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Date published: 12/20/2008
BY ALAN ZIBEL AP Real Estate Writer
WASHINGTON --Rates on 30-year-fixed mortgages dropped this week to their lowest levels in at least 37 years, as the Federal Reserve pledged to pour money into the mortgage market in an effort to spur the moribund U.S. housing market.Freddie Mac, the mortgage company, reported that average rates on 30-year fixed-rate mortgages dropped to 5.19 percent, down from the year's previous low of 5.47 percent, set last week. The rate is the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971. The average rate on a 15-year fixed-rate mortgage dropped to 4.92 percent from 5.2 percent last week, Freddie Mac said. Mortgage rates started falling after the Federal Reserve launched a sweeping new effort in late November to aid the U.S. housing market by purchasing up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. A daily survey found that the national average rates falling as low as 5.06 percent on 30-year fixed-rate mortgages, according to financial publisher HSH Associates, the lowest since the 1960s. It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage because only borrowers with stellar credit can qualify. Faced with a dramatic surge in defaults, both Freddie and its sibling company, Fannie Mae, are stepping up efforts to prevent foreclosures. The federal agency that regulates the two companies anticipates they will modify about 75,000 troubled loans next year, up from about 60,000 this year. The program applies only to borrowers who have missed three months of payments, have not filed for bankruptcy and still live in their homes. Most of the increase is expected to result from a mass loan modification program for loans owned by Fannie or Freddie that was launched this week. Loan servicing companies, which collect mortgage payments for Fannie and Freddie, are expected to send out thousands of letters to eligible borrowers in the coming weeks. Borrowers who are current on their mortgages can take advantage lower interest rates, refinance and save money.
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