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PRESS RELEASES
Treasury Department and Federal Housing Finance Agency Suspend Certain Requirements Under Preferred Stock Purchase Agreements with Fannie Mae and Freddie Mac
September 14, 2021
WASHINGTON – The U.S. Department of the Treasury (Treasury) and the Federal Housing Finance Agency (FHFA) today agreed to suspend certain requirements that were added on January 14, 2021 to the Preferred Stock Purchase Agreements (PSPAs) between Treasury and each of Fannie Mae and Freddie Mac (the Enterprises). FHFA will continue to measure, manage, and monitor the financial and operational risks of the Enterprises to ensure that they operate in a safe and sound manner and consistent with the public interest. During the suspension, FHFA will review the suspended requirements and consult with Treasury on any recommended revisions. These suspensions do not affect the Enterprises’ ability to build or retain capital.
The suspension of these PSPA requirements recognizes that FHFA has the authority and responsibility for the Enterprises’ safety and soundness and to foster housing finance markets that support sustainable homeownership, and is not intended to stimulate aggregate housing demand given current conditions in the housing market. Home prices have been accelerating rapidly, with the annual rate of national home price growth at multi-decade highs. A principal challenge for the U.S. residential housing market today is inadequate housing supply. The Administration is focused on promoting housing stability, which includes advancing housing policies that can sustainably increase the stock of affordable housing units for rent and ownership.
Please see the executed letter for Fannie Mae and the executed letter for Freddie Mac .
I don't know the government never seems to do anything quickly do they! It would be nice for the government to admit culpability and quit holding investors in the housing finance system hostage....
Is the instant recap on the table with the new MC, Michael Calhoun? Is this your finest hour and time to dust off the bird cartoon?
https://finance.yahoo.com/quotes/fmcc,fnma,fmckj,fmcki,fmccm,fmcck,fmcct,fmcci,fmckk,fmccg,fmcch,fmccl,fmccn,fmcco,fmccp,fmccj,fregp,fmckp,fmccs,fmcko,fmckm,fmckn,fmckl,fnmap,fnmao,fnmfo,fnmam,fnmag,fnman,fnmal,fnmak,fnmah,fnmai,fnmaj,fnmas,fnmat,fnmfm,fnmfn/view/v1
"Doing so through a capital raise would have involved five basic steps, the first four
of which Director Calabria and Treasury actually took."
"Defendants resist Plaintiffs’ burden-shifting argument, but they cannot dispute that
the allocation of the burden in a presidential removal case presents a novel question
on which there is no controlling authority. Any non-public evidence of prejudice
from an unconstitutional removal restriction will invariably be in the government’s
exclusive possession, and the cheap shot FHFA takes at Plaintiffs for relying on
“podcasts and news stories” only underscores the point. See FHFA Br. 9. At the very
least, a remand for discovery into these disputed factual issues is warranted."
"As this case returns
from the Supreme Court, the question is whether FHFA and the Trump Treasury
Department would have gone “back to the bargaining table” but for Director Watt’s
for-cause removal protection. Collins, 141 S. Ct. at 1781."
"The Court’s prior ruling did not place these issues in the broader context of
the Trump Administration’s housing finance reform policies or purport to address
whether Director Watt’s removal protection prevented the Trump Administration
from altering the Companies’ capital structures in a way that would have benefitted
Plaintiffs."
But for the Unconstitionally insulated FHFA Director Mel Watt, how far along in the RECAP,RELIST, AND RELEASE PROCESS WOULD BE AT NOW?
Should the Collins Plaintiffs really have the Burden of Proof, given the Defendant is in absolute control of private POTUS intra governmental communications?
"Large portions of Defendants’ supplemental briefs attack a straw man.
Plaintiffs’ contention is not that President Trump “desired a swift end to the Third
Amendment” for its own sake, Treas. Br. 5, but that his Administration actively
pursued housing finance reform plans that could not have been completed without
changes to the Companies’ capital structures that would have benefitted the private
shareholders. Despite Defendants’ attempts at misdirection, the public record is clear
that President Trump would have fired Director Watt but for his for-cause removal
protection, and Plaintiffs are thus entitled to a remedy under the Supreme Court’s
decision. The appropriate remedy is to order Defendants to do what would have been
done absent the constitutional violation."
Thanks for your insight. Being deprived of the economic beneficial use of our private property for so long seems to at a minimum require some compensation to shareholders via the Takings Clause, especially in light of case law like Cedar Point.
