Interest rates on long-term mortgage loans dipped down by only 0.02 percent in the latest week, and rates on other loans saw relatively little change as well, according to mortgage finance company Freddie Mac Thursday.

During the week ended January 29, 2009, the average interest rate on a 30-year fixed rate mortgage inched down to 5.10 percent, excluding fees, from 5.12 percent. Two weeks ago, the average rate was 4.96 percent, while one year ago the rate was much higher at 5.68 percent.

Rates on 15-year fixed rate loans remained constant with the previous week at 4.80 percent. Last year at this time, the average rate was 5.17 percent.

One-year adjustable rate mortgages carried an average interest rate of 4.90 percent, down slightly from 4.92 percent the previous week. One year earlier, the average rate on a one-year ARM loan was 5.05 percent.

“Mortgage rates held steady this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The index of leading indicators rose 0.3 percent in December, the first increase in 6 months, fueled by an expansion in the money supply. However, the Federal Reserve acknowledged in its January 28th policy committee statement that since December the economy has weakened further.”

He cited as evidence an 28 percent annual decrease in the S&P/Case Shiller 20-city index through November and a 15 percent annual decline in home sales through December, according to the National Association of Realtors.

Yet there have been bright spots on the horizon. “Interest rates for 30-year fixed-rate mortgages reached a 50-year low toward the end of December,” Nothaft added. “These two factors contributed to housing affordability reaching its highest level since 1973, as measured by the NAR’s monthly affordability index and help to explain the 7.0 percent increase in existing home sales in December.”

The nation’s two largest residential mortgage funding companies, already under government conservatorship, may be asking for more money in the coming weeks, as loan delinquencies loom larger and the many subprime securities in their portfolios continue to suffer.

Freddie Mac made a regulatory filing Friday with the U.S. Treasury Department stating an intent to borrow another $30 billion to $35 billion in order to makeup for projected fourth quarter losses. Rival company Fannie Mae is likely to ask for $5 billion to $10 billion for similar efforts.

The two mortgage giants guarantee or hold almost half of all U.S. home loans and both were seized last September by the federal government. As both companies experienced deep portfolio losses and ultimately faced bankruptcy, the Treasury stepped in and established a conservatorship of each in order to save the already foundering mortgage market from a potentially crippling blow if either Fannie or Freddie went belly up.

Prior to the takeovers, both Fannie Mae and Freddie Mac were government sponsored entities, chartered by Congress to help provide money for increased homeownership but run by private interests.

Fannie and Freddie are perceived as being vital to the nation’s housing market, especially at this time as other sources of mortgage funding have contracted during the current credit crunch.

Freddie has seen greater losses  than Fannie in the latest quarter as its portfolio is stocked with more subprime mortgage backed securities. There are some analysts who believe that Fannie will be subject to more risk and loss through the current year as the value of mortgage securities is expected to drop further.

To date,  Freddie Mac has drawn out $14 billion of the $100 billion available from the Treasury. The newly requested funds for the company, based in McLean, Virginia, will be injected in the form of senior preferred stock.

According to a CNN/Opinion Research Corporation poll conducted before a key vote in the Senate last Thursday, 61 percent of Americans are opposed to any more government bailouts.

“One reason for the opposition to more money being spent may be that more than eight in 10 said that the first $350 billion of taxpayer money for the bailout didn’t work,” said CNN Polling Director Keating Holland. “Only 14% say that the money accomplished what it was supposed to do.”

Yet, the U.S. Senate did approve the release of the remaining half of the Troubled Asset Relief Program  (TARP) bailout funds Thursday by a 52-42 vote.

“Barack Obama may have something to do with the vote,” said Holland. “Democratic leaders in the Senate may not have been eager for a showdown with the president-elect. The public would have been squarely on Obama’s side. Sixty-two percent in the poll say they trust Obama more than Democratic Congressional leaders.”

In fact, the president-elect did make several promises about the way the money would be used, stating, “My pledge is to change the way this plan is implemented and keep faith with the American taxpayer by placing strict conditions on CEO pay and providing more loans to small businesses.”

