That widely-distributed estimate comes from Oppenheimer & Co. analyst Chris Kotowski, who projects U.S. banks could be hit with losses of $7 billion this year when those loans are taken back.

When banks are forced to buy back bad loans, they typically take a loss. This means higher reserves for credit losses and reduced revenues.

And it means that the financial crisis is still gnawing at their books, despite the countless bailout programs set up by the U.S. Treasury, mostly replenished by the banks’ repayments.

The cycle of mortgage buybacks is being accelerated as Fannie and Freddie, now financing more than 70 percent of mortgages, are making the lenders more accountable for their past underwriting mistakes.

Fannie and Freddie have already sought nearly $127 billion in Treasury bailouts, and since a controversial Christmas Eve announcement by the Treasury, now hold open-ended credit lines to cover quarterly shortfalls.

Fannie and Freddie forced the four largest U.S. banks with buybacks in 2009 amounting to about $5 billion in losses, according to recent company filings.

The arrest warrant affidavit alleges they each committed 15 felonies, including conspiracy to commit grand theft of property and money laundering.

Prosecutors say between 2006 and 2007, the father bought five homes where he falsely claimed he would live, but the loans almost immediately went into default.

Prosecutors say the pair also never disclosed large cash kickbacks the father got from sellers by using inflated appraisals.

More than 10 percent of people with mortgages owe 25 percent more than their home is worth.

The number of underwater mortgages increased by about 620,000 from the third quarter, the firm said. An additional 2.3 million mortgages had less than 5 percent equity in their home, which could be wiped out if home prices fall further.

Once the mortgage is underwater, owners cannot easily sell their home or refinance their loan.

Underwater mortgages are concentrated in few states: California, Florida, Nevada, Arizona, Michigan and Georgia. In Nevada, 70 percent of mortgages were underwater. In California, more than a third of mortgages were underwater.

In Washington state, nearly a quarter of a million homeowners are upside down on their mortgages, representing 15.9 percent of homes. The rate is slightly lower, at 15.1 percent, for the Seattle-Bellevue-Everett metropolitan area.

“The rise in negative equity is closely tied to increases in pre-foreclosure activity,” CoreLogic said. Once a homeowner owes 25 percent more than the house is worth, foreclosure rates rise sharply.

Negative equity exceeded 25 percent in six states and topped 20 percent in six others.

Contributing to the upside-down mortgages has been the decline in home prices, which peaked nationally in Summer 2006.

Only in the last half of 2009 did the trend show signs of turning around.

According to the latest Standard & Poor’s/Case-Shiller 20-city home-price index, home prices across the U.S. rose for the seventh straight month in December.

In the Seattle market, which includes King, Snohomish and Pierce counties, the seasonally adjusted index was 148.37, up 0.2 percent from November and 0.8 percent from its bottom in September.

The 20-city index was off 3.1 percent for the year from December 2008, while in Seattle, prices were down 7.9 percent over that same period. But that was an improvement over the one-year drop of 10.6 percent from November 2008 to November 2009 in the Seattle area.

Rep. Barney Frank, a Massachusetts Democrat, told reporters that bondholders of major mortgage finance sources Fannie Mae (FNM.N) and Freddie Mac (FRE.N) should not assume the federal government will guarantee the debt of these government-sponsored enterprises at 100 cents on the dollar and they could theoretically suffer losses, according to U.S. media reports.

“People who own Fannie and Freddie debt are not in the same legal position as (those who own) Treasury bonds and I don’t want them to be,” Frank told the Washington Post in an interview conducted Thursday and published Friday.

Margaret Kerins of RBS Securities said Frank’s assessment that so-called agency debt is not fully backed by the government is incorrect.

“Regardless of the ultimate outcome for the GSEs, we expect all agency debt outstanding and issued under GSE status to remain related to the government. Reducing support is contrary to all of the actions takes by the administration and Treasury,” Kerins said in a research note.

Asked about Frank’s comments, Treasury Department spokeswoman Meg Reilly repeated the administration’s position of backing the companies.

“As we said in December, there should be no uncertainty about Treasury’s commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market during this current crisis,” the Treasury statement said.

The comments comes as Republicans on Frank’s committee are pushing the Obama administration to put the trillions of dollars in debt obligations on to the federal budget.

