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38 MORTGAGE RATES DECLINE IN MID-MAY Mortgage rates pulled back slightly again in the middle of May, responding to what little major economic developments there were. According to Freddie Mac's Primary Mortgage Market Survey, the 30-year aver- age fixed-rate mortgage (FRM) eased to 4.20 percent (0.6 point) for the week ending May 15, a drop of just 1 basis point from the last survey. It was the third straight week of declines, Freddie Mac reported, bringing the 30-year fixed average to a six-month low. At the same time, the 15-year FRM aver- aged 3.29 percent (0.6 point), dropping from 3.32 percent. On the adjustable-rates side, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.01 percent (0.4 point), down from 3.05 percent, while the 1-year ARM was unchanged at 2.43 percent (0.5 point). "Mortgage rates were little changed amid a week of light economic reports," said Frank Nothaft, chief economist at Freddie Mac. "ese lower than expected rates are welcome news with the spring homebuying season under way and may even provide those who haven't already refinanced possibly a reason to take another look." Bankrate.com's national survey also saw declines in all categories. In its weekly release, the finance site recorded the 30-year fixed at 4.33 percent and the 15-year fixed at 3.42 percent, each down a few basis points. e 5/1 ARM, meanwhile, ticked down to 3.31 percent. Even with the recent downward trend, the majority of analysts—62 percent—polled in Bankrate's trend survey predicted rates would remain more or less where they where over the following week. However, a quarter of those surveyed expect a bump upward, including senior mortgage reporter Polyana da Costa, who reasoned, "Rates have dropped consecutively for three weeks. is is not sus- tainable. Even if we get more bad economic news, rates should trickle up next week." JOHNSON-CRAPO BILL CLEARS SENATE BANKING COMMITTEE Despite some recent pushback from Senate Democrats, the Johnson-Crapo reform bill that plans to phase out Fannie Mae and Freddie Mac passed the Senate Banking Committee by a bipartisan vote of 13-9. e legislation is an agree- ment between chairman Tim Johnson (D-South Dakota) and ranking member Mike Crapo (R- Idaho) "designed to stabilize the housing finance market and strengthen the American economy," the committee said in a press release. "After the housing crisis we experienced, real reform is clearly necessary to stabilize the hous- ing system and renew the faith in the American Dream of homeownership for generations to come," Johnson said. "Even though the support was not unanimous, every member on the com- mittee was actively engaged in this collaborative process, and passing this legislation out of com- mittee is only the first step." e bill would get rid of both Fannie Mae and Freddie Mac in their current form, allowing pri- vate companies to enter the space vacated by the two companies. Currently under the conservator- ship of the federal government, the companies can't be relinquished from federal control without an act of Congress or their regulator, the Federal Housing Finance Agency (FHFA). e bill would create a reinsurance fund, known as the Mortgage Insurance Fund, to protect taxpayers. e new system would be regulated by the Federal Mortgage Insurance Corporation, which is similar to the FDIC. "Today's vote marks an important milestone. For the first time in the nearly six-year con- servatorship of Fannie Mae and Freddie Mac, both bodies of Congress have passed legislation to reform our broken housing finance system. I thank everyone for their continued work on this legislation and look forward to further discussions as the process continues," Crapo said. e White House, through the Office of the Press Secretary, lauded the committee for its work, calling the vote "an important step toward achieving a more sustainable housing finance system that helps protect the American Dream of homeownership." However, many viewed the vote neither as a win nor a positive long-term outcome for the American people. An outspoken critic of the bill, House Finan- cial Services Committee Chairman Jeb Hensar- ling (R-Texas) believes it is nothing more than a wealth redistribution scheme. "[T]he Senate bill features a controversial and irresponsible new politicization of mortgage cred- it insisted by Senate Democrats under the guise of affordable housing. is wealth redistribution scheme, far worse than that of the current system, would be a multibillion-dollar annual invitation to return to the lower credit standards, higher risks, and unsustainable lending that created the crisis in the first place." Democrats also found problems with the bill, albeit for different reasons. "I remain concerned that this bill in its current form does not do enough to produce a housing market that works for middle-class America," said Sen. Elizabeth Warren (D-Massachusetts), who voted against the bill. e bill now heads to the Senate, where it is expected to have an uphill battle gaining support for a floor vote. Consumer confidence rose 1.3 percent to 83 in May, according to the Wells Fargo Economics Group. KNOW THIS

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