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U.S. regulator unveils policy to help people get foreclosed homes back
WASHINGTON | Tue Nov 25, 2014 1:22pm EST
WASHINGTON, Nov 25 (Reuters) - Americans who lost their homes to foreclosure will be able to buy them back at current market value if the properties are owned by housing finance giants Fannie Mae and Freddie Mac, the two firms' regulator said on Tuesday.
Previously, the Federal Housing Finance Agency required the two firms to demand former homeowners pay the entire amount owed on the mortgage.
"This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods," FHFA Director Mel Watt said in a statement.
The FHFA said the new rule applies to about 121,000 properties currently owned by Fannie Mae and Freddie Mac.
For more information on the policy change, please click here: http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Directs-Fannie-Mae-and-Freddie-Mac-to-Change-Requirements-Relating-to-Sales-of-Existing-REO.aspx
http://mobile.reuters.com/article/idUSL2N0TF1L320141125?irpc=932
Judge Sweeney Approves Ackman’s Amicus Brief In Fannie Mae Case
by Michael IdeNovember 25, 2014, 1:14 pm
Pershing Squares motion to file an amicus brief shows seems to confirm that Pershing Square dropped its DC District Court case so that the government wouldn’t be able to use an unfavorable ruling against it elsewhere
Earlier this month Bill Ackman’s Pershing Square Capital Management dropped one of its lawsuit against the government regarding Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA), and a recent development in the Fairholme case seems to confirm that it was a tactical decision meant to limit some of the government’s options.
Yesterday, Judge Sweeney at the Court of Federal Claims approved Pershing Square’s request to file an amicus brief in the Fairholme case, and the reason for the decision is revealing.
Fannie Mae: Pershing Square agreed to wait until Fairholme’s discovery finishes
In case you’ve been wondering, the reason all of the focus in the Court of Federal Claims has been on the Fairholme case is because Pershing agreed to a government request to delay its case to avoid going through the same exact discovery process multiple times. The idea was that Fairholme would go through jurisdictional discovery first and whatever was found would likely apply to both cases since they are making essentially the same claim (that the full income sweeping violates the takings clause).
But when Judge Royce Lamberth threw Fairholme’s case in the DC District Court (which claimed a violation of the Administrative Procedures Act, not the takings clause), the government filed for an indefinite stay on the Fairholme’s other case currently in front of Judge Sweeney. Fairholme is appealing the Lamberth decision, as is Perry Capital, but putting discovery on hold in the Sweeney court would still be a blow to Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) shareholders because it would extend an already lengthy legal process even more.
Fannie Mae: Pershing Square provides cover for Fairholme in Sweeney court
We speculated at the time that Pershing Square dropped its DC District Court case because it expected the same result and preferred to focus on what now looks like the stronger claim, but the amicus brief adds another layer to that strategy.
“The Government seeks an indefinite stay of all proceedings in Fairholme—and, by extension, Amici’s case—based on a preclusion argument against the Fairholme Plaintiffs that, even if correct, would not apply to Amici. The Government’s motion thus affects Amici’s interests while ignoring the broader context of these related cases. Amici’s proposed amicus brief brings this context into proper focus,” says Pershing Square’s motion.
In other words, dropping the DC District Court case not only strengthened Pershing Square’s other lawsuit, it may have strengthened Fairholme’s case as well because it shows that the stay, if granted, would have a broader impact.
See both rulings here 112114-motion-for-leave-to-file-amicus-brief-regarding-defendant_s-motion-to-stay-2
1124-order-granting-amicus-brief-2
http://www.valuewalk.com/2014/11/judge-sweeney-approves-ackmans-amicus-brief-fannie-mae-case/
Zargis, Nice response. Some people will not pass on an opportunity to be offended. I don't think that you left an opportunity there.
At least your response didn't make Lumpina's head hurt.
Freddie, Fannie to expand risk-share bond issuance
25 November 2014 | By Joy Wiltermuth
Freddie Mac and Fannie Mae are both exploring new types of US home loan credit-risk transfer deals in the year ahead, executives at the agencies said Monday in separate interviews.
The mortgage giants expect regular issuance out of their existing risk-sharing bond platforms, but their programs will also be tweaked in fresh ways to draw in more private capital.
Freddie Mac, which rolled out its first Structured Agency Credit Risk (STACR) bond in 2013, is now mulling the addition of an actual-loss bond which could be ready by the second quarter, said Mike Reynolds, vice president for Credit Risk Transfer.
“Based on market conditions, we expect to roll that out using some seasoned collateral that looks as far back as 2009,” he said.
“It would be a new series (with) deal sizes of anywhere from US$500m to US$1bn.”
As of now, Freddie and Fannie’s risk-transfer deals only come with estimated losses based on a pre-calculated schedule for a pool of loans, an analyst said.
But an actual-loss product would reflect precisely what is recouped (or lost) on an individual loan once it is sold or refinanced out of the pool.
As part of this, Freddie announced today it will be increasing investor transparency in the coming year by adding actual losses to its existing loan-level performance data sets.
The analyst said that kind of deep-dive data has never before been available to investors.
On top of that, Freddie is also looking to add a senior-subordinated bond to its STACR series, which could broaden its buyer base by appealing to REIT investors.
For its part, Fannie declined to note any specific plans to alter issuance for its Connecticut Avenue Securities (CAS) program.
Laurel Davis, Fannie’s vice president for credit risk transfer, said the agency continues to look at ways for lenders to take on credit risk.
Fannie in October issued an inaugural US$989.13m credit risk transfer bond with JP Morgan, called JP Morgan Madison Avenue Securities Trust 2014-1.
The idea is the same as the STACR and CAS transactions, but with JP Morgan administering the loan pool rather than one of the agencies, said Suzanne Mistretta, senior director in Fitch’s US RMBS group.
“The objective is to have private investors share the credit risk,” she said. “And (it is a) novel way of doing it, with less reliance on Fannie’s infrastructure.”
In the fourth-quarter, Redwood Trust is expecting to complete a US$1.1bn risk-transfer deal with Fannie, its first-ever transaction of this type, according to an investor call.
Redwood is selling the conforming loans to Fannie, but will take any first losses of up to 1%.
“In 2015, will be researching how we can sell a portion of our first-loss position (as well),” said Reynolds at Freddie.
“Those transactions represent skin in the game for the seller, which is very appealing,” he said.
A combined US$11.8bn in risk-sharing bonds has already been offloaded into the private market via the STACR and CAS programs.
The deals reference a slice of risk tied to US$425bn in agency-backed home loans. Both programs have already been tweaked once to include a second loan bucket with higher loan-to-value loans above the original 80% cap
http://www.ifrasia.com/freddie-fannie-to-expand-risk-share-bond-issuance/21175272.article
Who Will Pick up Fed's MBS Buying Slack?
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Nov 24 2014, 12:51PM
The Federal Reserve has completed its latest round of Quantitative Easing, the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae are under orders to continue shrinking their investment portfolios and significant constraints exist to keep private investors from purchasing agency mortgage-backed securities (MBS). So who, the Mortgage Bankers Association (MBA) asks, is going to pick up the slack?
A white paper written by MBA's vice president and senior economist Michael Fratantoni, lays out the conundrum facing the MBS market. Fratantoni says both policy makers and the housing industry have a common interest in bringing private capital into the mortgage markets but the key question is how and in what form that private capital can best reenter the system. MBA has advocated for private capital to have a larger role in covering credit risk within the government guaranteed, conforming portion of the market but we need to consider how to draw it to the interest-rate risk of the conforming market and how to reengage it for lending outside of the government guaranteed system.
For years, the GSEs' ability to issue long-term fixed-rate debt appeared to be a stabilizing factor for the U.S. housing finance system. Long-term, fixed-rate debt issued by the GSEs was a better match for funding long-term fixed-rate MBS than other funding instruments but the GSEs' purchase of fixed-rate MBS with minimal capital turned out instead to be destabilizing because they did not have enough skin-in the game.
The GSE's investment portfolios which once topped more the $1.5 trillion have been reduced under their post-crash agreement with Treasury, to less than $1 trillion. Fratantoni said he is not arguing with that policy choice but those portfolios did historically serve to channel global capital into the U.S. mortgage market absent bearing the uncertain cash flows from directly owning mortgages or MBS. Now it has to be asked how the market can be structured to attract stable private capital over time without GSE investment portfolios playing that role.
Confronting this issue has been delayed, first by the Federal Reserve's purchase of more than $1.7 trillion of agency MBS over a five year period; in many months this accounted for the vast preponderance of issuance. But in October the Fed stopped growing its portfolio although it is likely to continue replenishing it until the first increase in the Fed's target short-term rate. Then, likely at some point in the middle of 2015, this major investor will be leaving the MBS market, according to Fratantoni.
Second, modest supply has required little demand. MBA estimates that origination volume in 2014 will be the lowest in 14 years with correspondingly less MBS issuance. Reduced supply has kept spreads relatively tight, even as the GSEs have been net sellers and the Fed has tapered its purchases.
Third, demand from banks has been relatively strong. Banks have made up the difference in their relatively low loan-deposit ratios by maintaining, even increasing their securities holdings. However Basel II standards have recently led larger banks to favor whole-loan over MBS holdings, increase holdings of jumbo and near-jumbo whole loans, and to preferentially hold Ginnie Mae rather than GSE MBS on their balance sheets.
Fourth, attention has been focused primarily on policy steps to improve the efficiency of the secondary market - i.e. proposals to issue a single GSE security to level the playing field between Fannie Mae and Freddie Mac and as a step toward GSE reform. As the market continues to recover however ensuring adequate investment will become more important.