His senior economic advisor, Lawrence Summers, also outlined the Obama spending plan in two letters sent to the Senate this week. As much as $100 billion will be used to help individual homeowners stay out of foreclosure, a plan feature many on Capitol Hill had called for from the beginning of the mortgage bailout legislation process. The other funds may be used to finance a Bank of America Corp buyout of Merill Lynch & Co, support other failing lenders and possibly even automakers.

“If the president-elect concludes that a substantial new commitment of funds is necessary to forestall a serious economic dislocation,”Summers said in a letter, “he will certify that decision to Congress before any final action is taken.”

Interest rates on long-term mortgage loans fell to another all-time low this week, breaking the 5 percent barrier, according to mortgage giant Freddie Mac Thursday.

“Interest rates for 30-year fixed rate mortgages fell for the 11th straight week to another record low, due in part to the slowing economy and government actions,” said Frank Nothaft, Freddie Mac vice president and chief economist.

“So far,” he explained, “both the U.S. Treasury Department and the Federal Reserve have added over $100 billion in liquidity to the mortgage market since September 2008, which put downward pressure on interest rates for fixed-rate mortgages. The Federal Reserve may add up to an additional $570 billion more this year, based on its November 25, 2008 announcement, to further shore up mortgage lending and keep rates low.”

The average rate on a 30-year fixed rate mortgage dropped to 4.96 percent, excluding fees, during the week ended January 15, 2009, down from 5.01 percent the previous week. The rate has never been below 5 percent since Freddie Mac began keeping track of weekly rates in 1971. One year ago, the average rate was 5.69 percent.

Rates on 15-year fixed rate loans increased slightly however in the latest week with the average growing to 4.65 percent from 4.62 percent one week earlier. Last year at this time, the average rate was 5.21 percent.

One-year adjustable rate mortgages carried an average rate of 4.89 percent, down from 4.95 percent the week before. During the same week of January 2007, one-year ARM rates were higher than even fifteen-year FRM rates at 5.26 percent.

Meanwhile, during roughly the same week, the Federal Reserve bought up $23.4 billion of mortgage-backed bonds from Fannie Mae, Freddie Mac, and Ginnie Mae in an attempt to keep rates low and pump liquidity back into the lending markets.

President-elect Barack Obama has not asked President Bush to release the remaining $350 billion Troubled Asset Relief Program funds and he will not act unless Obama wants him to, Bush said Monday in his farewell news conference.

“I have talked to the president-elect about this subject,” the President said. “I told him if he needed the $350 billion on my watch, I’d be willing to ask for it.. if he felt like it needed to happen on my watch.”

“He hasn’t asked me to make the request yet, and I don’t intend to make a request unless he specifically asks me to make it,” Bush added.

Obama may still ask Bush to release the funds, allowing them to be available a few days into the new administration, which begins January 20. Yet, requests from either president are likely to be met with some resistance and certainly many preconditions by Congress.

Congressional members of both parties have been disappointed with the Treasury’s use of the first half of the TARP funds, which have mainly been used to buy up mortgage-backed securities from Freddie Mac, Fannie Mae, and Ginnie Mae in order to promote greater mortgage lending. The investments were made with almost no strings attached and many fear that there will be little accountability for the use of the taxpayer money.

Others on the hill are upset because they hoped to see the money used more directly for saving homeowners from foreclosure. There is talk that Obama may be required to write a letter of assurance about his intentions for the remaining money before Congress will release it.

“The best course of action, of course, is to convince enough members of the Senate to vote positively for the request,” Bush said of the Congressional discontent on the matter.

President Bush did, however, state that he was pleased overall with the way the first $350 billion was spent, saying that mortgage rates had dropped and lenders have felt the effect of greater liquidity.

“Credit spreads are beginning to shrink, lending is just beginning to pick up,” he said. “The actions we have taken, I believe, have helped thaw the credit markets, which is the first step toward recovery.”

Federal Reserve efforts helped long-term mortgage interest rates drop to their lowest point on record, for the fourth straight week, according to mortgage giant Freddie Mace Thursday.

“Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” said Frank Nothaft, Freddie Mac vice president and chief economist. “On November 25, 2008, the Federal Reserve announced that it planned to purchase up to $500 billion of these securities by the end of June of this year. For the sake of comparison, there were roughly $4.7 trillion of such securities backed by home mortgages available as of September 30, 2008.”

