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low rates, rising inventories
By Ruth Mantell
Published: Nov 20, 2014 10:37 a.m. ET
WASHINGTON (MarketWatch) — Home sales in October rose to the fastest pace in a year, helped by cheaper mortgages and growing inventories, according to data released Thursday.
“Buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” said Lawrence Yun, chief economist at the National Association of Realtors.
The average rate for the popular 30-year fixed-rate mortgage has hovered near 4% since mid-October. Cheap mortgages make it easier for buyers to afford a home.
However, low loan payments alone won’t be enough to draw many more buyers in coming months. Home purchasers consider a wide variety of factors, such as their career prospects and their families’ needs. Many parents don’t want to move once the school year has started.
Prospective buyers also have to convince a lender to give them a mortgage, a challenge in the current strict credit environment, especially for young families and other first-time purchasers. Regulators are trying to encourage banks to make more loans, but analysts say federal efforts may only lead to a slight increase in credit access.
“We believe that mortgage activity in 2015 will be very similar to 2014,” said Doug Duncan, chief economist at federally controlled mortgage-finance giant Fannie Mae FNMA, +5.58% “The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted.”
In addition to more lending, the housing market is also dependent on a vibrant labor market that consistently adds a healthy number of jobs. Otherwise, the pace of the household formation will remain slow, with families and friends doubling up in homes to save money.
Next: Existing-home sales fastest since September 2013
Sales of existing homes rose 1.5% in October to a seasonally adjusted annual rate of 5.26 million, the highest level since September 2013, NAR said Thursday.
Economists polled by MarketWatch had expected the sales rate to decrease to 5.15 million in October from an originally reported 5.17 million in September. On Thursday NAR revised September’s pace to 5.18 million.
Longer-term trends also looked good: October’s pace of sales was up 2.5% from a year earlier — the first annual growth in a year.
As jobs, wages and the broader economy pick up, sales of previously-owned homes next year could hit the fastest pace since 2006, economists say.
Next: Existing-home prices rise 5.5% from last year
The median sales price of used homes hit $208,300 in October, up 5.5% from the year-earlier period.
Home prices are no longer posting double-digit annual growth rates, which should encourage more buyers to jump into the market. Home prices recently slowed to the slowest annual appreciation in two years, even as certain local markets hit fresh record highs.
Weaker price growth comes with positive and negative effects. On the plus side: Now that prices are slowing down, and mortgage rates are low, prospective buyers may see an opportunity.
On the negative side: It will take longer for equity to rise for owners, including those who are underwater (they owe more on a mortgage than their home is worth) and struggling with their payments.
Sales of the lowest-priced existing single-family homes were down in October from the prior year, while sales for higher-priced homes rose, according to NAR.
Next: Housing inventory trending higher
October’s inventory was 2.22 million existing homes for sale, a 5.1-month supply at the current sales pace.
In a trend that NAR said supported more sales, the number of homes on the market in October was up 5.2% from the year-earlier period. Rising home prices over the past year have encouraged and enabled more sellers to place their homes on the market.
http://www.marketwatch.com/story/home-sales-strongest-in-a-year-on-low-rates-rising-inventories-2014-11-20
FHFA Head Mel Watt Testifies Before The Senate On Fannie Mae Reform
by Michael IdeNovember 20, 2014, 10:42 am
Federal Housing Finance Agency (FHFA) chief Mel Watt testified in front of the Senate Banking Committee yesterday, and some Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) investors have seized on a statement from current committee chair Tim Johnson that Watt could end the conservatorship for hope of a change in direction. But Watt, consistent with previous statements, shows no inclination to take such bold action without Congressional direction.
Watt defers to Congressional authority on future of Fannie Mae and Freddie Mac
“There is only so much that can be accomplished while the enterprises are in limbo. Everyone agrees that the conservatorship cannot continue forever. So I hope my colleagues will keep working toward a more certain future for the market. However, if Congress cannot agree on a smooth or certain path forward, I urge you Mr. Watt to engage the Treasury Department in talks to end the conservatorship,” said Johnson.
Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) bull Dick Bove points out that Johnson is expected to retire soon, and regardless won’t be the committee chairman next year, so Democrats will have even less ability to set the agenda than they have in the last few years. Senator Richard Shelby, who’s expected to chair the banking committee next year, is thought to be hostile to the GSEs, and Bove would like to see the Democrats take action now.
“As is implicit in Senator Johnson’s statements [the Democrats] have the power to act without contacting Congress or Senator Shelby. The Housing and Economic Recovery Act (HERA) of 2008 explicitly gives (in fact requires) the FHFA to end the government’s conservatorship over the GSEs when these companies are healthy once again. They are clearly very healthy,” Bove writes. “The Democrats are able to restructure these two companies in any way that they choose at present.”
Many would dispute the idea that Watt has the authority to restructure Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) however he pleases, but the point is moot because he has said very clearly that he isn’t going to try. Asked by Senator Mike Crapo to affirm that FHFA isn’t trying to cement the “failed status quo” in place, 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.”
Watt’s balancing act between safety & soundness and access to credit
While Watt defers to Congress’s right to determine the future of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), he also wishes they get to it already. Asked by Senator Bob Corker to name the great risk that we are currently facing, Watt said that, “Over time, uncertainty about the future will have a greater and greater cost. Uncertainty in [the mortgage market] causes costs to go up and this results in higher costs to borrowers. And that has an impact on the economy because it slows down borrowers’ willingness to participate.”
He came back to this point repeatedly during testimony, explaining that lenders respond to uncertainty, whether it’s over the Warranty and Representation Framework or the future of Fannie Mae and Freddie Mac, with higher borrowing costs that directly affect the housing market (and therefore the rest of the economy).
As just one example of the balancing act that Watt is trying to pull off, when asked whether he would resume payments to the Housing Trust Fund, he said that he had heard from Senators both for and against the idea, and that’s not to mention the actual policy considerations.
“Walking the line between safety and soundness, and access to credit, that’s the space in which we operate. So there’s not a decision that I make or that we make at FHFA where there’s not that kind of balancing going on and there’s always a constituency on one side and the other,” said Watt.
http://www.valuewalk.com/2014/11/fhfa-head-mel-watt-testifies-senate-fannie-mae-reform/
Latest Updates on Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA)
by Kevin Townsend November 20, 2014
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) is moving up after bouncing off $2 support. The stock has been one of the most active and volatile stocks on the entire OTCBB market in recent months. Running from $0.30’s range to highs of $6.35 the stock has already shown us swings well over 2000%
FNMA recently dropped as Billionaire investors that included the likes of the iconic Carl Icahn, Bruce Berkowitz, John Paulson, David Tepper, and Bill Ackman claimed the government acted illegally by making FnF pay them all of their massive profits in the form of dividends; the so-called sweep amendment. More on this later.
Fannie Mae (OTC: FNMA) operates as a government-sponsored enterprise (GSE). The Company conducts business in the U.S. residential mortgage market and the global securities market. It supports market liquidity by securitizing mortgage loans, which means it places loans in a trust and Fannie Mae mortgage-backed securities backed by the mortgage loans are then issued.
Fannie Mae is the largest backer of 30-year fixed-rate mortgages in the Country. FNMA purchases and guarantees mortgages through the secondary mortgage market and pools them to form mortgage-backed securities (MBS). Institutions including insurance companies, pension funds and investment banks purchase its MBS.
Fannie Mae is one of two of the largest purchasers of mortgages on the secondary market. The other is the Federal Home Loan Mortgage Corp., or Freddie Mac. Both are government-sponsored enterprises (GSEs).
Back in 2008 at the height of the credit crisis, FnF were bailed out to the tune of $187.4 Billion and taken over by the federal government. The common stock which was slated to get nothing was delisted to the OTCBB where it initially began trading for $0.30 per share.
Federal National Mortgage Equity Analysis
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) opened trading today as $2.32 and is trading in the range of 2.07-2.58 today. Federal National Mortgage’s current market cap stands at $13.31 billion.
