NEW YORK, Nov 5 (Reuters) – U.S. mortgage rates fell below 5 percent for the first time in three weeks, a key level that may boost home home loan demand and help the hard-hit housing market recover, a closely watched mortgage survey showed Thursday.

Interest rates on U.S. 30-year fixed-rate mortgages averaged 4.98 percent for the week ending Nov. 5, down from the previous week’s 5.03 percent, according to a survey released on Thursday by home funding company Freddie Mac.

The Senate and House are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for homebuyers, despite a recent government report on extensive mistakes and suspected fraud in the program.

Under the new legislation, individuals with income up to $125,000 a year and couples earning up to $225,000 would be eligible. The current income limits are $75,000 for individuals and $150,000 for couples. Under both the House and Senate versions, smaller amounts are available to people of slightly higher incomes until the credit phases out.

The expanded homebuyers’ tax credit was attached to a bill intended to extend unemployment compensation for up to 20 weeks for people who have been out of work for long periods. Another amendment would sweeten a tax break for businesses with net operating losses in 2008 and 2009.

WASHINGTON (AP) — The Obama administration is unveiling a new program to provide support to state and local housing agencies to provide help to thousands of home buyers and renters.

The program will feature two parts — a new bond purchase program to support new lending by housing finance agencies and a temporary credit and liquidity program to improve access by housing agencies to credit sources for their existing bonds.

The new program will operate under a law that Congress passed in 2008 to bolster the housing industry, which has been battered by the worst slump in decades, a downturn that saw home sales and home prices plunge and mortgage defaults soar to record levels.

Rising losses from consumer and commercial loans dragged Bank of America Corp. (BAC) to a third quarter loss of $1 billion despite impressive trading and investment banking revenues, which were helped in part by the Charlotte bank’s purchase last year of Merrill Lynch & Co.

Bank of America’s report holds signs of hope for the banking industry, which is struggling to hold down losses as rising unemployment and a U.S. economic recession have followed a nationwide slide in housing prices.

The bank’s credit card business took permanent losses of $6.5 billion from bad debt – a hefty amount, but about equal with last quarter. The bank also withdrew cash from its account for future loan losses tied to credit cards, instead of adding to the reserve, which suggests the bank expects troubles with its credit card accounts to begin slowing in the near future.

Increasingly worried about the health of mid-sized regional banks with less than $100 billion in assets, the Federal Reserve is working on an expansive review of the commercial real estate loan portfolios of these banks, with expectations that large losses in this asset category could still be coming, according to people familiar with the central bank.

As part of the examination, some banks are being asked to perform a commercial real estate analysis of their assets, according to one banking attorney who said a client of his has been asked to conduct such a review.

Consumer credit dropped like a rock in July on a mix of tight supply, weak demand, and charge-offs of bad debt.

The U.S. Federal Reserve reported consumer credit fell by $21.6 billion, well below the $15.5 decrease recorded in June, marking a 10.4% annualized drop.

Numerous reports have indicated that banks have tightened their lending standards. A recent survey by the Fed found that bank lending is expected to be tight through the first half of 2010. Even though the economy has been warming, banks like Citigroup, Bank of America and Wells Fargo have continued to play hard-ball with their lending practices.

NEW YORK, Sept 2 (Reuters) – The U.S. Mortgage Bankers Association said on Wednesday it will ask Congress to transform mortgage lenders Fannie Mae, Freddie Mac into several smaller, privately held companies that would issue mortgage securities with a government guarantee.

The new companies would guarantee the securities against defaults on underlying mortgages and pay fees into a federal insurance fund that would make good on interest and principal payments to bondholders if the companies were unable to make them.

The percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, the highest percentage ever recorded by the Mortgage Bankers Association, the industry group reported on Thursday.

The delinquency rate for mortgages on one- to four-unit properties rose to a seasonally adjusted 9.24% of all mortgage loans outstanding in the second quarter, up from 9.12% in the first quarter and 6.41% in the second quarter of 2008, according to the MBA’s national delinquency survey. The delinquency rate doesn’t include mortgages in the foreclosure process.

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the first quarter and 2.75% in the second quarter of 2008, the MBA said.

However, mortgages entering the foreclosure process during the second quarter actually fell slightly to 1.36% of all loans, down from 1.37% in the first quarter. Foreclosure starts were still up from 1.08% in the second quarter of 2008.

Some of the changes required of credit card companies through last spring’s credit card legislation begin to take effect this week.

Those changes force companies to give customers longer notice when changing the interest rate and to provide more time to pay their bill after it’s mailed. A new credit card market is beginning to take shape, based on companies’ reactions to the new regulation. The outcome will likely be something Congress didn’t expect.

Banks have made underwhelming progress on helping struggling mortgage borrowers, extending trial loan modifications to just 9% of those eligible under a $75 billion Obama administration program–and even that number may be inflated. Some of the homeowners in the trial program may not be allowed into the program due to weak initial controls.

The program, which offers cash incentives to get servicers and lenders to make loan modifications, is a bid to stem the next wave of foreclosures fueled by depressed home prices and rising joblessness.

Before a final modification can be created, plenty of paperwork is required like tax returns and proof of hardship. However, servicers can start a trial modification using very limited underwriting, even just a verbal agreement over the phone. Relevant documents then can be collected over the 90-day period.