As of June 30 2013 the Federal Reserve estimated there was $13.3 trillion in outstanding mortgage debt, $10 trillion of it residential mortgages. These mortgages were held as assets by a variety of investors; $4 trillion by depositories, $4.8 trillion by the GSEs and $76 billion by individual households. GSE MBS are held by the same types of investors but the Fed's holdings of$1.7 trillion almost match those of the entire banking system. Post crisis MBS holdings have fallen at the GSEs but increased among mutual funds, credit unions, banks, and REITS.
Banks and other depositories have been major holders of mortgages and MBS but adjustable-rate and shorter-term mortgages are better matched to their funding than long-term, fixed-rate mortgages. Consumer preference and Dodd-Frank regulations have made fixed-rate products more common but the Savings and Loan crisis remains a cautionary tale about financing long-term, fixed rate loans with short-term liabilities (i.e. deposits) as in rising rate environments.
The Federal Home Loan Banks (FHLBanks) have helped banks support their financing of mortgages and hedge interest rate risk. While banks are potentially a key source of private capital their ability to invest in the mortgage market is being restricted by regulatory and market limitations.
Basel III and other rules have increased capital requirements;
FHFA has proposed new limitations on FHLBank membership
Banks are likely to increase commercial and industrial lending, limiting funds available for mortgages
As rates rise it is likely that depositors will seek higher yields elsewhere.
Liquidity coverage ratios (LCR) for larger banks penalize banks holding GSE MBS while favoring Treasury and Ginnie Mae securities.
The banking system's role as counterparties in the repo market is coming under fire by regulators and there are plans to shrink this market.
A second natural set of investors in mortgages are institutional investors including pension and mutual funds. As of March the Barclays U.S. Aggregate Index had a weight of roughly 31 percent for securitized assets (MBS, ABS and CMBS). Fratantoni says it is reasonable to assume these investors would significantly increase their holdings of mortgage-related assets in the aggregate only if mortgages became a larger share of all fixed income, or if they delivered a better return on risk. Looking at U.S. budget deficit forecasts it looks likely that mortgage assets may be a smaller share of the total than in the past, as Treasury issuance ramps up once again although mortgage asset yields may increase to attract more investment.
Broker-dealers, while not significant long-term mortgage holders, have played an important market liquidity role through their holdings of inventory of various assets, and their ability to intermediate repo funding. Regulatory changes have led many firms to pare their inventories of MBS and regulatory focus on the repo market has also led to uncertainty over the long-term availability of cost-effective repo funding and which firms will provide such capital. Moreover, new rules with respect to margin requirements for essentially all participants add further complexity to this market.
Support for mortgage markets has also come from foreign investors. While the U.S. has large trade deficits it has long run a capital account surplus with the rest of the world - i.e. foreign investors save more in the U.S. than the reverse - and a portion has been directed into the mortgage market with its depth of liquidity and higher yield than Treasury securities. However, post crisis, there has been a notable decline in foreign investors' willingness to hold MBS without an explicit government guarantee. Still there has been a very large increase in funds globally seeking safe, fixed-income investments and there have been repeated "flights to quality" over the past several years when there are financial, political or security issues abroad. However, these global flows will likely need to be channeled into mortgage assets through intermediaries, given the hesitance by foreign investors to directly invest.
The MBA paper outlines the following obstacles to foreign investors buying a larger share of MBS.
Some foreign investors are banks and asset managers under similar constraints as U.S. banks and asset managers with respect to being measured relative to a benchmark index return.
Official investors are even more likely to look for an explicit government guarantee before investing in dollar assets.
MBS are complex securities to hold, hedge and finance. Many foreign investors are looking to intermediaries who can deliver more predictable cash flows from underlying mortgage assets.
Foreign bank investors are constrained by Basel III and global systemically important financial institution (SIFI) rules as well.
Real Estate Investment Trusts (REITs) are, by virtue of the law that created them, subject to asset, income and distribution requirements that require 75 percent of their assets and income be connected to real estate and real estate finance. REITs can and some do have operating subsidiaries that originate or service mortgages.
Most mortgage REITs focus on holdings of agency and other MBS and use a combination of equity and debt to finance holdings of MBS. However there are more than 20 sizeable mortgage REITs with varying concentrations in agency and non-agency MBS, whole loans, MSRs and other mortgage assets.
Total mortgage REIT MBS holdings were roughly $300 billion in midyear 2014 and their leverage is typically 6:1 contrasted with 40:1 for the GSEs or more than 10:1 for banks. To grow their capital base, given the extreme limitations on retaining earnings, mortgage REITs need to return to the market through follow-on offerings.
Today, mortgage REITs debt funding is primarily from secured financing ("repo") of their mortgage assets from banks and other investors. Any larger role they might play in replacing the GSEs as owners of mortgage assets are restricted by a number of regulatory hurdles and concerns, primary among them the aforementioned regulatory concern about the stability of the repo market.
To increase the stability of their lending base some mortgage REITs have become members of the FHLBank system, usually through an insurance subsidiary. However FHFA has proposed eliminating this avenue of eligibility even though it is clear that mortgage REITs are financing home loans in a manner not dissimilar from other FHLB members.
Second, there are questions whether certain assets represent "interests in real estate." Failure to meet the required REIT asset and income tests can result in significant tax and other consequences.
Third, regulators have questioned whether the mortgage REIT model, utilizing limited leverage to realize an acceptable yield on a portfolio of mortgage assets, represents a new form of hidden leverage that could present a systemic risk. Fratantoni finds this judgment "odd". "A greater reliance on mortgage REITs would mean a larger share of the market for a set of institutions that have no government backing whatsoever, and hence represent truly private capital. While they are leveraged institutions, their leverage is less than that of other institutions investing in the mortgage market. And their positions are hardly in the "shadows" - by law, REITs must have a broad distribution of ownership interests, and many, if not most, are publicly traded."
That publicly-traded status means counterparties, regulators and the public has access to financial data on individual REITS and recent Commodity Futures Tracking Commission (CFTC) rules have also resulted in many mortgage REITs being required to clear their hedge positions, introducing yet another review mechanism. Moreover, mortgage REITs are overseen on a daily basis by their counterparties and post margin to support their positions.
As organizing and capitalizing a REIT is a well-understood process the sector could potentially be scaled up if some regulatory hurdles were removed the paper says. They are prime examples of private capital being deployed to hold and manage mortgage exposures and while some will fail during severe market disruptions, this is part and parcel of being fully private entities.
Fratantoni's conclusion is that there is no single player waiting in the wings to replace the Federal Reserve. The simple answer is that for sufficient yield, investors will come to the market. But perhaps we are headed for a new dynamic with higher and more volatile mortgage rates because there is no investor focused solely on MBS and other mortgage assets. Will this potential volatility "thin the herd even further?"
"Rebuilding the housing finance system to be both more stable and more competitive is a long-term endeavor," he says. "Identifying the barriers to private capital increasing its ownership of mortgage assets, and moving to reduce those barriers where feasible, should be part of the conversation and debate as we move forward."
http://www.mortgagenewsdaily.com/11242014_mbs_investors.asp
It's all just fannieville entertainment. And it is all for free.
This is getting crazy. Everybody disagreeing to disagree. How can we have meaningful bickering if everyone disagrees to disagree?
Oh no, you didn't just disagree that you disagreed. Did you?
U.S. housing finance regulator leaves loan limits mostly unchanged
WASHINGTON | Mon Nov 24, 2014 1:47pm WASHINGTON (Reuters) - The top U.S. housing finance regulator said on Monday it would leave unchanged next year the maximum loan size that government-controlled Fannie Mae and Freddie Mac can guarantee.
The Federal Housing Finance Agency said in a statement it will allow the two mortgage finance giants to purchase loans of up to $417,000 for single-unit properties in all but 46 U.S. counties next year.
Loan limits will rise in the 46 counties due to rising home values in those markets, the FHFA said.
To see the FHFA statement on conforming loan limits, please click on the following link:
http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-2015-Conforming-Loan-Limits-Unchanged-in-Most-of-the-U-S.aspx
http://mobile.reuters.com/article/idUSKCN0J81UF20141124?irpc=932
I hope Fannie Clause is coming
My news-pop-fade chart is highly accurate
1. Minor news=excitement. Maybe big news soon. So...
2. Pop. Stock vol. Picks up pps picks up until....
3. No more news....slow fade until next minor news.
If we ever get real news I will show the engorged obelisk chart when it is ready to erupt
Watt: Only Congress Can End GSEConservatorship.FHFA Director Melvin L. Watt. WASHINGTON, DC—Hopes that Federal Housing Finance Agency chief Mel Watt could, with just the stroke of a pen, end the conservatorship of Fannie Mae and Freddie Mac, have been roundly dashed. In testimony last week before the Senate Banking Committee, Watt said that "conservatorship is not, cannot, should not be a permanent state, and it is the role of Congress to determine what the future state is."
Doubling down on this position, the US Treasury Department responded to a query by the Wall Street Journal on the subject on Friday. "Comprehensive housing finance reform legislation is the only way to end the conservatorship responsibly and transition to a new system that brings stability back to the housing market while protecting taxpayers," a spokesperson said in an email.
The notion that the FHFA might move forward to end conservatorship has been promoted by Sen. Tim Johnson (D-SD), who brought it up during Watt's testimony on Wednesday.
FHFA, though, is programmed to continue with its mission unless and until Congress acts. Certainly it has made its responsibilities clear in its newly-released FHFA Strategic Plan: Fiscal Years 2015-2019, which discusses the conservatorships. The strategic plan also includes the priorities outlined in the 2014 plan released in May.