Federal National Mortgage mean target price is $2.00 according to First Call. This presents a downside to the current price of the equity. The Mean Recommendation sits at 4.0
The current quarter EPS consensus estimate is .45 with revenue estimates of 4.99 B. Sales are expected to grow at a 2.90% rate. Federal National Mortgage reported actual earnings last quarter of 0.68 which beats the .46 consensus estimate, a 47.80% surprise.
http://insidetrade.co/federal-national-mortgage-assctn-fnni-otcbbfnma/
MOASS....A big fannie squeeze coming.
Fannie=mo-ass...LOL
Yes but I think articles like this will be much less effective with real news and video and transcripts out there right now. It almost seems desperate like yelling into a screaming head wind that is getting stronger.
Morning Scan: Fed-Goldman Sachs Revolving Door?; Commodities Update
by Andy Peters
NOV 20, 2014 8:25am
Revolving Door?: More evidence has emerged of conflicts of interest involving the New York Fed and Goldman Sachs. This time it's an indication of a revolving door between the two institutions, in which an employee leaves one and quickly joins the other, bringing sensitive market information along for the ride. Goldman fired two workers after the bank learned that one had shared confidential information with his colleagues about the New York Fed's supervision of another bank (the Financial Times identified the institution only as "a small New York bank"). The two former Goldman workers were a junior-level investment banker who shared the information and a more-senior banker who didn't report the incident to his bosses. The junior banker, Rohit Bansal, who had only been working for Goldman for about 10 weeks after spending seven years at the New York Fed, worked in the financial institutions group and specifically covered regional banks. The other is Joseph Jiampietro, who previously worked as an adviser to Sheila Bair at the Federal Deposit Insurance Corp. Jiampietro's lawyer said his client did nothing wrong and shouldn't have been fired. Bansal may have received the information from a former colleague who still worked at the Fed. All the relevant authorities are jumping in to investigate possible criminal violations: the FBI, the U.S. Attorney's office in Manhattan, he FDIC and New York State Banking Chief Benjamin Lawsky. New York Fed President William Dudley is scheduled to testify before a Senate panel Friday about the accusation that it's far too cozy with the banks that it regulates.
Hazardous Holdings?: A confidential New York Fed report from 2012 says banks could lose up to $15 billion (in excess of insurance coverage) in the event of a catastrophic event involving commodities. That would be one unfortunate result of banks like JPMorgan Chase, Goldman Sachs and Morgan holding physical commodities. A Wall Street Journal story reports a Senate investigation found the banks held so much power they were able to influence the prices of the commodities they owned, and put the broader financial system at risk. The Fed report came out during a Senate investigation. Some lawmakers support the Fed's plan to restrict banks owning commodities.
RBS Fined: British regulators fined Royal Bank of Scotland about $88 million for a technology failure that in 2012 prevented millions of customers from accessing their accounts for weeks, the Financial Times, Wall Street Journal and New York Times all report.
Wall Street Journal
Potential good news for borrowers who are struggling to pay back student loans. Wells Fargo will lower interest rates for all eligible student loan borrowers starting this month. It's the first time Wells has made such a move. Discover Financial Services is considering doing the same starting next year and it may also forgive some of the balances for those borrowers who are having the most trouble making payments. PNC Financial Services Group earlier this year began lowering rates for some borrowers.
The Journal's "Heard on the Street" column weighs in on Federal Housing Finance Agency Director Mel Watt's appearance on Wednesday before the Senate Banking Committee. Watt seemed to indicate he has no intention of bringing Fannie Mae and Freddie Mac out of their conservatorship status. Watt said Congress needs to tell the FHFA what GSE reform should look like, but there's no consensus on Capitol Hill about reform. That's going to leave the two GSEs in a state of limbo, much to the chagrin of investors who want the FHFA to act now.
Some banks have decided it's OK to get involved in risky leveraged loan deals, while others have concluded it's better to sit out until clearer regulatory guidance emerges. The divergence of opinion is highlighted by the recent deal involving a potential private-equity takeover of Swiss packaging company SIG Combibloc.
http://www.americanbanker.com/bankthink/morning-scan-fed-goldman-sachs-revolving-door-commodities-update-1071323-1.html
Ouijatrade
Hank Greenberg Is Just Sayin’ That The Titanic Was A Hell Of A Nice Boat
By Jon Shazar
Knows from sinking ships.The former AIG chief may not testify in his lawsuit against the government for taking his company away, but he can’t stop the government from mentioning—as often as possible—that time he said that AIG was the Titanic and he was the deck-chair-rearranger-in-chief.
Repeatedly, Mr. Dintzer drew out testimony from Mr. Smith that he and Mr. Greenberg were concerned about AIG’s exposure to risk in the bond-insurance and investment areas. “Hank thought they took too much risk,” Mr. Smith agreed at one point. Mr. Smith said his own view was that “mistakes were being made” and the company’s results “were not as good as we thought they could have been….”
Also shown in court was a summer 2008 assessment of some of AIG’s problems worked up for Starr by Perella Weinberg Partners titled “Project Aurora Valuation Analysis.” Aurora was the code name for AIG. One section was headed: “The Roots of Aurora’s Decline.” It noted “Loss of leadership and performance culture” among other items.
http://dealbreaker.com/2014/11/hank-greenberg-is-just-sayin-that-the-titanic-was-a-hell-of-a-nice-boat/
I wonder if cnbc or fox will have anything positive to say.
$2.32 and 9.5 mil.vol.
It means we can celebrate at the Wynn.
3 Reasons to Buy Annaly Capital Management, Inc.
By Dave Koppenheffer | More Articles | Save For Later
November 19, 2014 | Comments (0)
Annaly Capital Management's (NYSE: NLY ) eye-popping 10.4% dividend yield is unquestionably attractive, but it's important to remember that a dividend is only as strong as the company supporting it.
That's why I dug into what factors are driving Annaly forward to find three of the best reasons to buy this high-yield stock.
3. Management
Mortgage real estate investment trust, or mREITs, are managed portfolios of debt. Because debt is far from exclusive to Annaly -- or any other company, for that matter -- who is managing that portfolio should be among your chief concerns.
I have had my issues with Annaly's management in the past, namely the exorbitant $35 million followed by $25.8 million in compensation CEO Wellington Denahan received in 2011 and 2012, a salary that 72% of shareholders took issue with. Annaly's response to investor concern was to externalize management.
The change has not significantly affected operations, but did change transparency and management incentives. For instance, management no longer has to disclose executive compensation, and instead of being paid for performance, management receives a flat 1.05% of shareholder equity. This means if management want to up their pay, all they need to do is issue new shares of stock.
However, none of my major concerns have come to fruition. While Annaly's management could sell new shares and increase their compensation, they haven't. In fact, over the first nine months in 2014, average total diluted shares outstanding are down 4.8% compared to the same time in 2013. Moreover, I would argue that performance-based compensation could encourage excessive risk taking, while earnings a flat fee incentivizes a more balance approach.
Lastly, and most importantly, whether or not you agree with how management is compensated, it is hard to argue with results. Since around 1997 Annaly has navigated through a number of difficult environments, and, according to Denahan, created a total return for shareholders "three times that of the S&P 500." Ultimately, investing with a management team that has proven its versatility is a big advantage.
2. Commercial real estate
Another one of management's highly criticized decisions was its move into commercial real estate with its acquisition of CreXus in January of 2013, an issue that has become more topical following its acquisition of 11 grocery-anchored shopping centers earlier this month.
The chief concern is that commercial real estate and debt is exposed to credit risk, while Annaly's bread and butter investment, residential mortgage-backed securities, is guaranteed against loss of principal. The company's strict focus on residential mortgages has served it well in the past, but I'm firmly of the opinion that diversifying efforts will make Annaly a more stable business in the long-term.
As shown in the chart above, equity REITs -- companies that invest in physical properties -- have been consistently strong over the past decade. In fact, despite the financial crisis from 2007 to 2009, equity REITs' collective market cap is up more than 2200% since 1993.
Also, Annaly's commercial investments can earn yields of over 9%, three times the yield on residential mortgages. Lastly, Annaly will keep commercial investments to 25% of equity or less. This gives Annaly the ability to seize new opportunities without straying away from what it does best.
1. A need for private capital
The best long-term investments are in companies that fill a void; and up until recently I was not sure how Annaly fit into the larger picture. But that has changed.
In a roundtable discussion conducted by Andrew Davidson & Co. in 2012, it was suggested that "There are currently about $10 trillion dollars of mortgages outstanding. Fannie Mae and Freddie Mac currently bear the credit risk of almost 50% of those loans."
