Government

Congress' last-minute accord to avert a default wasn't enough to save the United States' top rating from Standard & Poor's. The agency downgraded the long-term credit rating of the U.S. to AA+, a grade just below the AAA rating the U.S. had held for 70 years. Analysts were expecting a temporary spike in Treasury yields, which are closely tied to mortgage rate trajectories, but investors responded with a rush on Treasuries, pushing yields down 13 basis points. Fannie Mae, Freddie Mac, and the Federal Home Loan Banks also had their S&P ratings lowered to AA+ on Monday.

The administration has released a new report on its flagship Home Affordable Modification Program (HAMP). Officials say more borrowers are qualifying for permanent modifications, and in less time. The rate of modifications moving from trial to permanent status under the HAMP umbrella is up to 74 percent, according to Treasury. At the same time, conversions from a trial to permanent modification are down to 3.5 months on average, compared to an average of 5.2 months a year ago.

Fannie Mae's second-quarter loss narrowed from the previous quarter, but still in the red, the GSE says it needs to draw another $5 billion from Treasury, bringing its tally of taxpayer-funded support to $104.8 billion since the company was placed into conservatorship. The company reported a net loss of $2.9 billion for the April-to-June period, compared to a net loss of $6.5 billion in the first quarter of the year. Fannie Mae acquired 53,697 REO homes through foreclosure over the three months ending in June.

Senator Jack Reed (D-Rhode Island) has sent a letter to the director of the Federal Housing Finance Agency (FHFA) recommending the agency require Fannie Mae and Freddie Mac rent out foreclosed properties rather than immediately attempting to sell them at bargain prices. Reed believes renting the properties would help the market on all fronts by reducing foreclosure inventories, providing affordable housing, and creating jobs in hard-hit industries.

The U.S. Department of Justice has filed a civil lawsuit against Robert S. Luce, founder and president of MDR Mortgage Corp. a mortgage lending business located in Palatine, Illinois. The complaint centers around 90 Federal Housing Administration (FHA) loans that went into default. According to the complaint, HUD was required to pay more than $1.6 million in insurance claims on the loans, which Luce and MDR were not authorized to originate.

After heading higher for three straight months, the nation's unemployment rate declined to 9.1 percent in July, down from 9.2 percent in June, according to figures released Friday by the U.S. Department of Labor. The economy added 117,000 jobs last month. July's numbers beat analysts' forecasts. Investors are hoping the news will help dispel fears of a double-dip recession and quell some of the sell-off frenzy seen in the stock market yesterday, which led to the largest one-day drop in the Dow since the financial upheaval following Lehman Brothers' collapse.

Data released by Lender Processing Services (LPS) Thursday indicates foreclosure and delinquency numbers are on the rise again. The company says foreclosures were initiated on 217,486 loans in June, up more than 10 percent from May. The national delinquency rate also increased to 8.15 percent. As a supplement to this month's report, LPS examined its historical data and found that nearly half of all loans originated in the U.S. since 2005 would not qualify as a Qualified Residential Mortgage (QRM) under regulators' current proposal.

An independent study conducted by Promontory Financial Group concludes that significantly more insured mortgages have survived the housing crisis than loans with ""piggyback"" second mortgages, which has been the most prevalent alternative to the use of mortgage insurance for the past decade. The study examined almost 5.7 million mortgages originated between 2003 and 2007. Compared with insured, low downpayment mortgages, loans with piggyback second mortgages were almost 21 percent more likely to go into default.

The Five Star Institute has announced a partnership with Fannie Mae to educate real estate agents on Fannie Mae's Short Sale Assistance Desk (SSAD). Fannie Mae's SSAD helps expedite the process by allowing real estate agents to reach out to the GSE directly for short sale approval of first-lien, Fannie Mae-backed loans. Agents can access the appropriate forms through multiple listing services. With 107,953 short sales in 2010, such transactions continue in significant numbers this year - 35,406 as of April, according to a federal report.

In its own private negotiations with state attorneys general and officials at HUD and the U.S. Justice Department, Bank of America is reportedly bringing principal reductions to the bargaining table. BofA and four other mortgage servicers have been in discussions with state and federal officials to settle investigations into foreclosure practices involving faulty paperwork and illegal affidavits, but talks have stalled. To move things along, BofA has put forth its own proposal for principal write-downs in exchange for liability protections.