“Since the end of October 2008,” Nothaft added, “these rates have declined by almost 1 1/2 percentage points, or payment savings of about $184 a month for a $200,000 loan – an additional $11 dollars from last week.”

The average rate on a 30-year fixed rate home loan fell to 5.01 percent, excluding fees, during the week ending January 8, 2009, down from 5.10 percent the previous week. The 30-year loan rate has never been lower during the entire 38-year history of the Freddie Mac weekly survey. Last year at this time, the average rate was 5.87 percent.

Rates on 15-year fixed rate mortgages averaged 4.62 percent, a decrease from 4.83 percent the week before. One year earlier, the average 15-year FRM rate was more than three-fourths of a point higher at 5.43 percent.

One-year adjustable rate mortgages carried an average rate of 4.95 percent, an increase from 4.85 one week previous. A year ago, the one-year ARM average rate was 5.37 percent.

A new report from two prominent academic economists predicts the U.S. housing market downtown will not bottom out until 2010.

The report entitled, “The Aftermath of Financial Crises” authored by University of Maryland economist Carmen Reinhart and Harvard economist Kenneth Rogoff, suggested that the nation’s unemployment rate may sink to 11 percent or lower by the end of next year. Such numbers would result in a loss of 6 million to 7 million jobs during that time. The current unemployment rate, as of November 2008, was 6.7 percent.

As the housing and mortgage markets continue their descent and unemployment continues to rise, the national debt will likely rise to historic levels.

“The big drivers of debt increases are the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions, as well as often ambitious countercyclical fiscal policies aimed at mitigating the downturn,” the authors said. “The much ballyhooed bank bailout costs are, in several cases, only a relatively minor contributor to post–financial crisis debt burdens.”

The report, presented at the annual meeting of the American Economic Association in San Francisco, noted that even dramatic actions by the Federal Reserve may not be enough to shorten the downward housing spiral.

“Some central banks have already shown an aggressiveness to act that was notably absent in the 1930s,” they said. “On the other hand, one would be wise not to push too far the conceit that we are smarter than our predecessors.”

In fact, the Federal Reserve increased its efforts Monday with the purchase of mortgage-backed securities that were backed by Fannie Mae, Freddie Mac, and Ginnie Mae.  According to Fed statements, the central bank may buy up to one-ninth of all the outstanding MBS bonds sold by the three government-sponsored companies. Promises to buy such bonds have already caused mortgage rates to plummet and home mortgage applications to rise.

According to the latest S&P Case-Shiller index released Tuesday, national U.S. home prices fell by historic margins again in October, an indication of a weak economy and a continued foreclosure crisis.

“The bear market continues; home prices are back to their March 2004 levels,” says David Blitzer, Chairman of the Index Committee at Standard & Poor’s. He added, “As of October 2008, the 20-City Composite is down 23.4%. In October, we also saw three new markets enter the ‘double-digit’ club.”

Those markets included Atlanta, Seattle, and Portland, each with a yearly price decline rate of about 10 percent.

“While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and Mid-Atlantic South is not immune to the overall demise in the housing market,” Blitzer added.

Cities that had already been experiencing price declines saw deeper plunges with prices dropping more than 30 percent during the past year in the Las Vegas, Phoenix, and San Francisco markets. Other severely impacted markets were Miami with a 29 percent yearly price decrease, Los Angeles with 28 percent, and San Diego with  27 percent.

“October was really the first month to feel the full brunt of the credit crunch,” he said. “Up until the Lehman Brothers [bankruptcy filing on September 15], everyone felt relatively optimistic.”

Massive amounts of foreclosures and short sales were also contributing factors in the most recent numbers, as almost 85,000 homes were repossessed in foreclosure proceedings during October.

Demand for homes is also continuing to drop as the National Association of Realtors reported an 8.6 percent decrease in existing home sales in November.

One potential bright spot on the horizon is historically low mortgage interest rates. During the week of December 31, 2008, the average rate on a 30-year fixed rate loan fell to an unprecedented 5.10 percent, excluding fees. Lower rates could make it much easier for many Americans buy new homes or get into the housing market for the first time, creating a larger appetite for housing and causing prices to stabilize again in many areas.