As government sponsored entities, GSEs, taxpayers are on the hook for significant credit losses taken by Fannie Mae and Freddie Mac. For that reason, the FHFA has made it a top priority to "reduce taxpayer risk by increasing the role of private capital in the mortgage market."
Unfortunately, the original credit-risk sharing deals designed to solve this problem were not direct investments in real estate, and therefore not a good fit for Annaly. But according to Annaly's head of agency portfolio David Finkelstein, this is changing, and "now it's on the radar."
Moreover, Annaly's president, Kevin Keyes, noted that "[W]hen you see the latest risk sharing deals that are getting done... we just think that it's going to grow and... I think there is a big opportunity for us in our industry."
Also, through the Federal Reserve's massive bond buying program (quantitative easing), the Federal Reserve is currently holding $1.7 trillion in mortgage-backed securities. This creates two separate, and yet equally massive, forces with the same need. Whether it is Fannie Mae and Freddie Mac looking to reduce credit risk, or the eventual shrinking of the Federal Reserve's balance sheet, there will be a long-term need for private capital, like Annaly, to fill the void.
http://www.fool.com/investing/dividends-income/2014/11/19/high-yield-stocks-3-reasons-to-buy-annaly-capital.aspx
The mad sell off has us up to $2.11
Warren And Warner Call for Action on Housing Finance Infrastructure
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Wednesday, November 19, 2014
Patrick Sargent, GoLocal Worcester Contributor
On Tuesday, Senator Elizabeth Warren, D-Massachusetts, and Senator Mark Warren, D-Virginia sent a letter to Melvin Watt, Director of the Federal Housing Finance Agency (FHFA) highlighting six areas where the FHFA can improve their regulations and overall performance.
The six areas the senators addressed included developing single security for Fannie Mae and Freddie Mac securities, developing regulations of these securities that would guarantee loans, and updating the credit scoring models these companies use. Also, continued experimentation in risk-sharing programs, making the Common Securitization Platform transparent and efficient, and improving the First Look Program.
In the letter, the senators said, "While we applaud FHFA for developing this program, we believe there are ways to strengthen it. We ask you to consider whether there are ways to further encourage purchases by owner-occupants, such as increasing the amount of time they have to bid on such properties or lowering the prices of the homes during the First Look period.
"Millions of credit worthy families are struggling to get mortgages and buy a home," said Senator Warren. "We believe FHFA can use its existing authority to extend credit to responsible families and, at the same time, prepare the housing finance system for the end of government conservatorship."
"While we work in Congress to pass comprehensive housing finance reform, we are asking FHFA to move responsibly and transparently as they lay the foundation for a system that better protects taxpayers and improves access to credit for homeowners," said Senator Warner.
The letter expressed the need for comprehensive reform. The senators stated, "We believe that the government conservatorship of Fannie Mae and Freddie Mac (the Enterprises) is not a long-term solution to provide access to mortgages, and that Congress should enact comprehensive housing finance reform. However, we also believe that, in the interim, the Federal Housing Finance Agency (FHFA) can and should take steps to build a housing finance infrastructure for the future, enhance the role of private capital in the agency mortgage-backed security (MBS) market, and responsibly increase access to mortgage credit."
http://m.golocalworcester.com/news/warren-and-warner-call-for-action-on-housing-finance-infrastructure
Fairlight Capital Pushes Back Against WSJ Valuation On Fannie Mae
Nov. 19, 2014 2:34 AM ET
The long thesis on Fannie Mae rests on the idea that if shareholders can get rid of the US Treasury's full income sweep, then the common stock price could increase five-fold, ten-fold or even more depending on who you ask. So when Jay Carney at the Wall Street Journal did his own valuation of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCQB:FNMA) assuming that the full income sweep would come to an end but still came up with essentially zero valuation, it ruffled a few feathers.
"Under what we believe are reasonable assumptions for commitment fee charges, regulatory capital levels, preferred redemption scenarios and under very conservative growth rates, Fannie Mae shares we estimate are worth $7.11 at an absolute minimum and at current prices offer possible gains of more than 250% or more," writes Fairlight Capital in a November 13 report.
Pricing Fannie Mae as a zero stock
Carney's valuation highlights the importance of three factors that have nothing to do with the controversial third amendment (full income sweep). First, even if Fannie Mae / Federal National Mortgage Assctn Fnni Me doesn't have to pay all of its profits to Treasury it's still on the hook for a 10% dividend and if the sweep were to be reversed it seems reasonable that Fannie Mae would still have to pay dividends for last year's high, mostly non-recurring, profits. Second, if Fannie Mae is going to start operating as a private company it is going to have to set aside some amount of regulatory capital, which Carney sets at 5%. Finally, after paying the ongoing 10% dividend to Treasury and building up its regulatory capital, the government is still entitled to take a 79.9% stake in Fannie Mae, leaving the current common stockholders with about 20% of profits, which Carney figures leaves a value of about $0.15 per diluted share (currently $2.05). Take the position of junior preferred shareholders into account as well, and Fannie Mae common stock looks pretty bad.
Fairlight's three objections to Carney's valuation
Fairlight, which is long on Fannie Mae / Federal National Mortgage Assctn Fnni Me, takes issue with three parts of Carney's valuation. It believes that Fannie Mae can grow faster than 2% over the next five years, which may be true but is difficult to forecast. Its other two objections, however, seem overly optimistic. Fairlight thinks that investors should assume that Fannie Mae will only have to set aside 2.5% regulatory capital because it's more like an insurance company than a bank. But right now there are no specific rules governing systemically important insurance companies, and it's hard to imagine that Fannie Mae, with its multi-trillion dollar portfolio, will get off much easier than SIFI banks.
Finally, Fairlight thinks that Fannie Mae / Federal National Mortgage Assctn Fnni Me might be able to redeem the senior prepared stock back from Treasury, but this really shows why the long case looks so stretched. Treasury has been a political opponent of Fannie Mae's for a long time, well before the US financial crisis, and has a clearly stated goal of winding down both Fannie Mae and Freddie Mac / Federal Home Loan Mortgage Corp (OTCQB:FMCC). For Fairlight's thesis to make sense it has to both win in the courts and then overcome years of hostility against the idea of a private corporation with a government mandate.
http://seekingalpha.com/article/2694205-fairlight-capital-pushes-back-against-wsj-valuation-on-fannie-mae
HUD chief sees support to eliminate Fannie, Freddie
What B.S. This is. 11/18/2014 | Hill, The
U.S. Housing and Urban Development Secretary Julian Castro says the Congress that takes office in January could reduce and eventually eliminate Fannie Mae and Freddie Mac as part of an effort to reshape the mortgage-finance system. Housing-finance reform, including abolishing the two mortgage giants, has bipartisan support, he said.
View Full Article in:
Hill, The
http://www.smartbrief.com/11/18/14/hud-chief-sees-support-eliminate-fannie-freddie#.VGs0rShMFEI
Spin drs. R up early today. Read this. HUD secretary says housing finance reform remains a top priority for the Obama administration
By Vicki Needham - 11/17/14 06:29 PM EST
HUD Secretary Julian Castro said Monday that overhauling the mortgage finance system remains a top priority for the final two years of the Obama administration.
Castro suggested that the next Congress consider legislation that would wind down and eventually eliminate mortgage giants Fannie Mae and Freddie Mac as part of the effort to boost the housing market's recovery.
"This could be, I believe, a good victory either in the lame-duck session or, more realistically, perhaps in the next term of Congress where there is bipartisan support for housing finance reform, for doing away with Fannie and Freddie as we’ve known them, creating a backstop," he told Bloomberg Television.
The Senate has generated two bipartisan bills, including one by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho) that gained approval by the panel in May.
But, since then, there has been little movement to get a bill through Congress. "Introducing more private capital into the market and taking the taxpayers off the hook if we do ever experience what we just went through as part of the housing crisis in 2007, 2008, 2009, that is a priority this administration and for HUD," Castro said.
During the interview, Castro also expressed concerns about potential home buyers struggling to qualify for mortgages.