The report also touches on directions in which the FHFA is nudging the GSEs, namely the development of a Common Securitization Platform and the development of a single GSE security.
A single security, the FHFA noted, would "reduce the trading value disparities between Fannie Mae and Freddie Mac securities. The different mortgage securities currently issued by the Enterprises are not fungible with one another, and Freddie Mac’s security has historically traded less favorably compared With Fannie Mae’s security."
http://www.globest.com/news/12_994/national/multifamily/Watt-Only-Congress-Can-End-GSE-Conservatorship-352830.html
New FHFA Strategic Plan Encourages Fannie Mae and Freddie Mac to Work with HFAs
November 24, 2014
by RealEstateRama
Government and Public Real Estate News: Property News, Housing News, Grant News, Mortgage News, Foreclosure News
WASHINGTON, D.C. – November 24, 2014 – (RealEstateRama) — The Federal Housing Finance Agency (FHFA) released on November 21 the final version of its strategic plan for fiscal years 2015-2019. The plan outlines FHFA’s goals and priorities for overseeing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs).
FHFA’s strategic plan discusses several steps that FHFA will take to help Fannie Mae, Freddie Mac, and the FHLBs maintain liquidity in the housing finance market. Notably, FHFA pledges to work with both Fannie Mae and Freddie Mac to address those barriers that prevent them from working with state HFAs. FHFA also makes it clear that it views strong participation from state HFAs as necessary toward ensuring a liquid and accessible housing market. FHFA also promises to work with the FHLBs to develop policies that allow for fair and equal participation by all FHLB member institutions.
The final strategic plan is nearly identical to the proposed strategic plan FHFA released in August. NCSHA submitted comments on the proposal, praising FHFA for developing a plan that “strikes a proper balance between safeguarding these entities’ fiscal health and ensuring that they continue to support a liquid and accessible housing finance market.” NCSHA also expressed strong support for FHFA’s commitment to work with Fannie Mae and Freddie Mac to increase their ability to partner with state HFAs.
FHFA’s strategic plan identifies three major performance goals: ensuring safe and sound regulated entities; ensuring a liquid, stable, and accessible housing finance market; and managing the enterprises’ ongoing conservatorship. FHFA makes it clear that it will balance these three goals equally, with none of them taking precedence over the others.
http://www.realestaterama.com/2014/11/24/new-fhfa-strategic-plan-encourages-fannie-mae-and-freddie-mac-to-work-with-hfas-ID025316.html
Economic Growth Slowing After Mid-Year Burst, But 2015 Expected To Top 2014
This Contributed Column is brought to you by REAL STREET Expo, a new event sponsored by Business Facilities and Today’s Facility Manager magazines.
Posted by Heidi Schwartz
Economic growth in the U.S. is slowing from the strong mid-2014 numbers to a more moderate pace heading into next year, but continued improvements in employment, income and consumer and business spending are expected to drive year-over-year growth overall, according to Fannie Mae‘s Economic & Strategic Research (ESR) Group. Full-year economic growth is expected to come in at 2.5 percent for all of 2015, a modest increase above the 2.1 percent forecast for 2014. Although the global economic slowdown in the Eurozone, China and Japan, as well as ongoing geopolitical events in Russia, Ukraine and the Middle East, remain the largest downside risks to the forecast, the Group believes the risk of recession is low.
“The pace of growth around the middle of the year was well above trend, driven by an unsustainable rebound after a weak first quarter, and we anticipate that the fourth-quarter numbers will presage a more modest pace for 2015,” said Fannie Mae Chief Economist Doug Duncan.
The sluggish global growth outlook has prompted long-term interest rates to move markedly lower. The ongoing decline in oil prices has helped to bring down headline inflation. This leaves more cash in consumer pockets but prompts concern at some central banks that the inflation rate may continue to decline from levels that are already below central bank targets. For example, in response, the Bank of Japan unexpectedly announced additional easing measures last month in an attempt to bring the inflation rate up to its 2.0 percent target.
Economic Growth Slowing; Remains Above Trend
The advance estimate of third quarter gross domestic product (GDP) showed real growth at an above-forecast 3.5 percent annualized pace, which followed a robust rebound gain of 4.5 percent annualized in the second quarter. The details were less encouraging than the headline growth, however. A key indicator of underlying growth for the private sector— real final sales to private domestic purchasers (which includes domestic spending by consumers and businesses and excludes inventories)—grew 2.3 percent, slowing from 3.8 percent in the second quarter. Also, third quarter growth may be subsequently downgraded. The Bureau of Economic Analysis assumed a 1.3 percentage point contribution to third quarter GDP from net exports in its advance estimate, though the September trade report released after the GDP report suggests the contribution likely will be revised lower to roughly one percentage point.
Manufacturing Expansion Remains In Place
Besides the drop in consumer spending in September, another disappointing piece of news came from the durable goods orders report, as September core durable goods orders—a leading indicator for business capital investment—posted the largest drop since January. However, other factory-related news was positive. Manufacturing output rebounded in September, offsetting the drop in the prior month, and the Institute for Supply Management (ISM) manufacturing index rebounded sharply in October, suggesting that the expansion in the sector will remain in place despite slowing demand abroad.
http://businessfacilities.com/economic-growth-slowing/
I think it is like any other stock because it has a ticker. After that I fail to see a resemblance.
I finally understand what a gap is. It is a three letter word that when merely uttered or written in the presence of others, it will immediately incite a spirited debate that will usually degrade to (I am right!/No you aren't I am right!
Question for everyone. Can a stock (FnF ) be uplisted while it is in conservatorship status? It has probably been asked and answered already but I have slept since then.
Well I can't really say.
U.S. Treasury Spokesman Says Only Way To End Conservatorship Is Legislation
Nov. 23, 2014 1:24 PM ET
A Treasury Department spokesman on Friday said the Obama administration wouldn’t consider ending government control of mortgage-finance companies Fannie Mae and Freddie Mac without legislation.
Treasury spokesman wrote in an email, “Comprehensive housing finance reform legislation is the only way to end the conservatorship.".
THE COURT: "The Government is saying Plaintiffs lack standing, this Court lacks jurisdiction because the conservatorship is not part of the Government, it’s not a Government entity.".
Treasury Calls Shots for Frannie
Joe Light at the WSJ recently wrote up the summary of an e-mail exchange with a Treasury Department spokesman.
"The administration's position has not changed," the spokesman wrote in an email. "Comprehensive housing finance reform legislation is the only way to end the conservatorship responsibly and transition to a new system that brings stability back to the housing market while protecting taxpayers."
Treasury sweeps entire net worth of each Enterprise
This is consistent with what the Treasury has been doing all along, aka calling the shots as they relate to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). Look and see what happens when they call the shots. Judge Royce Lamberth's Memorandum Opinion summarizes this beautifully.
In simpler terms, the amendment "requires Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each Enterprise, minus a small reserve that shrinks to zero over time."
...
These dividend payments do not reduce Treasury's outstanding liquidation preferences.
...
Third, according to the press release, the net worth sweep would "make sure that every dollar of earnings that Fannie Mae and Freddie Mac generate will be used to benefit taxpayers for their investment in those firms."
Judge Sweeney is less amused
Meanwhile, over at Sweeney's court, the government seems to be taking a variety of positions.
THE COURT: And so far, I haven't gotten - I haven't received a good answer from the Government. Counsel is very able. But counsel has expressed concern of what could happen if certain documents are released, which I do not want to see happen, but counsel didn't answer to my satisfaction the discrepancy between sort of using the deliberative process as sword and shield. On one hand, FHFA is a government entity, you know, for purposes of booting the Plaintiffs out of court and not part of the Government, but for purposes of forwarding discovery, all of a sudden deliberative process is appropriate because they are part of the Government. So, it's a schizophrenic approach and I'm just waiting to hear a reasonable explanation.
FHFA Director Watt not in charge
Director Watt continues to do nothing, as Elizabeth Warren puts it best. "You've been in office for nearly a year now, and you haven't helped a single family, not even one," she said. She points this out for different reasons, but the statement is applicable here as well. This director is not calling the shots as evidenced by his statement that illustrates that Treasury is in charge.
After the hearing, Mr. Watt seemingly left the door open to the FHFA and Treasury's ending the conservatorship without Congress. "It's something that would have to be initiated by Treasury, not by me," he said.
Who is forgetting to look at the law?
The reality is that, "the Government is trying to have it both ways" as Judge Sweeney says, "I don't accept that argument." Treasury still is making public facing statements as if the Third Amendment to the SPSPA is not illegal government self-dealing, but if you're reading what I am writing it is impossible to not see that Treasury is in the drivers seat right now. Forgetting the difference between ownership and management, Reuters even takes it to the next level saying that Treasury owns the businesses on behalf of taxpayers.
I recommend taking a look at the law that applies to Treasury.
122 STAT. 2736 PUBLIC LAW 110-289-JULY 30, 2008
(7) AGENCY NOT SUBJECT TO ANY OTHER FEDERAL AGENCY.-When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency."
Meanwhile, the FHFA entered into a legal contractual agreement itself or on behalf of the Enterprises which signs away a portion of its powers to another agency. That's what the Third Amendment to the SPSPA is. Just look at who is making the decisions here. Treasury is directing. Treasury is supervising. Watt has no power. Is that not funny to you? Watt is powerless.
The watt is a derived unit of power.
There are next steps
The dialog continues to change. I'm just pointing out what everyone else is thinking. Senator Johnson, who had previously proposed legislation to wind down the businesses puts it best:
I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship.
