for home purchase loans fell during the last week in October to the slowest pace since the week of Dec. 29, 2000, according to data from the Mortgage Bankers Association.

On Thursday, the head of the Senate Banking Committee said banks receiving money as part of the $700 billion federal bailout must increase their lending to businesses and consumers.

Banks are failing to use public funds to make credit more available and to help troubled homeowners, said Sen. Christopher Dodd, D-Conn.

A recent survey of senior loan officers from the Federal Reserve found that about 70% of banks raised their lending standards for prime mortgages, and about 90% of banks that offer nontraditional mortgages did so as well.

In September, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) were on the brink of failure, having racked up nearly $12 billion in losses from declining home prices, mortgage delinquencies and foreclosures.

Federal officials assumed control of the firms and the $5 trillion in home loans they back. The Treasury put up as much as $200 billion to bail them out and placed them in a temporary “conservatorship” overseen by the Federal Housing Finance Agency.

Credits: CNNMoney.com