"If a few years ago, it was too easy to get a home loan and today what we see out there is that for many everyday Americans who are responsible and hardworking it's too difficult to get a home loan," he said.
"Then the question is where is the pendulum best placed? Can we get the pendulum right in the middle where it belongs with a balance of ensuring that we don't slide back to where we were and also ensuring there is good access to credit for Americans who are ready and responsible to buy a home."
He also discussed Monday's report showing that the Federal Housing Administration's financial picture had improved in the past year, and the agency is finally out of debt for the first time in two years.
"The underlying fundamentals of the portfolio of the fund are stronger than they have been in quite a while," Castro said.
Still, the agency has more progress to make.
Castro said that the FHA's insurance fund should reach the congressionally mandated 2 percent capital requirement in 2016.
When asked about whether more changes are in the offing to improve its balance sheet, Castro said it would be premature to announce when the FHA might be able to lower fees and premiums, which are at a record high.
"That analysis has not yet been done," he said.
"We just got this annual report, and so we’ll be taking the time to do the due diligence that is part of answering that question."
He said that while trying to ensure that the agency's finances remain in good shape, the FHA needs to fulfill its role to ensure that first-time home buyers and middle-income buyers have sufficient access to credit.
"It’s all about striking that balance, and those are the questions that, going forward, we’re going to be putting a lot of time and effort to continually analyzing," he said.
http://thehill.com/policy/finance/224429-hud-secretary-says-housing-finance-reform-is-top-item-for-obama-administration
Exclusive: Gov’t Attorneys Pulled Greenberg on Testimony Concerns
By Liz Claman
Liz Vision
Published November 17, 2014
FOXBusiness
Maurice Hank Greenberg, Hank Greenberg, Maurice Greenberg
Reuters
Justice Department attorneys abruptly erased former (AIG) CEO Maurice “Hank” Greenberg -- a central figure in the case -- from its Starr v. U.S. witness list on concerns Greenberg’s testimony might possibly erode their defense.
Sources close to the matter tell the FOX Business Network that government attorneys in the $40 billion taxpayer-funded bailout lawsuit were weighing the benefits of putting Greenberg on the stand when they decided to pull him. The concern, these sources say, was that when cross-examined by his own attorney David Boies, Greenberg might be given a chance to articulate what he has maintained was a private -- not taxpayer-funded -- solution to the AIG liquidity crisis.
The trial now in its eighth week centers on Greenberg’s assertion that the government unconstitutionally seized equity in the faltering insurance giant during the 2008 bailout, imposed onerous interest rates as high as 12% on AIG for political reasons, and in turn, Greenberg alleges, destroyed billions in shareholder value.
Sources tell FOX Business that Justice Department attorneys were focused on the potential that the 89-year-old insurance executive would testify that he tried “multiple times” during the financial crisis to reach former Treasury Secretary Henry Paulson and Timothy Geithner, who was then head of the New York Federal Reserve, to offer private solutions to AIG’s liquidity problem.
If Greenberg were to have taken the stand in Federal Claims Court, he would have likely been asked to specifically outline what type of private market solutions he had at the ready as the insurance giant faced a massive liquidity crunch during the financial crisis. Sources said government attorneys would have tried to highlight holes in Greenberg’s assertion that he had the ability on short notice to cobble together a private equity bailout with the help of foreign sovereign wealth funds that included China and Singapore.
The government was also expected to press him on the validity and timeliness of his private bailout solutions. Concerns swirled at the time of the bailout that if AIG were to fail, it would systemically harm Goldman Sachs and other banks whose major investments in certain derivatives were insured by AIG.
However, last week shortly after FOX Business reported on potential strategies for both sides, the Justice Department removed Greenberg from its witness list. A spokesperson told FOX Business late Friday that Greenberg would not be on the witness list this week either.
Government lawyers are expected to rest their case as soon as Friday. Sources say presiding Judge Thomas Wheeler is expected to set a date for closing arguments shortly thereafter. A written opinion in the case may come during the first quarter of 2015.
The Justice Department and Greenberg’s attorney David Boies declined to comment on the case.
http://www.foxbusiness.com/economy-policy/2014/11/17/exclusive-govt-attorneys-pulled-greenberg-on-testimony-concerns/
FHFA’s Watt to go before Senate Banking Committee
by MPA | Nov 17, 2014
Mel Watt, director of the Federal Housing Finance Agency (FHFA), will testify in front of the Senate Banking Committee this Wednesday. The appearance will be one of the first times that Watt, a former Democratic lawmaker, has been before Congress as the director of the FHFA since he took over the job in January.
The FHFA director is expected to defend his proposal on expanding credit, including the 3% down payment plan, in front of Congress, while looking to gain supporters. However, Watt does have the authority to offer the loans without congressional approval.
In a speech at the annual Mortgage Bankers Association convention in Las Vegas last Month, Watt said Fannie Mae and Freddie Mac have reached an agreement with lenders that better define bad practices that would trigger penalties for lenders.
The clarification is part of a broader push to unlock tight credit after lenders had to repurchase billions of dollars of bad mortgages they sold to Fannie Mae, Freddie Mac and private investors. Currently, Americans are experiencing the tightest credit market in 16 years, which lenders have blamed on penalties.
Watt has received both criticism and praise for his plan. Issac Boltansky, an analyst at Compass Point Research & Trading LLC in Washington, described the situation to Bloomberg News as a lose-lose. “Is there a nice way to say, he’s damned if he does and he’s damned if he doesn’t?”
http://www.mpamag.com/mortgage-originator/fhfas-watt-to-go-before-senate-banking-committee-20318.aspx
This is off topic but it is funny as hell when always wondering is talking to don't understand. (Just the names)
The time on the article says 3:59 p.m. see my post also. I copied and pasted it
Bloomberg correction here
Fairholme Limits Fannie-Freddie Disclosures in Filing
By Zachary Tracer Nov 17, 2014 3:59 PM CT
(Corrects headline and first sentence of story published Nov. 14 to remove reference to Fairholme selling Fannie Mae and Freddie Mac common securities.)
Bruce Berkowitz’s Fairholme Capital Management LLC limited disclosures about the firm’s common and preferred stakes in Fannie Mae and Freddie Mac.
The investment firm opted to stop disclosing its holdings in the companies because U.S. Securities and Exchange Commission rules don’t require them to be listed, the firm said in today’s Form 13F filing.
Fairholme’s investments in Fannie Mae and Freddie Mac were concentrated in the preferred securities, previous filings show. Investments in the firms accounted for about 15 percent of the portfolio at Berkowitz’s main Fairholme Fund, according to a July 29 letter.
Investors in Fannie Mae and Freddie Mac suffered losses after losing a legal bid to force the bailed-out companies to share profits with private holders. The $7.85 billion Fairholme Fund fell 5.7 percent in the third quarter, its worst decline since 2011.
“We remain steadfast in our belief that -- at a minimum –- shareholders are due just compensation,” Berkowitz said in a letter to investors dated Oct. 1 about the Fannie-Freddie stake. “We will continue to pursue our legal rights.”
Fannie Mae common shares lost 31 percent in the quarter to $2.69, while Freddie Mac common stock declined 32 percent to $2.64.
Berkowitz’s Miami-based firm exited a stake in Genworth Financial Inc. (GNW) in the third quarter, today’s filing shows, sidestepping a November plunge in the insurer’s shares. Fairholme owned about 1.1 million Genworth shares at the end of June.
Money managers who oversee more than $100 million in equities in the U.S. must file a Form 13F within 45 days of each quarter’s end to list those stocks as well as options and convertible bonds. The filings don’t show non-U.S. securities, holdings that aren’t publicly traded, or cash.
http://www.bloomberg.com/news/2014-11-14/fairholme-exits-fannie-freddie-common-limits-disclosures.html
I don't know about anyone else but I post about AIG because of it's relevance to fnf. I posted the Berk article because it references FnF stock that he sold.
Bruce Berkowitz Buys Chesapeake, BP and New York Community Bancorp
By Holly LaFon - 45 seconds ago
About FAIRX, AIG, BP, NYCB, CHK, BAC
Bruce Berkowitz (Trades, Portfolio)’s Fairholme Fund (Trades, Portfolio) (FAIRX) gained 8.72% in the first half of 2014, compared to 7.14% for the S&P. He has beat the index 499.01% versus 76.43% since inception in 1999.