The mortgage giant’s weekly survey found that the average rate available on 30-year fixed-rate loans fell to 4.97%, down from 5.05% last week, with an average of 0.7% of the loan balance paid in upfront fees known as points
The 30-year rate has bumped around the 5% level since September, falling to a record low of 4.71% in a Freddie survey in December. This year it has been above 5% in six of the weekly surveys and below seven times.

Not since the 1950s have rates remained so low for so long, said Greg McBride, a senior financial analyst at Bankrate.com, citing data from the National Bureau of Economic Research.

The historically low rates have been engineered by the federal government in response to the deep recession.

Freddie Mac’s survey, conducted Monday through Wednesday, asks lenders to report for each loan type the interest rate they are offering, along with the points they are charging for that rate, for borrowers with good credit and at least a 20% down payment or home equity.

The 15-year fixed-rate mortgage this week averaged 4.33% with an average of 0.7% in points, down from 4.4% a week ago.

The five-year Treasury-indexed hybrid adjustable-rate loan, which has a fixed rate for the first five years, averaged 4.11% with 0.6% of the loan balance in points. The rate averaged 4.16% a week earlier.

Mortgage professionals say well-qualified borrowers often negotiate slightly better deals than lenders’ reported offering rates.

Connecticut, too, has dropped its rates on a similar mortgage program for first-time buyers, while New Jersey plans to lower its rates this spring.

George Leocata, a senior vice president at Sonyma, says demand for the Low Interest Rate Program has been the highest in 12 years, which is hardly surprising given the difficulty in qualifying for conventional loans in recent months.

In sharp contrast to all the mortgages out there with stiff underwriting guidelines, New York’s Low Interest Rate mortgages have no minimum credit score. Borrowers can also qualify for a Sonyma mortgage if their total monthly debt payments reach 45 percent of their monthly income — and sometimes more. That’s about 5 percent higher than the amount allowed by conventional lenders, and higher than the threshold recommended by many financial counselors.

Still, Mr. Leocata maintains that borrowers default on these loans less frequently than those with conventional mortgages. Borrowers must pay monthly mortgage insurance premiums. For a 3 percent down payment, the monthly premium is 0.8 percent of the loan amount; for 5 percent, it’s 0.67 percent; and for 10 percent, 0.42 percent.

Borrowers must also fall within the household income limits — $107,520 in Manhattan, $142,520 in Long Island and $146,420 in Westchester — and the purchase price cannot exceed $637,640.

Few brokers offer the mortgages, because lenders must split New York’s commission payment with brokers, so interested borrowers should contact lenders directly. The major banks and many regional banks participate in the program.

Mr. Leocata says mortgage rates in this program will most likely rise, if interest rates on conventional mortgages rise (as is widely expected). But he also says the program’s rates will probably remain about half a percentage point lower than the rest of the market.

Meanwhile, Jerry Keelen, the director of single-family programs at the New Jersey Housing and Mortgage Finance Agency, said that in early April the state would probably begin offering mortgages for first-time buyers in the range of 5 percent, versus the program’s current rates of 5.75 percent.

Most loans in the program with down payments of less than 20 percent are insured by the Federal Housing Administration, and as such, are subject to F.H.A.’s mortgage insurance premiums. Income limits and home-price limits apply. Most borrowers, Mr. Keelen said, also qualify for an average of $7,500 in down payment and closing cost assistance.

The first-time homebuyer program in Connecticut has the lowest rates, at 4.375 percent.

Carol DeRosa, the administrator of residential mortgage programs at Connecticut’s Housing Finance Authority, said that as with the affordable-housing programs of other states, borrowers need not be first-time buyers if the home they want to buy is in federally targeted urban areas like Bridgeport, Stamford and Norwalk.

Even in areas where borrowers must meet the first-time-buyer qualifications, though, Ms. DeRosa says demand for these mortgages has been strong.

She said lower values were “creating good buying opportunities.”

The fund’s investment objective is to generate attractive total returns through opportunistic investments in mortgage-backed securities (“MBS”). The fund noted in its prospectus its intention to invest in MBS directly, and indirectly through a separate investment in a public-private investment partnership formed pursuant to PPIP. The fund has now committed to invest $33 million in a feeder fund which in turn invests in a public-private investment partnership (the “Master PPIP Fund”) sponsored by Wellington Management Company, LLP (“Wellington Management”). The Master PPIP Fund invests directly in MBS and other assets eligible for purchase under PPIP. Wellington Management was selected by the U.S. Department of the Treasury in July 2009 as one of nine managers eligible to participate in PPIP. Wellington Management also serves as the sub-adviser to the fund.