So far, things have gone pretty much as anticipated with the exception of the Lamberth ruling, where some of the best clues are left out in the open:
Court does not seek to evaluate the merits of whether the Third Amendment is sound financial - or even moral - policy.
Judge Lamberth did not need to say that. The U.S. Treasury spokesman did not need to say anything either. I'm not saying anything either, I'm just saying, if you know what I mean. See what I did there.
Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.
http://seekingalpha.com/article/2704865-u-s-treasury-spokesman-says-only-way-to-end-conservatorship-is-legislation
Yes, one with a million dollar conscience fueled by a denied salary raise. One can only hope that a brave soul will step forward. But I'm not judging. LOL
Ah the strawberries. Maybe a mutiny is being planned.
Name calling. (idiot) Just think about that and all of it's implications when you want to be taken seriously and you won't wonder why you are not taken seriously.
It seems to boil down to ego and greed. Paulson would rather break the law to the tune of billions of dollars and benefit G.S. than let his ego be bruised. It could be ammo for FnF down the road.
Thank you Obit.
Nitwit I think you started your weekend early.
Hank Greenberg, AIG, CIC and the Backdoor Bailout
November 21, 2014
Six years after the U.S. government takeover of insurer AIG, a lawsuit reveals another potential buyer and raises the question of whether the bailout was even needed.
By Richard Teitelbaum
When former Treasury secretary Henry (Hank) Paulson Jr. testified in a suit last month about the U.S. government takeover of American International Group, his words were — mostly — numbingly familiar. Explaining the “punitive” terms set for the September 2008 bailout, he referred again to the transaction’s “moral hazard” — a term of art Paulson has invoked to describe the notion that companies should not rely on Uncle Sam when they foul up. “I take moral hazard seriously,” he said.
In the deal, a hemorrhaging AIG got an $85 billion backstop that eventually ballooned to $182.3 billion in U.S. taxpayer funds, and Treasury got 79.9 percent of the insurer. “It did indeed punish the shareholders,” Paulson said. “That’s just the way our system is supposed to work, that when companies fail, the shareholders bear the losses.”
What makes Paulson’s testimony remarkable is a tale that can be pieced together through a court document, the Plaintiffs’ Corrected Proposed Findings of Fact, and the ex–Treasury secretary’s own foggy recollections. Despite talk of moral hazard, it turns out that at least one alternative to the taxpayer rescue was readily available. Specifically, China Investment Corp., the big sovereign wealth fund of the People’s Republic of China, approached the Treasury Department directly and was eager to make an AIG investment — an offer that one or more officials in Paulson’s office in September 2008 believed was sufficient to meet the insurer’s needs at the time.
According to the court document, Treasury officials, after consulting with Paulson, told CIC that its help was not wanted. The secretary did not return CIC’s phone call, as requested by the Chinese government. A Treasury colleague was dispatched to tell the fund, in effect, to go away. A seperate, indirect entreaty from CIC was rebuffed as well.
Paulson’s brush-off of CIC is proof, critics say, that at the very least there were unexplored rescue options for AIG. “There were other solutions that did not require taxpayers’ or anybody else’s money,” says longtime investor Jim Rogers, a former partner of Soros Fund Management and a critic of the AIG bailout. “In the end, somebody did pay, and I just wish it hadn’t been the American taxpayer.”
The disclosure prompts two gob-smacking questions: Was the taxpayer bailout of AIG, the biggest in U.S. history, really necessary? And what would have happened if the main sovereign wealth fund of America’s biggest geopolitical rival had rescued it instead?
Alas, we may never know, but the revelation bolsters the arguments of those who view the bailout as a giant payoff to banks that were on the hook for tens of billions of dollars if AIG went belly-up — including New York–based Goldman Sachs Group, where Paulson served as CEO from 1999 to 2006, before being appointed Treasury secretary.
“It’s sinister or cynical,” fumes James Cox, a professor at Duke Law School. “It’s protecting the big banks against the yellow peril.”
The suit, Starr International Co., Inc. v. United States of America, effectively pits Maurice (Hank) Greenberg, CEO of Starr, among the largest shareholders of AIG, against regulators including former Federal Reserve chairman Ben Bernanke and ex–New York Federal Reserve Bank president Timothy Geithner, who have also testified. Starr alleges the government violated its constitutional rights as well as those of other AIG investors by appropriating their property without just compensation. Filed in the U.S. Court of Federal Claims in Washington D.C., the suit also asserts that the terms of the bailout were unfair, citing in particular the interest rate of more than 14 percent on the credit line that was part of the deal.
Starr, based in Zug, Switzerland, is seeking more than $40 billion in damages. And in hiring David Boies of Boies, Schiller & Flexner, who represented former vice president Al Gore in Bush v. Gore and has worked on other noted cases, the 89-year-old Greenberg has lined up some high-gauge legal firepower. AIG itself is a nominal defendant in the suit, meaning it is included for technical reasons. The suit is ongoing, with a ruling not expected until next year. An AIG spokesman declined to comment.
As for Greenberg himself, he was forced out as CEO of AIG in 2005 amid fraud allegations by Eliot Spitzer that the former New York State Attorney General never proved. Greenberg maintained control of Starr, whose business was closely intertwined with that of AIG.
AIG wasn’t the only financial firm to run into trouble in September 2008 as credit markets froze and stock prices plunged. Fannie Mae and Freddie Mac, two government-sponsored mortgage companies, were placed in conservatorship on September 6, 2008, as the value of their loan portfolios collapsed. Merrill Lynch & Co., losses mounting, agreed on Sunday, September 14, to be acquired by Bank of America Corp. At 1:45 a.m. the following Monday, September 15, Lehman Brothers Holdings filed for bankruptcy, after a plan for London-based Barclays to buy it was nixed by the U.K.’s then-chancellor of the Exchequer Alistair Darling. That forced the venerable Reserve Primary Fund, a money market fund that held Lehman commercial paper, to “break the buck,” the value of its shares falling from $1 to 97 cents. Redemptions were suspended. Panic reigned.
New York–based AIG’s financial situation had been deteriorating for months. The company was bleeding cash, largely because of the rising cost of insurance it had written on $62.1 billion of toxic collateralized debt obligations (CDOs). On September 15, the same day Lehman filed for Chapter 11, major rating agencies downgraded AIG’s long-term credit outlook, triggering further collateral calls by its bank counterparties. The downgrades would almost certainly have bankrupted the insurance giant.
We know what happened next. As part of the bailout, the New York Fed, on behalf of the U.S. government, took control of AIG’s management and directed it to pay off the banks that had bought insurance on the CDOs — despite the fact that these counterparties, including Goldman Sachs, Frankfurt-based Deutsche Bank, Merrill Lynch and Société Générale of Paris, had largely underwritten or managed these cratering securities themselves. The public was outraged.
A key point of contention was the New York Fed’s insistence that AIG pay the banks 100 cents on the dollar for the insurance, which was in the form of credit default swaps, even though AIG had been negotiating discounts on the insurance. That made Goldman Sachs, Paulson’s alma mater, whole on its $14 billion in CDO protection and the other banks whole on theirs. The CDOs were shunted into a special-purpose vehicle called Maiden Lane III, named after the street where the New York Fed keeps a back door through which it can sneak people without undue attention. (Perhaps that’s another reason to call the rescue a backdoor bailout.) A spokeswoman for the New York Fed declined to comment, while the Treasury Department did not respond to phone calls.
The suit speaks to the changes in sovereign wealth funds themselves since the crisis — a period in which the state-owned investors have mushroomed, hitting an estimated $5.3 trillion in assets under management in 2014, up from just $2.4 trillion in 2007, according to Institutional Investor’s Sovereign Wealth Center.
The funds have evolved, becoming more sophisticated stewards of their nations’ wealth and less likely to serve as bottomless sources of liquidity in times of trouble. Before and during the financial crisis, they were pouring money into foundering U.S. and European banks with abandon.
Among the biggest deals, according to Sovereign Wealth Center data, was GIC’s $6.9 billion investment in New York–based Citigroup in January 2008 and a $10.3 billion deal with Zurich-based UBS that May. In November 2007 the Abu Dhabi Investment Authority had sunk $7.5 billion into Citigroup. Korea Investment Corp. and the Kuwait Investment Authority each plowed $2 billion into Merrill Lynch in January 2008 following Temasek Holding’s $4.4 billion investment in the firm the previous month. Temasek took an additional $3.4 billion slug in July 2008, just months before Merrill’s disastrous acquisition by Charlotte, North Carolina–based Bank of America, which was completed, under U.S. government pressure, on January 1, 2009. The Qatar Investment Authority ponied up a total of $7.7 billion for two 2008 investments in Barclays. The fund also sank a total of $4.4 billion into two deals with Zurich-based Credit Suisse. The list goes on.
“There were multiple motivations back then,” says Rachel Ziemba, director of emerging markets at Roubini Global Economics in London. “One was to gain access to assets at a discount, two was trying to leverage their own financial institutions and partner with the firms they were investing in, and three was some feeling they would be thanked — there was a desire to build up political capital.” Some of the sovereign funds would come to regret their munificence.
“The investments of 2007–’08 were largely interpreted as sovereign wealth funds coming to the rescue of the Western financial system,” says Sven Behrendt, founder of Geneva-based consulting firm GeoEconomica. “There was an implicit understanding of a political quid pro quo based on financial engagement for broader nondiscriminatory market access.”
Don’t count on a repeat in the next crisis. “Many sovereign wealth funds, in particular those that were created in the past ten years, today take more-measured decisions,” Behrendt says. “They make their risk-return calculations and see if any future investment fits into their asset allocations. The times of personality-driven investment decisions are gone.”