Berkowitz still has the majority of his fund invested in American International Group (AIG) and Bank of America (BAC). In the third quarter, he sold out many of his Fannie Mae and Freddie Mac positions.
His latest new reported positions for the third quarter are: Chesapeake Energy Corp. (CHK), BP Plc (BP) and New York Community Bancorp Inc. (NYCB).
Chesapeake Energy Corp. (CHK)
Berkowitz purchased 536,900 shares of Chesapeake Energy Corp., a 0.17% portfolio position. Shares of the company cost on average $26 in the third quarter.
1416239401974.png
Chesapeake Energy Corp was incorporated in Oklahoma in 1989. Chesapeake Energy Corp has a market cap of $15.46 billion; its shares were traded at around $23.25 with a P/E ratio of 29.80 and P/S ratio of 0.80. The dividend yield of Chesapeake Energy Corp stocks is 1.50%.
BP Plc (BP)
Berkowitz purchased 54,000 shares of BP Plc for 0.033% of his portfolio. The share price average was $48.
1416239484340.png
BP PLC provides energy products and services. The Company is the parent company of the BP group of companies. BP Plc has a market cap of $123.69 billion; its shares were traded at around $40.53 with a P/E ratio of 16.90 and P/S ratio of 0.40. The dividend yield of BP Plc stocks is 5.70%. BP Plc had an annual average earnings growth of 1.70% over the past 10 years.
New York Community Bancorp Inc. (NYCB)
Berkowitz purchased 148,000 shares of New York Community Bancorp in the third quarter, for 0.032% of his portfolio. The share cost average was $16.
1416239573311.png
New York Community Bancorp Inc., formerly Queens County Bancorp Inc. was established in 1859 and was organized under Delaware Law. New York Community Bancorp Inc. has a market cap of $6.99 billion; its shares were traded at around $15.80 with a P/E ratio of 14.80 and P/S ratio of 5.30. The dividend yield of New York Community Bancorp Inc. stocks is 6.30%. New York Community Bancorp Inc. had an annual average earnings growth of 2.10% over the past 10 years.
http://m.gurufocus.com/news_read.php?id=293323
J.P. Morgan Deal Maker Lee to Take Stand in Greenberg’s AIG trial
By
Leslie Scism
CONNECT
Another top Wall Street deal-maker is poised to testify in the trial over the bailout of American International Group Inc.AIG +0.17%, providing additional detail about the frenzied and ultimately unsuccessful efforts to find a private-sector lifeline for the company.
The government has told the court that it expects this week to call James B. Lee Jr., vice chairman of J.P. Morgan Chase JPM +0.18% & Co, long one of the most prominent bankers in the mergers-and-acquisitions world. He could take the stand as early as this afternoon, people familiar with the matter said.
Associated Press
Mr. Lee is expected to testify about efforts by J.P. Morgan to help AIG line up private-sector financing in the several days before the company accepted what turned out to be one of the government’s biggest bailouts of the 2008-09 financial crisis. The rescue, which has been fully repaid, reached nearly $185 billion at its peak.
The judge at the bench trial in the U.S. Court of Federal Claims in Washington, D.C., already has heard from other bankers–including John Studzinski, a Blackstone Group LPBX +0.17% senior managing director–who were involved in the deal-making efforts.
The testimony has been entertaining at times. Asked if he was present at the AIG board meeting where the bailout was voted on, Mr. Studzinski answered: “What sort of advisor do you think I am? I was present in person. Oh, my God, shocking questions.”
The lawsuit was brought in 2011 by Maurice R. “Hank” Greenberg, who built AIG into a global powerhouse over nearly four decades as its chief executive until his departure in 2005. His Starr International Co. investment firm was AIG’s biggest shareholder at the time of the bailout.
The suit maintains the government didn’t have legal authority to take an equity stake in AIG, among other alleged improper aspects of the takeover. The deal-making activity is relevant because Mr. Greenberg contends that the government coerced AIG’s board into accepting the bailout by trying to quash private-sector opportunities. Its purported motive was to control the company and use it as a vehicle for funneling money to AIG’s counterparties on Wall Street and overseas in “backdoor bailouts.”
http://blogs.wsj.com/moneybeat/2014/11/13/j-p-morgan-dealmaker-lee-to-take-stand-in-greenbergs-aig-suit/
Gov't to Rest Case Friday Without Calling Greenberg in AIG Bailout Trial
By Liz Claman
Liz Vision
Published November 16, 2014
FOXBusiness
Hank Greenberg
Reuters
Department of Justice lawyers will rest their case in the $40 billion Starr v. U.S. lawsuit without calling to the stand former (AIG) chief Maurice "Hank" Greenberg, the man at the center of the case, the FOX Business Network has learned.
Sources tell the FOX Business Network that the government will finish calling witnesses and rest its case by Friday, although these sources also said that while unlikely, government lawyers could possibly stretch out their case to the day before the Thanksgiving holiday.
The trial now entering its eighth week swirls around Greenberg’s assertion that the government unconstitutionally seized equity in the faltering insurance giant during the 2008 taxpayer-funded bailout, imposed onerous interest rates on AIG for political reasons, and in turn, Greenberg alleges, destroyed billions in shareholder value. Greenberg filed the case on behalf of some 300,000 AIG shareholders, employees and retirees.
Witness names to be called next week were provided to FOX Business late Friday by the Justice Department. While Greenberg was on the government witness list last week, he was abruptly pulled after a FOX Business report articulating potential legal strategies on both sides of the case. Greenberg had flown to Washington D.C. to appear in Federal Claims Court after having been notified by the Justice Department that he was on the witness list.
FOX Business had exclusively reported that Greenberg would be asked by government attorneys to specifically outline what type of private market solutions he had at the ready as the insurance giant faced a massive liquidity crunch during the financial crisis.
Sources close to the matter said government attorneys would attempt to poke holes in Greenberg’s assertion that he had the ability on short notice to cobble together a private equity bailout with the help of foreign sovereign wealth funds that included China and Singapore. The government was also expected to press Greenberg on the validity and timeliness of his private bailout solutions.
Throughout the trial, Greenberg’s attorney David Boies has hauled central figures to the stand, from former Federal Reserve Chairman Ben Bernanke to former Treasury Secretaries Henry Paulson and Timothy Geithner. All three witnesses testified time was of the essence in the bailout to avoid a liquidity crunch and market loss of confidence.
Neither Boies’ office nor the Justice Department would comment on the timing of when the case might conclude. Legal experts say the verdict will be a historic one, closely watched by Wall Street, taxpayers and the U.S. government.
http://www.foxbusiness.com/economy-policy/2014/11/16/govt-to-rest-case-friday-without-calling-greenberg-in-aig-bailout-trial/
How Will FHA Answer Fannie Mae’s High LTV Loans?
by Michael IdeNovember 17, 2014,
http://www.valuewalk.com/2014/11/will-fha-answer-fannie-maes-high-ltv-loans/
I paid my money and I am staying on the ride.
Do they have all of these helpful and enjoyable pop ups at investors unite to slow down the web site?
Do you think that maybe since the disclosures are not required maybe Fairholme is using this strategy to accumulate more FnF as capital is freed up? They could do it quietly over time while the shares are cheap. Public knowledge of large purchases would have an immediate positive effect on share price and they would pay more over time as capital in the fund is freed up. Does this make sense or do the hedge funds keep large amounts of cash on hand for large purchases? I wouldn't think that they would be sitting on a pile of cash since it wouldn't be making them any more money.
Are Housing Regulators Quietly Dropping Their Opposition to PACE?
PACE and Mortgages and Housing Energy
The Federal Housing Finance Agency, the government entity responsible for regulating America's multi-trillion-dollar secondary mortgage market, is reportedly easing its opposition to local programs that allow homeowners to pay for renewable energy and efficiency retrofits through their property taxes.
That's according to a report from Asset-Backed Alert, an industry publication that covers securities markets. The publication reports that the Federal Housing Finance Agency (FHFA) has reached deals with lenders that will permit Fannie Mae and Freddie Mac, the nation's two biggest housing underwriters, to purchase mortgages for homes participating in property-assessed clean energy (PACE) programs.