I think it's pretty clear that the government doesn't want to be found to have nationalized the gses as that would require them to own the gses and a requisite $7T+ added to the federal government balance sheet. This is what the government was trying to prevent 50 teas ago when they set them up as private corporations.
Was Michael Calhoun winking at "salt the Earth with their carcasses" guy, what's his name? Do they both work at the same organization? Is Michael Calhoun a fellow traveler?
The Republican controlled Congress refused funding and the OBama administration needed $120B in net worth cash sweeps. No wonder they don't want us seeing POTUS intra governmental communications and are vigourisly defending the Executive Privilege so the shareholders can't see it!
What did OBummer tell the American people, "This is the most TRANSPARENT ADMINISTRATION IN HISTORY!"
How much political BS can Americans put up with before they lose faith in their government?
Congress already grabbed this cash from American homeowners for the next 10 years in one of the infrastructure bills: "The GSEs should support a restorative justice homeownership fund that should be initiated
administratively using the value of stock interests described above, and other possible funding, such as a
proposal to repurpose an existing GSE fee that was used to pay for the 2010 payroll tax and is scheduled
to expire in October 2011.80"
80 In the Temporary Payroll Tax Cut Continuation Act of 2011, Congress imposed an annual 10-basis point fee on new single-family
mortgage purchases as a pay-for for the extension of the payroll tax cut. Once this fee expires in October 2021, the proceeds from
this fee could be directed to other purposes. Rather than letting the statutory obligation expire, there are proposals for Congress to
extend it in permanently and direct the funds to affordable housing programs.
The theory of the Communists may be summed up in the single sentence: Abolition of private property.
KARL MARX, The Communist Manifesto
Michael Calhoun should know that this is exactly what happens when the federal government steals $308B of capital that SHOULD HAVE BEEN USED FOR A 1ST LOSS CAPITAL POSITION:
"Since the
financial crisis, many lenders and the GSEs have limited lending and increased prices for borrowers with
lower credit scores and/or lower down payments."
This could be a frickin disaster: "Importantly, this increased focus and activity on affordable housing by the GSEs must be mandated by
FHFA. These activities will further the GSEs’ public mission but produce lower financial returns, which is
statutorily permissible. Mandating them both ensures that they occur in light of the other competing
interests of the GSEs, and it also safeguards that neither GSE is disadvantaged compared to the other by
concentrating on a less lucrative portion of the housing market."
THE FHA SHOULD BE DOING THESE HIGH RISK LOANS NOT TWO GSES WHOSE CONSERVATOR HAS BEEN STEALING ALL THEIR 1ST LOSS CAPITAL SINCE 2012!
It's a Taking of our private property, but ALL THE FEDERAL JUDGES SEEM TO BE LOOKING THE OTHER WAY, MUTTERING, "THE KING CAN DO NO WRONG!". Those Judges know who butters their bread...
This sounds risky as sh*t: "To make affordable, sustainable home mortgages more available to lower wealth households, the GSEs
can take a number of steps. First, the GSEs should expand the availability of their low down payment
mortgages as well as other programs to assist homeowners with less wealth to obtain a mortgage and
sustain potential financial volatility during the mortgage. The GSEs should also remove so-called credit
overlays that are additional loan restrictions beyond the qualifications otherwise required for loans, as
these exclude sustainable loans.49"
Why can't the government through the FHA do these high risk loans?
He may have difficulty implementing that vision until the pending litigation ends...
"Yet, during conservatorship and with limited capital, the loans the GSEs finance have dramatically
trended to higher credit scores and increased mortgage costs for lower wealth borrowers despite their
clear important public interest mission of affordability in the housing market.44 During conservatorship,
the GSEs have focused on reducing risk, resulting in overly tight credit requirements for borrowers. The
median credit score of the GSEs’ loan purchases have been extraordinarily high, 758 in February 2020
prior to the COVID crisis and 772 at the end of 2020.45 Overly stringent lender credit overlays exacerbate
the problem. The Urban Institute has found that lenders would have issued 6.3 million additional
mortgages between 2009 and 2015 if lending standards had been at historically safe levels.46"
"The large net returns already realized by the government from its GSE investments and the extreme
current affordable housing crisis make it compelling for the government to amend the Preferred Stock
Purchase Agreements (PSPAs) to waive the government’s GSE stock interests in order to expand these
efforts."
I think the ruling from Collins was Acting Directors were removable at will whereas Senate confirmed were not.
Obama did say that he thought he could not remove one of the Acting Directors but Collins said he always could have.
Mel Watt was Senate confirmed and falls squarely in the ruling in Collins.