In September 2008, though, CIC was still a yearling. By early 2006, China had surpassed Japan to become the biggest holder of foreign exchange reserves — more than $1 trillion — and the State Administration of Foreign Exchange (SAFE) was worried that it was overly exposed to the dollar, which had tumbled steeply against industrialized nations’ currencies, according to a history of CIC on the Sovereign Wealth Center. SAFE had already set up Central Huijin Investment to support domestic banks, a fund that was eventually rolled into CIC, which was formally launched in September 2007 and, after much foot-dragging by the People’s Bank of China and SAFE, capitalized with more than $200 billion.
Critics lambasted the fund’s early management: CIC’s first investments were classic clunkers. Through Huijin, for example, it bought a 9.9 percent nonvoting stake in New York–based Blackstone Group’s initial public offering in June 2007 at a discounted price of $29 a share versus $31 for other investors. Shares briefly spiked and then fell below $5 in the 2008–’09 meltdown. In December 2007, CIC paid $5.6 billion for a 9.9 percent stake in Morgan Stanley, also of New York, through a convertible position yielding 9 percent. In February 2008, CIC teamed with New York–based private equity firm J.C. Flowers & Co. to form a fund to invest in distressed financial stocks, providing 80 percent of the $3.2 billion in capital.
The state-owned fund also held $5.4 billion of its cash in the Reserve Primary Fund, the ill-fated money market fund. CIC managed to withdraw before the fund froze redemptions. In June 2014, China’s National Audit Office disclosed it had found evidence of mismanagement at CIC and inadequate due diligence in 12 overseas investments. CIC now has $652.7 billion in assets, according to the Sovereign Wealth Center.
What would a 2008 CIC takeover or big investment in AIG have meant? It’s certainly likely that CIC would have insisted that the insurer drive a harder bargain on the swaps, costing Goldman and the other banks big bucks. “AIG should have pushed back — they should have clawed back the collateral,” says Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm. “Those CDOs were fraudulent.”
At least one other insurer had obtained a steep discount on swap payments it owed to a bank. Critically, as part of the rescue terms, AIG surrendered the right to sue the bank counterparties. That likely wouldn’t have happened if CIC were backstopping the firm. The New York Fed directed AIG to redact the names of bank counterparties and the identities of CDOs in a key Securities and Exchange Commission filing — wrapping the whole affair in a cloak of secrecy that has fed conspiracy theories.
What exactly was going on in the days before and after September 16, 2008, the day AIG’s board agreed to the punitive, and nonnegotiable, terms set by the New York Fed? That’s where the court document (the plaintiffs’ findings of fact) comes in. It cites snippets of depositions from key players at the time: Treasury Department officials, bankers and AIG executives.
The document cites John Studzinski, a partner in Blackstone’s advisory team working with AIG, who described investor interest from sovereign funds, including two of the biggest: CIC and Singapore’s GIC. The sovereign wealth funds had sufficient dry powder. At year-end 2008, CIC had $297.5 billion in assets and GIC an estimated $198 billion, according to the Sovereign Wealth Center. Through a Blackstone spokesman, Studzinski declined to comment.
The U.S. government discouraged China from helping AIG, the document says. A key sentence refers to the CIC offer. “At 12:25 p.m. on September 16, 2008, Taiya Smith, Paulson’s deputy chief of staff and executive secretary, informed Paulson’s chief of staff and Under Secretary for International Affairs David McCormick that the CIC was ‘prepared to make a big investment in AIG, but would need Hank to call [Chinese Vice Premier] Wang Qishan.’” The document says Smith added that “the Chinese ‘were actually willing to put in a little more than the total amount of money required for AIG.’” Based on the original bailout terms, that might have been more than $85 billion.
That day, the findings say, McCormick talked to Paulson about the Chinese interest in investing in AIG. “McCormick then told Smith that Treasury ‘did not want the Chinese coming in at this point in time on AIG,’” the document says. It was then left up to Smith to explain to the Chinese that the Treasury Department did not want them to invest. She spent as long as two hours doing so, at a previously planned trade and commerce meeting in Yorba Linda, California. “All [the Chinese officials] wanted to talk about was AIG,” she is quoted as saying.
Through a spokeswoman, McCormick, now president of Westport, Connecticut–based hedge fund firm Bridgewater Associates, declined to comment. Smith is a managing partner at Garnet Strategies, a China-focused advisory firm in Boston, Virginia, and a senior adviser at the Paulson Institute, an independent center founded by the ex-Treasury secretary at the University of Chicago that promotes economic growth and clean energy in the U.S. and China. Efforts to contact Smith were not successful.
What does Paulson have to say about the CIC offer? A spokeswoman for the former Treasury secretary sent an e-mail attachment with an excerpt of his court testimony.
On October 6, under examination by Boies, Paulson testified repeatedly that he could not remember any offer from CIC at that point. “I have no recollection of that, but I would say this,” Paulson said. “There’s no way I would have encouraged them to come in because I was certain that they would not have done a deal of the size that it took to save AIG without a government guarantee, and I couldn’t — couldn’t provide one, and the government couldn’t provide that assurance.” That seems on the surface at odds with the statement by Smith about CIC’s eagerness to invest. The court document makes no mention of a request by CIC for a government guarantee.
The former Treasury secretary testified that he did, in fact, recollect talking to then-president George W. Bush about CIC making an additional investment in Morgan Stanley, also in the midst of a liquidity crisis and in which the sovereign wealth fund had already sunk $5.6 billion the previous year. CIC ultimately did not invest more capital in Morgan Stanley in 2008. The fund did invest an additional $1.2 billion in the bank the following year.
While maintaining that he didn’t recall any CIC offer on or before September 16, Paulson said that in retrospect he wouldn’t have wanted to sow panic given AIG’s precarious state. “I sure wouldn’t have wanted to spook the Chinese knowing what I know now,” Paulson testified. “And I’ll tell you, I can only imagine how they would have reacted if I had to air the dirty linen and tell them what we were dealing with at that point in time.”
Bailout critics call this obfuscation. “This was the epitome of crony capitalism,” consultant Tavakoli says. “What happened was egregious, and the public doesn’t get how egregious it was, and Congress doesn’t understand how egregious it was.”
To be sure, by September 16, after the downgrades of the previous day, AIG’s money was running out. The government was readying the term sheet for the takeover. Paulson might have viewed a CIC approach as a distraction. “I’m skeptical it was a real option,” says Damon Silvers, former deputy chairman of the Congressional Oversight Panel, which investigated the AIG bailout. “It was the 16th. Time’s up. The cash had to be in hand.”
Paulson said as much in his testimony. “If the CEO of AIG on the 13th or 14th when we were talking with him or on the 15th had said, ‘We are in discussions with CIC and we’re negotiating to make an investment, would you say something to them, I would have said, ‘You betcha,’” Paulson testified. His redacted Treasury Department phone logs for the 13th and 14th of September, which were released under a Freedom of Information Act request [from the New York Times], are blank because he was at a New York Fed meeting, staying at the Waldorf Astoria hotel.
One obvious question is whether September 16 was too late in the game for a CIC-assisted rescue. It was certainly a busy day: Those same phone logs showed Paulson made or received about 60 calls on the 16th, including conversations with former president Bush, Geithner, Bernanke, Berkshire Hathaway CEO Warren Buffett and presidential candidates John McCain and Barack Obama. But the court document does not say specifically that September 16 was the date the Chinese offer was broached; it only says that Smith informed undersecretary McCormick on that date. Because Paulson says he can recall so little about the situation, we may never know the specifics.
However — and this may be crucial — September 16 was only the day that AIG’s board signed the term sheet authorizing the government takeover. Term sheets, by their nature, are nonbinding agreements. “It’s a bid,” says Duke professor Cox, referring to the legal documents in general. “It’s important to remember that a term sheet is not the deal.”
The definitive agreement, laden with onerous terms, including those that protected the banks from possible AIG suits, was not announced until September 23. By that time Paulson had already fired AIG CEO Robert Willumstad. He was replaced with ex–Allstate Corp. CEO Edward Liddy, a Goldman Sachs board member and chairman of its audit committee, who was put in charge of liquidating the company.
Regardless, the Chinese fund remained persistent. The trial transcript shows that former Goldman Sachs president John Thornton, a professor at Tsinghua University in Beijing with close China ties, had approached Paulson about CIC buying or investing in AIG but that the former Treasury secretary again could not recall when that happened. “I suspect it was after the 16th,” Paulson testified about the approach. “And as I’ve thought about it, I thought it was probably coming from a man named Gao, who ran CIC, which reported up to, you know, the State Council, but I don’t remember when, when John approached me, but I do remember that.” He was referring, presumably, to CIC’s president at the time, Gao Xiqing. CIC did not return an e-mail seeking comment, nor did a spokeswoman for GIC.
There is no call to or from Thornton listed for the 15th or 16th on Paulson’s Treasury Department phone log. There is a ten-minute call from Thornton, from 7:40 a.m. to 7:50 a.m., on September 19th, four days before AIG announced the definitive bailout agreement.
Thornton joined the first International Advisory Council of CIC in 2009. He is also chairman of Toronto-based Barrick Gold Corp. and co-chairman of the Brookings Institution, a Washington-based think tank. Thornton did not respond to a phone call and e-mail seeking comment left with a spokeswoman at Brookings.
Silvers contends that a major investment by CIC in AIG would have been a dangerous undertaking for China’s leadership — potentially, a disastrous one if the insurer had gone belly-up. “They would be taking an enormous risk,” he says. “They would have been risking the overthrow of the government.” (Ironically, after piling on extra financing, the U.S. government ultimately made a profit of $22.7 billion from the AIG bailout, according to a December 2012 press release from the Treasury Department. That figure has been disputed.)