For the past four years, FHFA has been publicly opposed to underwriting mortgages for homeowners that have received PACE loans. The agency says municipal PACE loans are too risky for Fannie and Freddie because they must be paid back first if a homeowner defaults.
However, after five years of experience, there is no evidence that PACE has increased the risk of default.
Matt Birkbeck, a reporter with Asset-Backed Alert, described the agency's softening stance:
The Federal Housing Finance Agency has reached an agreement with several mid-size lenders that will allow Fannie and Freddie to buy mortgages on homes encumbered by liens booked under the property-assessed clean energy (PACE) program, so long as the mortgage lenders agree to repurchase any of the home loans that default. The FHFA, which declined to comment, has yet to officially adopt the policy.
PACE obligations enjoy first-lien status in most states, rendering municipalities first in line to be repaid -- ahead of the mortgage agencies -- in the event of mortgage default. Specifically, Fannie and Freddie have been refusing to buy mortgages that refinance homes with PACE liens or mortgages financing the purchase of homes with PACE loans taken out by previous homeowners.
One industry source said the FHFA “surprised a lot of people” by agreeing to allow purchases of mortgages on homes with PACE liens.
So far, 31 states have passed legislation enabling PACE financing, despite the fact that FHFA’s longstanding position curtailed the development of the program.
When asked by Greentech Media if FHFA has changed its position, a spokesperson for the agency was blunt: "We have not changed our policy at all."
The Asset-Backed Alert story does not conclude that regulators have officially changed their policy. Rather, it seems the agency is moderating its position behind the scenes -- as long as other lenders are willing to bear the risk of taking on mortgages that are part of PACE programs.
Birkbeck reaffirmed his reporting: "They do have agreements with several lenders. We are confident in our sources."
FHFA's public opposition to PACE initially slowed growth of these programs, which allow homeowners to finance an energy efficiency retrofit or renewable energy installation over twenty years through their property taxes. Many communities worried that FHFA would redline them if they expanded PACE offerings.
But in the last year, communities throughout California, Connecticut, Florida and New York have started offering PACE loans in record numbers. The wave of defaults feared by FHFA has not hit Fannie and Freddie, and the agency has not penalized communities for creating PACE programs.
"There have been many thousands of projects completed since 2008. There's no evidence that PACE has caused defaults," said Cisco DeVries, CEO of Renewable Funding, a PACE administrator based in California.
In California, where residential PACE has expanded fastest, the government created a $10 million loan-loss reserve in order to back any defaults that might threaten mortgage lenders. Although the fund did not fully alleviate FHFA's concerns, it was part of an ongoing effort to lower any risks from PACE faced by Fannie and Freddie.
Now, according to Birkbeck, some mid-sized lenders appear willing to take that risk on themselves by agreeing to repurchase mortgages that go into default.
J.P. McNeill, the CEO of Renovate America, California's largest PACE administrator, said that he "could neither confirm or deny" whether FHFA had changed its relationships with lenders supporting PACE-tied mortgages. But he did say that such a shift would make sense, given the spread of PACE programs across the country.
"It's not necessarily a change in policy. I view it as FHFA evaluating another alternative in which risk is absorbed by some other entity," said McNeill. "If the risk can be borne by the lender, then Fannie and Freddie can avoid it."
http://theenergycollective.com/stephenlacey/2154946/are-housing-regulators-quietly-dropping-their-opposition-pace
Fannie-Freddie Regulator’s 3% Down Loans Draw Jeers
By admin on Friday, November 14th, 2014 | No Comments
Mel Watt, director of the Federal
Housing Finance Agency, has set off a political tempest.
The cause: 3-percent down mortgages.
Watt, who oversees Fannie Mae and Freddie Mac, unveiled his
plan in late October to allow the companies to back mortgages
with down payments as low as 3 percent. Republican lawmakers and
some industry executives are lambasting the change as an
irresponsible opening of the credit floodgates.
The blowback shows the pressure Watt faces in his effort to
expand homeownership six years after defaults on subprime loans
set off the financial crisis. Watt said low down-payment loans
are a safe way to help families with healthy incomes and meager
savings buy homes. Jeb Hensarling, chairman of the House
Financial Services Committee, said Watt’s plan is a return to
the policies that caused the housing crash.
Watt’s proposal is “an invitation by government for
industry to return to slipshod and dangerous practices that
caused the mortgage meltdown in the first place and wrecked our
economy,” Hensarling said in a statement last week. The
initiative “must be rejected.”
Fannie Mae (FNMA) and Freddie Mac, which purchase about two-thirds
of new home loans and package them into bonds, currently allow
down payments as low as 5 percent. Fannie Mae accepted 3 percent
down as recently as last November before increasing the
requirement as part of a tightening of its underwriting
standards. Taxpayers bailed out the two companies in 2008.
‘Narrow Effort’
Watt, 69, told bankers in Las Vegas that the return to 3
percent down is a “narrow effort” to bring more Americans,
especially minorities, into the housing market. Watt said his
plan will help those who “experienced record loss of wealth
during the financial crisis as a result of abusive mortgage
products, the economic downturn, and other factors.”
The U.S. homeownership rate has fallen to 64.4 percent from
69.2 percent in 2004 as blacks, Hispanics and first-time buyers
struggle to get loans. Lenders have tightened standards after
paying tens of billions of dollars in settlements of mortgage-related lawsuits for underwriting errors.
Douglas Yearley, chief executive officer of homebuilder
Toll Brothers Inc. (TOL), called Watt’s proposal “a really dumb”idea
during a conference in late October.
Peter Wallison, a fellow at the American Enterprise
Institute and former Treasury official during Ronald Reagan’s
presidency, wrote a Nov. 4 article criticizing the decision that
was published in newspapers such as the Wall Street Journal and
the Palm Beach Post.
Taxpayer Bill
“Since the taxpayers are still standing behind Fannie and
Freddie, it’s clear who will have to pay the bill when these
mortgages default in the future,” Wallison wrote.
Fannie Mae CEO Timothy J. Mayopoulos, responding to
critics, told reporters that mortgage rules enacted as part of
the 2010 Dodd-Frank act ensure the safety of 3 percent down
loans. They will still have to conform to the qualified mortgage
rule, which offers lenders protection from legal liability only
if borrowers spend no more than 43 percent of their income on
debt. The rule also penalizes lenders for risky features such as
balloon payments or interest-only payments.
During a Nov. 7 speech in New Orleans, Watt pointed out
that borrowers will need to meet extra requirements, such as
debt counseling or stronger credit histories, than are needed
for loans with larger down payments.
“The guidelines for these loans will be targeted in their
scope and will include standards that support safety and
soundness,” he said.
Negligible Risk
Laurie Goodman, director of the Housing Finance Policy
Center at the Urban Institute in Washington, said Watt’s move is
an important first step in expanding credit. A study of Fannie
Mae data by Goodman and other researchers found that credit
scores had more bearing than the size of the down payment on
whether borrowers defaulted.
The study concluded that allowing loans with down payments
between 3 percent and 5 percent is likely to have a
“negligible” effect on mortgage risk. These loans made up only
about 1 percent of Fannie Mae originations when they were
previously allowed.
Private mortgage insurers support the 3-percent down loans,
said Rohit Gupta, chief executive officer of Genworth Mortgage
Insurance and co-chair of U.S. Mortgage Insurers. Borrowers are
required to obtain insurance when they put less than 20 percent
of the purchase price down on Fannie Mae and Freddie Mac loans.
“Fully documented, low down-payment loans with the right
credit score and right debt-to-income ratio have performed in
this cycle,” Gupta said. “We have empirical data that those
loans can be insured.”
Camel’s Nose
Most lenders will welcome the loans as well, said Dave Stevens, CEO of the Mortgage Bankers Association in Washington.
“These loans will be underwritten more conservatively and
will likely come with higher mortgage insurance costs,” Stevens
said. “History has shown that these loans, when properly
underwritten, perform well.”
Mark Calabria at the Cato Institute said there’s no
guarantee that lending will be confined to borrowers with the
highest credit scores on the scale set by the Fair Isaac Corp. (FICO),
or FICO.
“This is just the camel’s nose under the tent,” said
Calabria, a former congressional staff member. “You start with
low down payments for high-FICO borrowers, which you can do
safely, and it erodes over time. It’s disingenuous or naive to
say it’s going to remain with high-FICO borrowers.”