The fund’s capital commitment will be drawn down through a series of capital calls initiated by the Master PPIP Fund. The initial capital call took place on March 2, 2010. The fund’s full $33 million capital commitment represents between approximately 26% and 29% of the net proceeds of JMT’s initial public offering, depending on the final number of additional fund shares issued pursuant to the underwriters’ over-allotment option. The fund’s entire capital commitment is expected to be called by October 1, 2010.

With over $537 billion in client assets under management as of December 31, 2009, Wellington Management serves as an investment advisor to approximately 1,650 institutions located in over 40 countries. The firm is structured as a collection of investment teams that create solutions designed to respond to specific client needs, and is recognized for its global, proprietary, independent research, which is shared across all areas of the organization and used only for managing client portfolios. Tracing its roots back to 1928, the firm is based in Boston, Massachusetts, and also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Hong Kong; London; Singapore; Sydney; and Tokyo.

The Company believes that the dividend will be paid from taxable REIT earnings earned in the first quarter of 2010. The Company estimates that “Core Earnings” will be approximately $0.37 per common share for the first quarter of 2010 and that earnings from gain on sale of agency mortgage backed securities will be approximately $0.03 per common share. “Core Earnings” represents a non-GAAP measure and is defined as net income (loss) excluding impairment losses, gains or losses on sales of securities and termination of interest rate hedges, unrealized gains or losses on interest rate hedges, and certain non-recurring expenses. GAAP earnings, which will be announced with the filing of the Company’s first quarter 2010 Form 10-Q, may differ from Core earnings as GAAP earnings will take into effect the unrealized change in the value of the Company’s interest rate hedging program.

ARMOUR’s residential mortgage backed securities portfolio consists of hybrid adjustable-rate, adjustable-rate and fixed-rate residential mortgage-backed securities issued or guaranteed by the U.S. Government-chartered entities the Federal National Mortgage Association (more commonly known as Fannie Mae), the Federal Home Loan Mortgage Corporation (more commonly known as Freddie Mac), and the Government National Mortgage Administration, a U.S. Government corporation (more commonly known as Ginnie Mae). On February 10, 2010 Fannie Mae and Freddie Mac announced plans to buy-out seriously delinquent mortgages (120 days or more delinquent) from pools which those agencies have issued. ARMOUR owns pools which may be subject to the announced buy-outs. The Company believes that the agency buy-outs will have no material impact on the Company’s portfolio value and first and second quarter 2010 net income. On March 4, 2010, the agencies reported payment information which affects the holders of record for securities as of the last day of February 2010. ARMOUR’s portfolio had an estimated weighted average annualized constant prepayment rate of 22% (or 22 CPR).

The Company also announced today that it expects to file a Form 10-K with the Securities and Exchange Commission for 2009 prior to the end of March 2010. As of the date of this announcement, the Company believes that it will report that shareholder’s equity, as of December 31, 2009 was approximately $21.49 million, or approximately $9.32 per common share.

ARMOUR Residential REIT, Inc.

ARMOUR is a Maryland corporation focused on investing in residential mortgage-backed securities. ARMOUR is externally managed and advised by ARMOUR RESIDENTIAL MANAGEMENT LLC (“ARRM”). ARMOUR intends to elect and qualify to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with ARMOUR’s taxable year ending December 31, 2009.

Safe Harbor

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results.

Additional information concerning these and other risk factors is contained in the Company’s most recent filings with the Securities and Exchange Commission (“SEC”). All subsequent written and oral forward-looking statements concerning the Company are expressly qualified in their entirety by the cautionary statements above. The Company cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in their expectations or any change in events, conditions or circumstances on which any such statement is based.

Additional Information and Where to Find It

Investors, security holders and other interested persons may find additional information regarding the company at the SEC’s Internet site at http://www.sec.gov/, www.armourreit.com or by directing requests to: ARMOUR Residential REIT, Inc., 956 Beachland Blvd., Suite #11, Vero Beach, Florida 32963, Attention: Investor Relations.