I think oral arguments may be next up in the 5th Circuit.
Seems that the government HAS taken the economical beneficial use of our shares for the public it serves with the nws and via the 4th Amendment with the LP. Under the Lucas case it seems a Takings has occurred.
I'm not sure but I think HERA says the Director of OFHEO is to become the Director of FHFA, but I could be wrong. Didn't Barry want to remove Lockhart but said that he couldn't?
This a question for you and 'get in there and sell Mortimer' Clarence Beaks or anyone else:
How does Lucas v SC Coastal Commission impact if at all a shareholders Takings Claim?
Keep in mind we are dealing with PERSONAL PROPERTY NOT REAL PROPERTY and not only was the federal government privy to insider information they were and still are in 100% control of all the enterprises business decisions...
Facts of the case
In 1986, Lucas bought two residential lots on the Isle of Palms, a South Carolina barrier island. He intended to build single-family homes as on the adjacent lots. In 1988, the state legislature enacted a law which barred Lucas from erecting permanent habitable structures on his land. The law aimed to protect erosion and destruction of barrier islands. Lucas sued and won a large monetary judgment. The state appealed.
Question
Does the construction ban depriving Lucas of all economically viable use of his property amount to a "taking" calling for "just compensation" under the Fifth and Fourteenth Amendments?
Conclusion
Yes. In a 6-to-2 decision, the Court relied on the trial court's finding that Lucas's lots had been rendered valueless by the state law. "[W]hen the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good...he has suffered a taking."
https://www.oyez.org/cases/1991/91-453
Even if the current administration is on board with TH'S well reasoned advice, the current chair of the Senate Banking Committee, Sherrod, is kinda opposed to any public perceptions of a giveaway to shareholders, especially the evil hedge fund guys. This is the latest bill he and Ron Wyden introduced today:
https://www.brown.senate.gov/newsroom/press/release/brown-wyden-tax-stock-buybacks
SEPTEMBER 10, 2021
BROWN, WYDEN UNVEIL MAJOR NEW LEGISLATION TO TAX STOCK BUYBACKS
Stock Buyback Accountability Act Would Prioritize Real Investment in the Economy Over Wall Street Shareholder Giveaways
WASHINGTON, D.C. – Today, U.S. Senators Sherrod Brown (D-OH) and Ron Wyden (D-OR) unveiled new legislation to prioritize real investment in the economy over Wall Street shareholder giveaways in the form of stock buybacks. The senators’ Stock Buyback Accountability Act would assess a two percent excise tax on the amount spent by a publicly-traded company on buying back its own stock, helping to reinvest in the economy, while also preventing abuse and reducing tax avoidance, both of which are significant risks from stock buybacks.
“A few decades ago, a majority of Wall Street capital funded the real economy – wages, machinery, research, new construction. Today, much of that capital is funneled back to wealthy executives in the form of stock buybacks – which used to be illegal market manipulation – and only about 15 percent goes to the real economy. Instead of spending billions buying back stocks and handing out CEO bonuses, it’s past time Wall Street paid its fair share and reinvested more of that capital into the workers and communities who make those profits possible,” said Brown.
“Rather than investing in their workers, mega-corporations used the windfall from Republicans’ 2017 tax cuts to juice their stock prices and reward their wealthiest investors and their executives through massive stock buybacks,” said Wyden. “Even as millions of families struggled through the pandemic, corporate stock buybacks are once-again nearing all-time highs. Stock buybacks are currently heavily favored by the tax code, despite their skewed benefits for the very top and potential for insider game-playing. Our bill simply ends this preferential treatment and encourages mega-corporations to invest in their workers.”
For many years stock buybacks were nearly banned due to the market-manipulation risk they presented. Today, serious concerns remain about corporations using stock buybacks to inflate their stock prices, particularly when corporate insiders have significant amounts of stock-based compensation themselves.
After the 2017 Republican tax law, instead of higher job growth or a GDP surge, we saw corporations spending hundreds of billions of dollars buying back their own stock. The big winners were rich shareholders, CEOs, and foreign entities, not American workers.
“Corporate stock buybacks further enrich already wealthy CEOs and major shareholders while helping them dodge their fair share of taxes. They’re one more way in which corporations, billionaires and the other ultra-wealthy play by their own set of tax rules. Taxing excessive stock buybacks would ensure that corporations and the very rich pay closer to their fair share; raise needed revenue for vital public services like healthcare, education and climate-change response; and narrow the wealth gap that destabilizes our economy and imperils our democracy,” said Frank Clemente, executive director, Americans for Tax Fairness.