One factor goading on CIC may have been AIG’s large book of business in China. “AIG sold enormous amounts of insurance in China,” says Silvers, who is now director of strategy and special counsel for the AFL-CIO labor union in Washington. “They may have considered what kind of impact a bankruptcy by AIG would have domestically.” Also, AIG is intimately intertwined with Chinese history: Its predecessor firm was founded in a two-room office by Cornelius Vander Starr in Shanghai’s Bund district in 1919 before branching out across Asia in the years leading up to World War II.
That fact that CIC’s offer has never been has made public is as startling as the news itself. It bolsters accusations of a cover-up.
For the record, Paulson’s own book on the subject, On the Brink — copies of which were handed out during Paulson’s October 6 testimony — made no mention of the CIC offer. Nor did Andrew Ross Sorkin’s seminal Too Big to Fail or the Financial Crisis Inquiry Report, the official report by the Financial Crisis Inquiry Commission.
More egregious, perhaps, numerous government investigations that drilled down into the AIG takeover and the subsequent swap payments to the banks made no mention of the CIC offer. One of the first, by the Office of the Special Inspector General for the Troubled Asset Relief Program, in November 2009, did not refer to any sovereign wealth fund offers. A SIGTARP spokesman declined to comment on whether the office knew of the CIC offer or others at the time. A person familiar with the audit process said that if the information had been made available to SIGTARP, it would have been included in its November 2009 report.
The Congressional Oversight Panel’s June Oversight Report in 2010 referenced discussions between AIG and sovereign wealth funds but did not mention specific funds or any offers to invest. “We interviewed numerous Fed and Treasury officials, and none of them mentioned this matter,” former deputy chairman Silvers says. Similarly, a September 2011 report by the U.S. Government Accountability Office referred to talks between AIG and a group of private equity firms, sovereign wealth funds, investment banks and others regarding financial assistance but made no mention of specific offers from CIC or GIC to the Treasury Department. A GAO spokesman e-mailed a copy of the report declining further comment.
“That would be one elephant-size omission,” says Michael Smallberg, an investigator at the Project on Government Oversight, a watchdog group in Washington. “All taxpayers have a legitimate interest in this. I’d be fascinated to know the reasons for why Hank Paulson didn’t engage.”
Duke professor Cox says Paulson likely would not have been psychologically inclined to hand over such an enormous financial institution to a foreign power. “Given his personality and DNA, he likes to be in charge,” Cox explains. “If you let somebody else into the deal, you are no longer in charge.” And, obviously, elements of the term sheet might have been challenged — such as the 100 percent payoffs on the swaps and the requirement not to seek redress against the bank counterparties.
Silvers, for all his skepticism regarding the viability of the CIC offer, is certain that Paulson would never have approved it under most any circumstance. “The day that China buys out a systemically important company because the U.S. government can’t is the day the U.S. loses its preeminence,” he says. “Paulson is too macho to have ever let such a thing happen on his watch.”
For Tavakoli, who worked briefly in the 1980s as a mortgage expert at Goldman Sachs, it all boils down to the former Treasury secretary’s ties to his former employer. “Paulson is saying, ‘I saved the banking system, and I did it the right way,’” she says. “He did it in a way that benefited Goldman Sachs.”
Ultimately, the geopolitics of the situation may have proved overwhelming for Paulson. “The savior of the financial system would have been a communist, totalitarian country,” says Cox. “The irony of the Chinese saving Wall Street would have been too much.”
http://m.institutionalinvestor.com/Article.aspx?ArticleId=3402934
Mortgage delinquencies fall 11 quarters in a row
Post-recession loans “squeaky clean,” says TransUnion
11/21/2014 - 17:19
The delinquency rate for home loans continued its steady decrease in the third quarter, dropping to 3.36%, according to TransUnion. While the overall rate hasn’t yet dipped to pre-recession normal levels, the rate continued to approach those levels for the eleventh straight quarter.
TransUnion also reported that while the overall figures reflect the impact of loans that remain in the foreclosure process from the last of the financial crisis, newer credits look even better than the overall trend.
“Recent mortgages have been squeaky clean,” says Ezra Becker, vice-president, Research and Consulting—Financial Services at TransUnion. He emphasized that even the overall numbers are coming closer to normal delinquency levels. He credited this to improving home price levels and declines in unemployment rates.
An additional factor, relating to the clean record for post-recession loans, is continuing conservatism by lenders, according to Becker. “The lessons of the recession have been well learned,” says Becker. “It’s a very different world now from that of 2006-2008. I doubt that lenders will forget those lessons nor do I think their regulators will let lenders forget those lessons.”
Some of this reminding has been in the give and take between regulators and the regulated, but Becker also believes that the Consumer Financial Protection Bureau’s Qualified Mortgage and affordability guidelines have played a role in underwriting conservatism as well..
In addition, with secondary market providers Fannie Mae and Freddie Mac aggressively putting back troubled mortgages to lenders, he says, bankers have worked to produce credits that won’t wind up back in their laps.
Becker notes that delinquency figures for consumers under 30 have fallen significantly, but he qualified this. He points out that very few qualify under the industry’s currently strict standards. He suggests that as the economy improves, lenders will be more open to younger borrowers.
Geographically, all 50 states and Washington, D.C., saw declines in delinquency rates in the third quarter. The greatest falls were seen in Nevada, Florida, and California, three among the states hardest-hit by the crisis.
http://www.bankingexchange.com/management-topics/financial-trends/item/5091-mortgage-delinquencies-fall-11-quarters-in-a-row
2.50 baby
Fannie Mae Projects Modest Growth Forecast for 2015
Author: Brian Honea in Daily Dose, Data, Featured, News November 21, 2014 0
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riseDespite slower economic growth in recent months following a strong showing in mid-2014, Fannie Mae's Economic and Strategic Research Group said in a report released Thursday that it still expects 2015 to be a slightly better year overall economically in the United States.
The group's current forecast was based on continued improvements in employment, income, and consumer and business spending. The group predicted that economic growth will come in at 2.5 percent for 2015, which is a slight improvement over the 2.1 percent predicted for 2o14.
"The pace of growth around the middle of the year was well above trend, driven by an unsustainable rebound after a weak first quarter, and we anticipate that the fourth-quarter numbers will presage a more modest pace for 2015," said Doug Duncan, chief economist for Fannie Mae. "We are still seeing some conservatism on the part of consumers, who remain hesitant to take on significant credit and mortgage debt in the wake of the economic downturn. However, recent data show that their confidence is growing amid strengthening employment numbers and household incomes, which we expect to continue next year and eventually drive stronger consumption."
Duncan said the housing market "continues to grind its way upward" and that due to muted fundamentals, he does not expect the market to have a breakout performance in 2015. Duncan predicted the state of the housing market and mortgage industry in 2015 will be similar to that of 2014 based on Fannie Mae's current view of home sales, housing starts, and price trends, which is largely unchanged from the research group's previous forecast.
"Homebuilding activity improved during the third quarter due primarily to the multifamily segment, which we expect to grow further next year, but the single-family segment has been relatively flat for some time," Duncan said. "Although interest rates still are relatively low, the temporary burst in refinance activity appears to have subsided, and we expect that the market will turn more toward the purchase market in 2015."
http://themreport.com/news/data/11-21-2014/fannie-mae-projects-modest-growth-forecast-2015
Fannie & Freddie Changes Will Help Lenders; Possible Changes for NY Lenders;Nov 21 2014, 8:07AM
In New York, the New York Mortgage Bankers Association's website is now live. The group is functioning and has already had meetings with DFS, so lenders looking for things to be done on an "industry vs. company" level should reach out to the NY MBA to make their industry issues known. And by visiting the site one can read comments about Benjamin Lawsky stepping down from the NY Department of Financial Services post he now holds.
Speaking of which, the NY MBA spread the word to members that the NYDFS proposed regulation of force-placed insurance. "Under the proposed regulation, insurers and servicers are prohibited from: obtaining insurance in access of borrower's last known amount, unless that amount did not comply with mortgage requirements, issuing force-placed insurance on mortgaged property serviced by a servicer affiliated with the insurer, receiving compensation with respect to the force-placed insurance, including the cost of insurance tracking in the insurance premium, providing tracking services to the servicer at no cost or at a reduced fee.
It also posted information on proposed NMLS changes to the Mortgage Call Report. The National Mortgage Licensing System (NMLS) has issued a proposal that would make significant changes to the Mortgage Call Report (MCR). The NYMBA has signed on to a letter urging a postponement of the proposed changes.
And New York is considering a "borrow and save" pilot program as an alternative to high-cost mortgage programs. President Jim Bopp writes, "Although this pilot program is not directly related to mortgage loans, the NY MBA would support any program that helps NYS residents establish traditional credit histories that would enable them to build a credit rating that would help them qualify for the most competitive rates and terms available based on an established or improved credit score. This program executed correctly could result in more people being able to purchase a home and for the borrowers to realize the American dream of homeownership and all of the benefits related to achieving it."
Turning to agency news, Fannie Mae and Freddie Mac announced significant revisions to their respective rep & warrant frameworks. These revisions provide lenders with greater clarity concerning the post-sunset enforcement of Life of Loan exclusions, as well as certain other reps & warrants. Look for higher thresholds for "Life of Loan" breaches with numerical triggers for misstatement & misrepresentation and data inaccuracy. Perhaps the reduction of uncertainty to Life of Loan breaches will encourage lenders to expanding lending with larger players likely unmoved by the clarity with smaller ones set to fill the void. Fannie Mae's announcement can be found here; Freddie Mac's can be found here. FHFA Director Watt's statement concerning these revisions can be found here.