Cut Principal
While Watt fends off these criticisms, he’s also under
pressure from consumer groups, which are calling on him to ease
credit even further. The National Community Reinvestment
Coalition and the Center for American Progress are urging him to
cut the principal on loans for troubled borrowers, and increase
lending in inner-city neighborhoods.
“Is there a nice way to say, he’s damned if he does and
he’s damned if he doesn’t?” said Issac Boltansky, an analyst at
Compass Point Research Trading LLC in Washington.
Watt, a former Democratic congressman who took over the job
at FHFA in January, probably will have to defend his proposal
again this week when he testifies before the Senate Banking
Committee.
While the FHFA director hopes to win supporters, he does
have the authority to offer the loans without congressional
approval. Fannie Mae and Freddie Mac are now finalizing details
of who will be eligible for the loans and how they will be
priced.
Background Noise
“The backlash shows the political contours of the issue
are going to remain complicated,” said Boltansky of Compass
Point. The criticism “will just be background noise to the
administrative actions, because they’re going to proceed no
matter what.”
http://originatortimes.com/
Housing reform: Unleash the power of Fannie Mae and Freddie Mac
by Guest PostNovember 14, 2014, 2:49 pm
Housing reform: Unleash the power of Fannie Mae and Freddie Mac by Investors Unite
Thanks to Investors Unite member, Link Neimark, for his recent Letter to the Editor in The Missoulain. We are always happy to have active investors that help educate the media and the public about shareholder rights.
“In 2008, the government-sponsored entities were reeling from a financial crises precipitated by big Wall Street firms like Goldman Sachs Group Inc (NYSE:GS), Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM), which sold fraudulently rated sub-prime mortgages to Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) and private investors. Fannie Mae and Freddie Mac were placed in conservatorship and given a loan from the Treasury to help them recover. They have since paid back every dollar borrowed plus interest. They have literally paid their debt to society. It is now time to release the GSEs from conservatorship.
Since the Great Depression, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) has helped raise the standard of living in this country. By providing liquidity in the housing market and by promoting 30-year fixed-interest mortgages, Fannie Mae (and her younger cousin Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)) have enabled millions of Americans to obtain mortgages and purchase homes. This is one of the best ways for the average American to save money and build a secure future.
The middle class in this country is under attack. Wall Street has emerged from the 2008 recession (which it caused) stronger than ever; but main-street America is suffering. Debt is up and wages are down (that is if you are lucky enough to have a job). Now is not the time to “wind down” the GSEs (as the White House and many in Congress would have you believe). Now is the time to release Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) from conservatorship and allow them to help revitalize the middle class by once again making home ownership an affordable dream. A healthy housing market fuels the economy and a healthy middle class will benefit all Americans.”
http://www.valuewalk.com/2014/11/housing-reform-unleash-power-fannie-mae-freddie-mac/
Investment firm takes on Carney over Fannie Mae
12:37 PM ET • FNMA
Fairlight Capital disagrees with a number of John Carney's assumptions - the sum of which led to essentially a zero valuation for the common stock of Fannie Mae (OTCQB:FNMA). Applying what it believes to be a conservative earnings growth rate and a 0% commitment fee on the senior preferred stock, Farilight sees a current value of $2.81 per share.
More importantly, says Farilight, Carney assumes a 5% regulatory capital level. Carney makes the mistake of comparing that to other financial institutions, says Fairlight, forgetting Fannie would be an insurer, not a bank - a 2.5% capital level should be adequate.
Assuming that and also assuming the government would allow the redemption or refinancing of the senior preferred stock leads to a valuation of $7.11 per share, even under very conservative earnings growth rates, concludes Farilight.
Previously: Carney at it again on Fannie Mae
Sorry I think it is a twitter post/tweet. No link
look at this 1:30 p.m. schedule. 21st Annual Distressed Investing Conference Program & Faculty
Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact pressreleases@worldnow.com.
SOURCE Beard Group, Inc.
WASHINGTON, Nov. 13, 2014 /PRNewswire/ -- Beard Group, Inc., is hosting the 21st Annual Distressed Investing Conference on Mon., Dec. 1, 2014, at The Helmsley Park Lane Hotel located at 36 Central Park South in Manhattan.
"We're honored to bring together an array of corporate restructuring professionals, lenders, and debt and equity investors in high-profile chapter 11 bankruptcy proceedings and out-of-court restructurings who place their resources and reputations at risk to produce stellar results by preserving jobs, rebuilding broken businesses, and efficiently redeploying underutilized assets in the marketplace," says Peter A. Chapman, Beard Group's CEO.
This year's conference panels and faculty members are:
8:00 a.m. -- Co-Chairs' Opening Remarks -- Hugh M. Ray, Esq., Principal, McKOOL SMITH and Van E. Conway, Chief Executive Officer, CONWAY MacKENZIE, INC.
8:10 a.m. -- Year in Review & New Business Opportunities -- Steven L. Gidumal, Managing Partner, VIRTUS CAPITAL, LP
8:40 a.m. -- Municipal Debt Restructuring -- Glenn M. Kushiner, Managing Director, CONWAY MacKENZIE, INC.; John W. Hill, Chief Financial Officer, CITY OF DETROIT; James Doak, Managing Director, MILLER BUCKFIRE; Jamie Baird, Managing Director, THE BLACKSTONE GROUP, L.P.; and William A. Brandt, Jr., President & CEO, DEVELOPMENT SPECIALISTS, INC., and Chair, Illinois Finance Authority.
9:25 a.m. -- Funding into a Cash Burn -- Gregory A. Charleston, Senior Managing Director, CONWAY MacKENZIE, INC.; John Rosin, Managing Director - National Originations Manager, MIDCAP FINANCIAL LLC; Jeffrey S. Kolke, Managing Director, MONROE CAPITAL LLC; and Gerard Hanabergh, Senior Executive Vice President & Chief Credit Officer, FIRST CAPITAL
10:25 a.m. -- When the 546(e) Safe Harbor Isn't Safe -- Stephanie Wickouski, Esq., Partner, BRYAN CAVE LLP; Colin M. Adams, Executive Director, Morgan Stanley & Co.; Sharon L. Levine, Esq., Partner, LOWENSTEIN SANDLER LLP; Todd R. Snyder, Executive Vice Chairman of North American GFA and Co-Chair of the North American Debt Advisory and Restructuring Group, ROTHSCHILD INC.; and Christopher K. Kiplok, Partner, HUGHES HUBBARD & REED LLP
11:05 a.m. -- Investing in Highly Regulated Businesses -- Joseph H. Smolinsky, Partner, WEIL, GOTSHAL & MANGES LLP; George Mack, Managing Director, BARCLAYS CAPITAL; Alexander Tracy, Managing Director, MILLER BUCKFIRE & CO., LLC; and Brian S. Rosen, Esq., Partner, WEIL, GOTSHAL & MANGES LLP
11:45 a.m. -- The Harvey R. Miller Awards Luncheon sponsored by EPIQ SYSTEMS, INC., presenting the Harvey R. Miller Outstanding Achievement Award for Service to the Restructuring Industry to James E. Millstein at Millstein & Co.
1:30 p.m. -- Fannie Mae & Freddie Mac Conservatorship Proceedings -- Matthew D. McGill, Esq., GIBSON DUNN; Bill Maloni, former Fannie Mae lobbyist; James E. Millstein, Founder and Chief Executive Officer, MILLSTEIN & CO.; and Kent Collier, REORG RESEARCH INC.