“White, Black and Brown working people have borne the brunt of the Covid-19 crisis. This proposal will make sure that executives pitch in a little bit more to the recovery as they line their own pockets via stock buybacks,” said Mandla Deskins, Take on Wall Street at Americans for Financial Reform.
“There is no reason stock buybacks should receive preferential tax treatment, as they do now in multiple ways. This legislation would help remedy that tax code flaw through an administratively simple means – a corporate excise tax. More importantly, it would raise substantial amounts of revenue from the wealthiest corporations that engage in this practice. It is a further illustration that Congress has plenty of progressive, common-sense revenue options to consider and therefore no excuse to shortchange the critical investments we need,” said Seth Hanlon, Senior Fellow at Center for American Progress.
Additional Background:
Large corporations buy back stock using the capital that could be used to make investments, create new jobs, and raise wages. This practice has further exploded under former President Trump’s tax law that overwhelmingly benefited major corporations and the top 1 percent. Stock buybacks also provide a tax arbitrage opportunity for wealthy shareholders, as a means to delay and potentially fully-avoid tax on their share of corporate gains.
Stock buybacks were once a small share of corporate distributions, but now dominate, and have only exploded following the 2017 Republican tax bill – a case of the rich, literally, getting richer. In 2018, the largest U.S. companies spent a record $806 billion on stock buybacks, a 55 percent jump from the prior year. In 2021, as millions of families are struggling through the pandemic, corporate stock buybacks should approach, or even surpass, this record. To put that in perspective, the median household in the U.S. has a net worth of $97,300, with Hispanic ($38,000) and Black ($23,000) families even less.[1]
The two-percent excise tax on stock buybacks by publicly-traded corporations in Sen. Brown and Sen. Wyden’s Stock Buyback Accountability Act would not apply to the extent the stock buyback is used to fund an employee pension plan, an ESOP, or similar vehicle, is used for employee stock plans, or is below a de minimis threshold. Special rules address the treatment of foreign corporations, while inverted corporations are fully subject to the excise tax.
Bill text is available here.
The growth of Freddie in 2020 versus Fannie was substantial, yet it's selling at a 7% discount. Why?
We'll know with 100% certainty in the end, won't we? Seems like the sp reflects your thinking or are we headed for a 90% drop from here, just in time for you to sell your free lottery tickets and harvest the tax losses?
Is there also a zero percent probability of any recovery ever from the Executive and/or Legislative Branch?
Rent in Hong Kong has consistently been among the worlds highest is that still the case? Renting offers a couple of advantages that buying doesn't, mainly the ability to relocate to a better job situation, zero maintenance and capital expenditures expense, and typically the renter can redeploy the down payment cash into other ventures...
Why those documents remain under seal is troubling as an American Citizen who wants to a little transparency from the government in this whole going on 14 yeas fiasco.
"Therefore, in order to restore the balance between safety and soundness and mission, FHFA has placed Fannie Mae and Freddie Mac into conservatorship. That is a statutory process designed to stabilize a troubled institution with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate the Enterprises until they are stabilized."
https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=Statement-of-FHFA-Director-James-B--Lockhart-at-News-Conference-Annnouncing-Conservatorship-of-Fannie-Mae-and-Freddie-Mac.aspx
PEOPLE WONDER WHY THERE IS LITTLE TRUST AND FAITH IN THE GOVERNMENT, THIS NATIONALIZATION OF THE TWINS IS EXHIBIT A.
But will the administration be able to get their party on board or will the fear of the 5 second sound bite, "It's an evil hedge fund guys gift from the US Government" prevail?
Tim's logical and correct analysis and conclusions that IT WILL HELP AFFORDABLE HOUSING may not resonate as well as the above. But at least it sounds like Jared Bernstein or someone in the administration is at least trying to do the best thing to promote affordable housing in the US.
They have something similar here in the county I live in. In the US, typically a family's largest asset on their balance sheet is their primary residence. Low income families that stay in the housing for longer than a few years will still be able to generate some wealth...
If you think about it, as Warren Buffett says, all investors have a silent partner and it's the government!
China seems to be acting lately less like capitalists and more like socialists with their crackdowns on businesses to "share the prosperity".
Hell, if China sees the US Government nationalizing two of its largest private corporations, it kinda makes the CCP look bad
Love this: "Any non-public evidence of prejudice
from an unconstitutional removal restriction will invariably be in the government’s
exclusive possession, and the cheap shot FHFA takes at Plaintiffs for relying on
“podcasts and news stories” only underscores the point. See FHFA Br. 9. At the very
least, a remand for discovery into these disputed factual issues is warranted."