As this commentary has mentioned many times, lenders say, "We can play by the rules - just tell us what they are." This is an effort to do that by F&F, and may lead to an expansion of the credit box. For example, under the new rules seen by clicking on the links above, if there is a defect but the loan still would have qualified for purchase by F&F, the lender will have to cover the difference once the loan is re-priced but will not face a repurchase request. Dave Stevens of the MBA writes, "These changes build off the revisions announced earlier this year and are intended to provide lenders with clarity regarding R&W enforcement after a loan qualifies for repurchase relief. Life of loan exclusions concerning misstatements, misrepresentations, & omissions and data inaccuracies have been revised to state that the GSEs will only issue repurchase requests for significant violations that reflect a pattern of activity involving multiple parties to the transaction." The guidelines require that the same lender has 3 or more loans with qualifying misstatements, misrepresentations, or omissions prior to a life-of-loan R&W kicks in and the threshold is higher for data inaccuracies as the same lender/entity must have 5 or more inaccuracies before triggering the life-of-loan R&W.
For purposes of the life of loan exclusions, the definition of fraud has been revised to clarify the distinction between fraud and misstatement under the Guides. These revisions are applied retroactively to loans delivered to a GSE on or after January 1, 2013. The GSEs will lengthen the expected foreclosure timelines in 47 out of the 55 covered jurisdictions effective for all foreclosure sales completed on or after November 1, and will temporarily suspend compensatory fee assessment in four states (New York, New Jersey, Maryland and Massachusetts) for at least six months until more data can be gathered to determine an appropriate timeline effective for foreclosure sales completed on or after January 1, 2015. In addition, both GSEs have raised the de minimis exception- a threshold where there will be no compensatory fee invoice-from $1,000 per month to $25,000 per month, effective for foreclosure sales completed on or after January 1, 2015. This will provide significant relief for smaller servicers. Changes to both of these frameworks could not have occurred without the diligent work put in by MBA staff and a number of very engaged MBA members."
"There are qualified borrowers who are not being served in today's market," Andrew Bon Salle, a Fannie Mae executive vice president, said in a statement. "With this clarity, lenders should have greater confidence in lending to Fannie Mae's full credit standards and making mortgages available to more borrowers."
Bankers Advisory writes, "The changes to the framework are effective retroactively for whole loans purchased, and mortgage loans delivered into MBS with pool issue dates, on and after January 1, 2013, except that these changes do not apply to any loans for which Fannie Mae has issued a repurchase request prior to November 20, 2014. The changes to the Selling Guide provisions regarding compliance with laws are effective for whole loans purchased on and after November 20, 2014, and for mortgage loans delivered into MBS with pool issue dates on and after December 1, 2014. It is Fannie Mae's expectation that any future modifications to the framework will apply prospectively.
"In addition to the above changes to the framework, Fannie Mae is also updating the Selling Guide, A3-2-01, Compliance with Laws, which among other things requires lenders to comply with applicable federal, state and local laws. These changes are effective for whole loans purchased on and after November 20, 2014, and for mortgage loans delivered into MBS with pool issue dates on and after December 1, 2014, without regard to whether the loan has obtained relief under the framework."
(Speaking of which, The Collingwood Group's November survey focuses on the GSEs and their impact on the industry. "We want to know what the industry thinks of GSE Reform, which FHFA initiative is most important for a market recovery, and how Fannie Mae and Freddie Mac could stimulate demand among other topics. Survey participants will get a "first look" at the report before we make it available to the public.)
Fannie Mae is offering sessions designed to help servicers understand Fannie Mae's updated (Property) Hazard and Flood Insurance policy. This course explains the new guidance for handling insurance losses based on the mortgage loan status at the time the servicer receives notification of damages, regardless of the cause. The sessions are scheduled on December 9th and 10th, to register, click here.
It becomes harder and harder to argue that housing is still in a slump. Yesterday we learned that Existing Home sales rose (+1.5%) in October for the second straight month and are now above year-over-year levels for the first time in a year, according to the National Association of Realtors. Sales are at their highest annual pace since September 2013. The median existing-home price for all housing types in October was $208,300, which is 5.5 percent above October 2013. This marks the 32nd consecutive month of year-over-year price gains.
And the Philly Fed made a huge move upward, from "20.7" to "40.8". This is the highest reading in over 20 years. The Bloomberg Consumer Comfort Index rose to 38.5, while the Index of Leading Economic Indicators rose to 0.9%. We saw 2.34% on the 10-yr at the end of trading on Thursday and this morning, with no scheduled news, we're...unchanged, as are agency MBS prices.
http://www.mortgagenewsdaily.com/channels/pipelinepress/11212014-reps-and-warrants.aspx
Nov.21, 2014, 10:30 amPreserve Fannie and Freddie for the housing market and the middle class
Yesterday’s Senate oversight hearing on the Federal Housing Finance Agency underscored the need for thoughtful housing reforms to make sure that minority communities are being adequately served.
Since the 2008 financial crisis, the gap between minority and white homeownership has only widened and young people are less likely to become homeowners. The long-term impact of this disturbing trend could be dire.
From starting a family through retirement, an entire generation is at risk of missing out on the financial security that comes with homeownership. And families of color will face another barrier in striving for the American dream.
Already, we have seen perceptions about homeownership in communities of color change. For example, 63 percent of Hispanic homeowners now believe it would be difficult to get a home mortgage today, compared to 40 percent of the general population of owners.
The debate over the future of Fannie Mae and Freddie Mac provides a rare opportunity to reverse these trends and make responsible homeownership a possibility for those families that would benefit from it, generation after generation.
The Federal Housing Finance Agency, the regulator and conservator of Fannie and Freddie, can take the lead in seizing this opportunity and accomplishing these goals, without putting taxpayers or our economy at risk.
Fannie and Freddie now hold our best hope to ensure the future growth of the housing market and availability of 30-year, fixed-rate mortgages that are affordable for young people and people of color.
But for Fannie and Freddie to live up to these objectives, they will require capital. Director Mel Watt, who testified at yesterday’s hearing, made an important announcement last month that the FHFA will expand lending to middle-class borrowers, but building the capital necessary for the broad success of these initiatives will be impossible if Fannie and Freddie remain in “permanent conservatorship.”
Given these realities, we believe it is vital to discuss unwinding the conservatorship in a way that allows Fannie Mae and Freddie Mac to start rebuilding their capital. Before this can be done, significant reforms will be needed to safeguard our economy and taxpayers, and to ensure that these two mortgage giants fully and fairly serve all communities. But in our rebounding economy, it is clear that Fannie and Freddie can be profitable entities that continue to deliver a large return on the government’s investment.
The recent proposals in Congress to discard Fannie and Freddie entirely would simply pose too great a risk to our economy, our housing market, and millions of striving American families. Thoughtful reform, with an eye toward protecting taxpayers and making sure all communities are served, can resolve remaining concerns without destabilizing the American economy with an untested new system. With Congress unlikely to move forward with a complete overhaul, it is time to consider how we can make the most of the housing finance system that currently exists.
http://thehill.com/blogs/congress-blog/economy-budget/224893-preserve-fannie-and-freddie-for-the-housing-market-and-the
Fannie is losing her shorts or her shorts !
Heehee
One mil. in vol. in 5 min. LOL
FHFA: G-Fees Increase an Average of 51 BP in 2013
Thu, 2014-11-20 14:18 — NationalMortgag...
FHFA_Logo_04_13_12
The Federal Housing Finance Agency (FHFA) has released its sixth annual report on the single-family guarantee fees (g-fees) charged by Fannie Mae and Freddie Mac. The report includes data from 2009 through 2013 and shows that g-fees more than doubled over this period and increased at a higher annual rate in 2013 than in the prior four years. The report also reflects the impact of g-fee policy changes in previous years and changes in risk-adjusted g-fees by product type and volume, indicating that:
?Guarantee fees increased to an average of 51 basis points in 2013 compared to an average of 36 in 2012 and 22 in 2009;
?The g-fee increases in 2012 reduced pricing differences between small and large lenders in 2013;
the percentage of loans sold to Fannie Mae and Freddie Mac by extra-large lenders decreased from 60 percent in 2010 to 49 percent in 2013 while the percentage of loans sold by extra-small lenders increased from 8 percent to 19 percent over the same time period;
?The 2012 fee increases also substantially reduced the pricing difference between 30-year fixed rate and 15-year fixed rate loans.
The Housing and Economic Recovery Act of 2008 requires FHFA to submit annual reports to Congress on g-fees. The fees are intended to cover the costs Fannie Mae and Freddie Mac incur for guaranteeing the payment of principal and interest on single-family loans they purchase from mortgage lenders. Those fees cover projected credit losses from borrower defaults over the life of the loans, administrative costs, and a return on capital.
FHFA published a Request for Input in June 2014 seeking public input on a number of questions related to future guarantee fee policy and implementation. The input period ended on September 8, 2014, and FHFA is currently in the process of reviewing the submissions.
http://www.nationalmortgageprofessional.com/news67776/fhfa-g-fees-increase-average-51-bp-2013
21 mil. Vol. Power hour ahead
Fannie-Freddie Rise on Proposal to End U.S. Control
By Clea Benson and Alexis Leondis Nov 20, 2014 9:50 AM CT
South Dakota Democrat Tim Johnson is the first lawmaker to publicly say that regulators... Read More
Tim Johnson, the South Dakota Democrat who wrote a bill to eliminate Fannie Mae and Freddie Mac, sat in the walnut-paneled chambers of the Senate Banking Committee yesterday and said Congress might never get rid of the two companies.