2:10 p.m. -- Make-Whole Premiums -- Peter S. Goodman, Esq., Principal, McKOOL SMITH; Brent Williams, Managing Director, TENEO CAPITAL; Philip C. Dublin, Esq., Partner, AKIN GUMP STRAUSS HAUER & FELD LLP; and Robert T. Schmidt, Esq., Partner, KRAMER LEVIN NAFTALIS & FRANKEL LLP
3:05 p.m. -- Trends & Novel Strategies -- Harold L. Kaplan, Esq., Partner, FOLEY & LARDNER LLP; Lorenzo Mendizabal, Esq., Managing Director, EPIQ SYSTEMS; David S. Kurtz, Managing Director, LAZARD; and Evan R. Fleck, Esq., Partner, MILBANK, TWEED, HADLEY & McCLOY LLP
3:45 p.m. -- Ethics Hour -- Jack Butler, Executive Vice President, HILCO GLOBAL and Edward ("Ted") Gavin, Managing Director, GAVIN/SOLMONESE LLC
4:45 p.m. -- Investors' Roundtable -- Steven L. Gidumal, Managing Partner, VIRTUS CAPITAL, LP; Leon Frenkel, General Partner, TRIAGE CAPITAL MANAGEMENT; Ken Grossman, Managing Partner, JURIS ADVISORS LLC; Gary E. Hindes, Managing Director, THE DELAWARE BAY COMPANY LLC; and Dave Miller, Portfolio Manager, Elliott Management Corp.
5:30 p.m. -- Reception (for all delegates, speakers and honorees) hosted by WEIL, GOTSHAL & MANGES LLP honoring the 2014 Turnarounds & Workouts Outstanding Young Restructuring Lawyers:
http://www.cbs8.com/story/27374289/21st-annual-distressed-investing-conference-program-faculty
Is Fannie Mae Really a $50 Stock? By Matthew Frankel | More Articles | Save For Later
November 12, 2014 | Comments (0)
In the latest chapter of the Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) saga, fund manager Bill Ackman recently made some of his more bullish comments yet on the stocks of these companies. And these comments come just a month after a Federal judge dismissed several shareholder lawsuits, and just days after Ackman himself voluntarily dropped one of his.
So, why does Ackman think the shares could be worth so much that he's willing to bet tens of millions on a favorable legal outcome? And if he's so convinced he's right, why did he drop one of his lawsuits against the government?
Fannie Mae could be worth how much?
Other than the U.S. Government, Ackman's Pershing Square hedge fund is the single largest holder of Fannie Mae and Freddie Mac's common stock. So, obviously he thinks there is value in the companies. However, even the most bullish of shareholders may not quite share his latest sentiments.
Speaking at the Invest for Kids Conference in Chicago, Ackman said the shares could be worth $40-$50 if the government allows the agencies to begin distributing profits to shareholders. (Both companies' stocks trade in the low $2 range right now.) He also called Fannie and Freddie the "most interesting risk/reward of anything we own."
He seems to be so convinced that shareholders will ultimately prevail because the government's seizing of Fannie and Freddie's profits is an example of the government taking private property. And he finds it inconceivable that such an action could hold up in court.
Why would he drop the lawsuit?
It's impossible to know for certain, but many speculate that it's a part of a bigger strategy.
Ackman dropped his suit in U.S. District Court, the same court that recently dismissed several other shareholder lawsuits. His lawsuit would have been presided over by the same judge, and there's no reason to believe that the same judge would reach a different ruling on what is essentially an identical lawsuit.
With all of the attention shifted toward those cases and their ongoing appeals, lawyers from the Justice Department argue that those plaintiffs' other lawsuits should be put on hold until the appeals process plays out. Who knows how long that might take.
However, Ackman's other lawsuit, in the Court of Federal Claims, is still ongoing. And by dropping his case in the U.S. District Court, it could prevent the Justice Department from imposing a similar delay on him.
What's next, and should you join in?
Is there any reason to believe that the Court of Federal Claims lawsuits will work out any differently than those in the District Court?
Maybe there is. After all, the two sets of lawsuits are claiming different violations of shareholder rights. The U.S. District Court lawsuits violated the Administrative Procedures Act by overstepping its authority. On the other hand, the claims court lawsuits claim that the full income sweep by the Treasury violates the Takings Clause.
Finally, it's tough to make the case that shareholders don't have a good argument just on the principles of the situation. The fact is that the government continued to allow the companies' shares to trade when they didn't have to do so, especially if there was no chance of future profitability, ever. As of the companies' just-announced earnings, the government has been paid back every dollar of its more than $188 billion bailout, plus another $37 billion or so on top of it.
How much will be enough? Under the current arrangement, all of this money has been collected as "dividends," and has not paid down the principal at all. That's a pretty strong dividend to receive during a short time period. Not many investors get a 115% return on investment in five years. Investors' claims that something is a little "off" seem to be accurate.
Still, any stock that trades for $2 and "could" be worth $50 should raise some serious red flags. Something with that kind of near-term payoff sounds more like a lottery ticket than an investment, and should be treated as such. Approach with caution, and realize that you're taking a serious gamble if you buy in.
http://www.fool.com/investing/general/2014/11/12/is-fannie-mae-really-a-50-stock.aspx
Maybe the Cramer effect will give us a good week. Plus the WSJ article yesterday was not really negative. For the WSJ it could be considered positive. We could be getting closer to news and a big move up.
I guess you mean us. I know I don't qualify for an Obama phone.
Stop giving away free cell phones abd plans would be a good start
Fannie Mae, Freddie Mac to send $6.8B to U.S. Treasury
Government-controlled mortgage finance firms Fannie Mae and Freddie Mac said on Thursday they will pay U.S. taxpayers $6.8 billion after reporting a third-quarter profits that modestly rose from the second quarter.
Once they have made the latest payments in December, the two companies will have returned $225.5 billion to taxpayers in exchange for about $188 billion in taxpayer aid they received after being placed under the government's wing at the height of the financial crisis.
Fannie Mae, the bigger of the two and the nation's largest source of mortgage funds, earned a net income of $3.9 billion in the third quarter, up from $3.7 billion in the second quarter.
The increase was driven by higher net interest income, an increasing portion of which is derived from guaranty fees, and about $1.2 billion in settlement payments from Goldman Sachs and HSBC related to Fannie's investments in private-label mortgage securities sold by the two banks before the credit crisis.
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Slowing home-price appreciation was a drag on Fannie's profit growth. Based on its own home price index, Fannie estimated that U.S. home prices increased just 1.2 percent in the third quarter and are up just 5.3 percent in the year to date, after gaining 8.2 percent in 2013.
On a year-over-year basis, Fannie's net income was down from $8.7 billion a year earlier.
Freddie Mac, meanwhile, generated net income of $2.1 billion versus $1.4 billion in the second quarter. Like Fannie, Freddie also posted higher net interest income and benefited from $1.2 billion in legal settlements in the same litigation, which had been brought by the U.S. Federal Housing Finance Agency, which regulates both companies.
Freddie's profit fell dramatically from a year earlier, when one-time tax benefits drove its net income to nearly $30.5 billion.
Neither Fannie Mae or Freddie Mac lends money directly to home buyers. Rather, the two companies buy mortgages from lenders and repackage them into securities they sell to investors with a guarantee.
Their businesses collapsed during the financial crisis and the two were seized by the U.S. government in 2008. Under their bailout terms, the two firms must turn their profits over to the Treasury as dividends on the government's controlling stake.
Fannie Mae's dividend to the U.S. Treasury was larger than the $3.7 billion it paid in the prior quarter, while Freddie's was up from $1.9 billion.
Those dividends swelled in early 2014 and late 2013 due to one-off events like legal settlements.
However, in a sign that the sluggish housing market is affecting its bottom line, Fannie Mae reported credit-related income of $836 million, the lowest since having negative credit-related income in the third quarter of 2012.
This was “due primarily to a slower rate of home price appreciation compared with the second quarter of 2014,” Fannie Mae said in a statement.
Private shareholders in Fannie Mae and Freddie Mac have sued the government over the dividend policy, claiming Washington is expropriating the value of their preferred shares. A federal court dismissed a suit by one of the largest shareholders in September, but other legal challenges could drag on for years.
Fannie Mae and Freddie Mac have been a minor cash cow for the Treasury in recent years, paying back all their bailout funds and more. But their obligation to turn over all their profits to the Treasury has helped keep them undercapitalized, analysts say, and a severe downturn in the housing market could eventually lead them to require further bailouts.
The Obama administration has argued for replacing the firms with a new entity, but lawmakers might not address housing reform even after Tuesday's congressional elections, in which Republicans seized control of the Senate.
Republicans want to see less government support of mortgages, while some Democrats argue low-income borrowers should get more support.
http://www.chicagotribune.com/business/breaking/chi-fannie-mae-freddie-mac-treasury-check-20141106-story.html