"Third, at least two of the judges who formed the bare nine-judge en banc
majority that previously denied Plaintiffs a remedy thought that backward-looking
relief is categorically unavailable in presidential removal cases. See Collins, 938
F.3d at 595–96 (Duncan, J., concurring). The Supreme Court disagreed, see Collins,
141 S. Ct. at 1788–89, and it is thus appropriate for the en banc Court to reconsider."
The Mnuchin quote on Maria's show is GREAT! I mean think how far along the Recap, Relist, and Release process we would be BUT FOR MR. "I DON'T STAY UP AT NIGHT WORRYING ABOUT THE SHAREHOLDERS" MELVIN WATT!
I'm not confident about a federal Judge ruling against the "King can do no harm" philosophy that has dogged our pursuit of Justice from Day 1.
But if any of the Federal Courts will reign in the government, the 5th Circuit is one of the best.
Seems to work, thanks!
Hopefully the gses are just talking about manufactured permanent housing and not mobile homes, which I think are chattel or personal property financing and not real property financing.
Most mobile home parks have the land underneath owned by the trailer park...
Ben Graboske, Black Knight’s data and analytics president, said homeowners’ equity will serve as a buffer for homeowners exiting forbearance. Of homeowners still in forbearance as of mid-August, 98% have at least 10% equity. During the last downturn, in contrast, 28% of mortgage holders were fully underwater.
“Such strong equity positions should help limit the volume of distressed inflow into the real estate market as well as provide strong incentive for homeowners to return to making mortgage payments — even if needing to be reduced through modification,” Graboske said.
https://www.housingwire.com/articles/borrowers-withdrew-63b-in-equity-in-q2/
The higher the capital requirement the less leverage available to the financial institution. Remember that the main assets of banks are loans. International commercial banks have varied loans from all over the world and need to hold more capital than the gses which only invest in assets involved with American housing.
The 4.55% capital requirement is mainly CET1 which sits on the balance sheet as capital and is unavailable for mortgage loans.
Higher capital requirements increase the cost to the gses of providing their mortgage guaranty and the more capital needed to be set aside for each loan results in lower returns for the gses and hence they need to charge MORE to make their targeted rate of return.
Banks can keep mortgage loans on their own balance sheet as an asset and assume the credit and interest rate risk and sometimes they do and avoid the gses all together.
MC set the Capital Requirements so high BECAUSE AS A LIBERTARIAN HE FUNDAMENTALLY BELIEVES THAT THE PRIVATE SECTOR SHOULD BE DOING THIS NOT THE GSES, they also tend to like charging user fees for government services, like tolls for roads, or as here, high GFees for government guarantees in MBS.
PLMBS is currently still a very small segment of the MBS market but some financial intermediaries are testing that market again.
Community banks, credit unions, and small financial intermediaries typically send their mortgage loans to the gses so they can free up funds for other type of lending and have fewer options.
The instant recap and dilution solution continue to be the drumbeat of the jps despite the knowledge that the governments plan was nationalization pre HERA...
It makes sense economically for them but lacks a certain righteousness...
Approximately one third of the US population decides by choice to lease their housing and that has held through consistently for extremely long time periods in American history.
We saw what happens when you give everyone access to financing the American Dream, it can turn into a nightmare like 08-09.
I may be wrong but it seems to me that mom and pop landlords would be less ruthless to those Americans choosing to rent and the gses provide a low cost conduit to promote individuals who wish to provide this service to the American public and make a reasonable rate of return.
I wonder how many small landlords were forced to sell during all these endless eviction moratoriums?
I've spoken with tenants who rented a house from Corporations like American Homes 4 rent and they nickel and dime these people to death with practically zero flexibility and repairs and maintenance is not carried out well...
JB loves his new found power granted courtesy of the Collins Plaintiffs...
https://amp.cnn.com/cnn/2021/09/08/politics/trump-appointees-biden-boards/index.html
"The President's objective is what any president's objective is -- to ensure you have nominees and people serving on these boards who are qualified to serve on them and who are aligned with your values. And so yes, that was an ask that was made," Psaki told reporters at a White House briefing.
Psaki added: "I will let others evaluate whether they think Kellyanne Conway and Sean Spicer and others were qualified, or not political, to serve on these boards, but the President's qualification requirements are not your party registration, they are whether you're qualified to serve and whether you're aligned with the values of this administration."