Johnson looked at Mel Watt, the director of the Federal Housing Finance Agency who was testifying before the committee, and told him to terminate U.S. control of the two companies. That would end a six-year political battle over dissolving the two mortgage giants, giving them another chance to prove they can carry the home loan system as private companies.
“If Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship,” said Johnson, who is set to retire in December.
Shares of Fannie Mae and Freddie Mac are soaring on the news. After the hearing, Watt told reporters that he wouldn’t rule out talks with Treasury about ending conservatorship in the long term. Fannie Mae shares rose 6.4 percent to $2.48 as of 10:29 a.m. in New York. Freddie Mac increased 8 percent to $2.42.
Johnson is the first lawmaker to publicly say that regulators may have to take control of the companies’ futures. He echoes the predictions of housing analysts that there is no chance the Republican leadership taking over the Senate will reach an agreement with Democrats and President Barack Obama to reform a system that guarantees affordable mortgages to most Americans. That would leave the overhaul to Watt, who has already begun to make a series of changes, from streamlining operations to transfers of mortgage-bond risk to private investors.
“If we could get Congress to do something that would pass, it would be the best solution,” said Clifford Rossi, a finance professor at the University of Maryland’s Robert H. Smith School of Business in College Park. “But it’s clear that it’s highly unlikely, particularly after the midterm elections, that we’re going to get legislation again.”
Taxpayer Bailout
Fannie Mae (FNMA) and Freddie Mac, which buy mortgages and package them into bonds backed by a government guarantee, were seized by regulators in 2008 as losses on defaulted loans pushed them toward insolvency.
After a $187.5 billion taxpayer bailout, Fannie Mae and Freddie Mac rebounded and are now required to send the Treasury all of their profits. They’ve paid a combined $225.5 billion, which is counted as a return on the U.S. investment and not as repayment, leaving the government-sponsored enterprises without a legal avenue to exit conservatorship on their own. The U.S. government owns a 79 percent senior stake in the two companies.
The extent of Treasury and FHFA’s power to free Fannie Mae and Freddie Mac from government control is under debate.
Jim Parrott, a senior fellow at the Urban Institute and former housing-policy adviser to Obama, said Treasury and FHFA would need congressional approval to change the current system.
“They can do a great deal administratively to prepare for the eventual exit or the eventual wind-down, but it’s very difficult for them to take the final steps that you’d need to take to transition to the new system,” he said.
The fate of current shareholders in the two companies also likely rests with Congress, Parrott said.
Interim Steps
Rossi said his reading of the laws that created the conservatorship lead him to the opposite conclusion.
“Can the FHFA actually take action without Congress?” he said. “The answer to that is yes.”
Watt said Treasury would have to initiate talks with him if Congress isn’t able to come up with a solution. Treasury spokesman Adam Hodge said the Obama administration “continues to believe that the best way to responsibly end the conservatorship is through comprehensive housing finance reform legislation.”
Watt has been working with executives at Fannie Mae and Freddie Mac (FMCC) on interim steps to change the way mortgages are securitized and reduce the amount of risk backed by taxpayers.
The two companies, which back $5 trillion in mortgages, have been experimenting with deals in which they transfer a portion of their credit risk to private investors. They’ve completed $352 billion in such deals, Watt said yesterday.
Common Security
Fannie Mae and Freddie Mac each currently issue their own mortgage bonds. At the direction of the FHFA, they’re working on developing a single common security.
Those are necessary steps toward a future housing-finance system, said Julia Gordon, director of housing finance and policy at the Center for American Progress, a group affiliated with Democrats. Still, she said, only Congress can determine whether there will be a government guarantee if a new system is created or if Fannie Mae and Freddie Mac are allowed to become independent again.
“All of that can help reduce risk, but at the end of the day, if something happens --say there’s some external factor that tanks the economy -- is the government making good on these bonds or not?” she said.
Some of the strongest support for keeping Fannie Mae and Freddie Mac operating is coming from consumer advocates and civil-rights groups which see the companies as the best way to guarantee that low-income families and minorities have access to the mortgage market. Those groups helped stall the legislation winding down the two companies this year as they lobbied Democrats including Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio not to support it.
Private Label
In a letter to Watt on Nov. 18, they said they believed he could act without Congress to allow Fannie Mae and Freddie Mac to accumulate capital and unwind the conservatorship.
“Given the demise of GSE overhaul legislation on Capitol Hill, it is clear that any successful policy must involve strong leadership into the future by Fannie Mae and Freddie Mac,” Wade Henderson, president of the Leadership Conference on Civil and Human Rights, and Janet Murguia, president of the National Council of La Raza, wrote to Watt.
If there were more support for a private label market, Fannie and Freddie could be liquidated, said Patricia McCoy, a professor at Boston College Law School and former assistant director for mortgage markets at the Consumer Financial Protection Bureau. Since that isn’t likely, she said, the more realistic options are for Watt to end the conservatorship or keep things as is.
http://www.bloomberg.com/news/2014-11-20/regulators-urged-to-set-fannie-freddie-free-from-u-s-.html
When Will The Conservatorship Of Fannie (FNMA) And Freddie (FMCC) End?
Published: November 20, 2014 at 12:32 pm ESTBy: Troy Kuhn
Shares of the government-sponsored enterprises (GSEs), Fannie Mae (OCTCBB:FNMA) and Freddie Mac (OTCBB:FMCC), rallied 12% and 11%, respectively, in trade yesterday. This surge came after Senator Tim Johnson called for the end of the GSEs’ conservatorship.
Mr. Johnson, who chairs the Senate Banking Committee, targeted both the Federal Housing Finance Agency (FHFA) and Congress during yesterday’s SBC hearing. He urged the mortgage finance giants’ regulator, FHFA, to bring to an end the government’s control over the GSEs, if Congress fails to shake up the ailing real-estate space.
He acknowledged the efforts put in by the FHFA and its director Melvin L. Watt to revive the housing market, as well as their work to assist Fannie and Freddie. Mr. Watt was not convinced, however, that Congress would cooperate. But, he added, “conservatorship cannot continue forever.”
Mr. Watt believes the conservatorship might come to an end, contingent on Congress’ efforts to bring about reforms for Fannie and Freddie. He conceded that the discretion lies with the US Treasury, as the FHFA is involved in operating the GSEs.
The FHFA announced credit-easing policies last month, in the hopes of stimulating lending in the country. The GSEs reached agreement with various financial institutions to increase potential lending to borrowers.
The agreement included buyback conditions – instances where banks would be required to repurchase the loans doled out to Fannie and Freddie. Banks were also encouraged to employ a cautious approach while handing out loans.
Prior to this change, banks faced huge penalties from Fannie and Freddie in the event a loan went “bad,” triggering a buyback. As a result, several banks declined loans to less credit-worthy borrowers, further aggravating the country’s mortgage lending problem.
Moreover, the FHFA also eliminated the 20% down payment required for a loan. Mr. Watt claimed this down payment requirement could fall to as low as 3%.
Fannie and Freddie were bailed out by the Treasury in 2008, and have since been under conservatorship. The $187.5 billion bailout requires the GSEs to transfer all their profits to the Treasury. Some $225.5 billion has already been returned, but it is not clear when the conservatorship will end.
Despite Mr. Johnson’s optimism, and considering Congress’s easy-come-easy-go approach where the GSEs are concerned, an end to conservatorship doesn’t seem likely in the foreseeable future.
http://www.bidnessetc.com/29575-when-will-the-conservatorship-of-fannie-fnma-and-freddie-fmcc-end/1/
Fannie Mae and Freddie Mac Litigations Detailed Summary
by valueplaysNovember 20, 2014, 11:52 am
Fannie Mae and Freddie Mac Litigations Detailed by Todd Sullivan, ValuePlays
The following, courtesy of Peter Chapman outline all the major litigation regarding Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s and the conservatorship.
Enjoy…
Fannie Mae and Freddie Mac Litigation Summary
Litigation-Summary-112014
Continental Western says it’s not forum shopping and reminds the Court in Iowa that it is not bound by Judge Lamberth’s decision. Continental Western tries to differentiate it’s complaint from the complaints filed by Fairholme in the U.S. District Court for District of Columbia.
Continental-Response
Further, Judge Pratt has scheduled a hearing on the Government’s Motion to Dismiss Continental Western’s Complaint for 10:00 a.m. on Tues., Dec. 16, 2014, in Courtroom 265 of the U.S. Courthouse in Des Moines, Iowa.
This is good news as it least means, unlike Lambreth, Pratt is going to actually hear arguments (do his job) before rendering any type of decision.
Now, in order Pratt grant the government’s motion to dismiss on its grounds (Lamberth’s ruling), 5 factors must be met:
(1) the party sought to be precluded in the second suit must have been a party, or in privity with a party, to the original lawsuit; (2) the issue sought to be precluded must be the same as the issue involved in the prior action; (3) the issue sought to be precluded must have been actually litigated in the prior action; (4) the issue sought to be precluded must have been determined by a valid and final judgment; and (5) the determination in the prior action must have been essential to the prior judgment.
One can argue (4) and (5) either way but Continental was not a party to the Perry action before Lamberth, the actions, while similar, are not “the same” and in no way can anyone claim the issue “had been actually litigated”, Lamberth never even bother to hold a hearing on the issue.
Now, this is the courts so anything can happen but it unlikely Pratt dismisses based on Lamberth. Now, he may dismiss for alternative reasons (or he may not), but basing his action on Lamberth’s I’m skeptical of.
http://www.valuewalk.com/2014/11/fannie-mae-freddie-mac-litigation/