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The Board of Directors also announced that it expects to maintain a minimum quarterly dividend of $0.48 for the third and fourth quarters of 2015.
http://finance.yahoo.com/news/declares-second-quarter-2015-common-200500596.html
I posted this a few months back...didn't get around to following up on how it applies or would affect the GSE's
Usury and the law
anyone have any ideas or thoughts...anything that may show how this might be a benefit to us?
I could well be pizzin up a rope, but something to take a look at.
"When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not."
United States
In the United States, the primary legal power to regulate usury rests with the states. Usury laws are state laws that specify the maximum legal interest rate at which loans can be made. Each U.S. state has its own statute which dictates how much interest can be charged before it is considered usurious or unlawful.
If a lender charges above the lawful interest rate, a court will not allow the lender to sue to recover the debt because the interest rate was illegal anyway. In some states (such as New York) such loans are voided ab initio.[43]
On a federal level, Congress has never attempted to federally regulate interest rates on purely private transactions, but on the basis of past U.S. Supreme Court decisions, arguably the U.S. Congress might have the power to do so under the interstate commerce clause of Article I of the Constitution. Congress opted to put a federal criminal limit on interest rates by the Racketeer Influenced and Corrupt Organizations Act (RICO Statute) definitions of "unlawful debt", which make it a federal felony to lend money at an interest rate more than twice the local state usury rate and then try to collect that "unlawful debt".[44] It is a federal offense to use violence or threats to collect usurious interest (or any other sort) (Extortionate Credit Transactions statute, chapter 42, title 18, U.S. Code). Such activity is referred to as loan sharking, but that term is also applied to non-coercive usurious lending or even to the practice of making consumer loans without a license in jurisdictions that require licenses
Current as of June 2, 2015
Bailout Recipients
Fannie Mae
RECEIVED FROM TAXPAYERS - $116,149,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $136,335,000,000.00 BILLION DOLLARS
Profit to the Taxpayer - 17.3966 % - 20.206 BILLION DOLLARS
Fannie Mae has paid $8.5911 BILLION dollars OVER the 10% dividend to date.
*************
Freddie Mac
RECEIVED FROM TAXPAYERS - $71,336,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $91,806,000,000.00 BILLION DOLLARS
Profit to the Taxpayer - 28.6951 % - 20.470 BILLION DOLLARS
Freddie Mac has paid $13.336 BILLION dollars OVER the 10% dividend to date
This equates to a total paid back to date of 228.161 BILLION dollars.
Initial bailout total for both GSE's - $187,485,000,000.00
Amount repaid to date for both GSE's - $228,161,000,000.00
Profit to the "taxpayer" from the GSE's - $40,676,000,000.00 BILLION
This equates to an overage of 21.6956 % combined paid to the Treasury by both GSE's.
**************
AIG
RECEIVED FROM TAXPAYERS - $67,835,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $72860967492.00 BILLION DOLLARS
Profit to Taxpayer - 07.40911 % - 5.025 BILLION DOLLARS
*************
GM
RECEIVED FROM TAXPAYERS - $50,744,648,329.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $39,334,175,747.00 BILLION DOLLARS
GM Still OWES the Taxpayers $11.41 BILLION DOLLARS.
This article has quite a bit more details. It seems as though Fannie was not the lead in this lawsuit...maybe Treas. or NY?
http://finance.qq.com/a/20150604/031110.htm
UPDATE 1-Abacus bank acquitted of grand larceny, conspiracy in New York
By Karen Freifeld
NEW YORK, June 3 (Reuters) - Abacus Federal Savings Bank (ABFSV.UL) , which caters to the Chinese-American community in New York, New Jersey and Pennsylvania, was found not guilty of grand larceny and conspiracy on Wednesday after a three-month trial for the alleged sale of hundreds of millions of dollars worth of fraudulent mortgages to Fannie Mae, lawyers involved in the case said.
Two executives at the bank were acquitted on all charges.
Yiu Wah Wong, the bank's chief credit officer, and Wai Hung "Raymond" Tam, the loan origination supervisor, were found not guilty of about 80 counts each, the lawyers said.
The jury in New York state court in Manhattan is still mulling charges of mortgage fraud and falsifying business records against the bank, the lawyers said. Deliberations are scheduled to continue on Thursday morning.
Abacus is believed to be the only bank to face a criminal trial in the United States on charges of mortgage fraud in the run-up to the financial crisis.
Unlike other banks, however, Abacus's loans did not have a high default rate; rather its loans are still performing, meaning monthly mortgage payments are being made by borrowers.
Loan defaults greatly contributed to the financial crisis. As loans became delinquent, mortgage-backed securities collapsed, helping to trigger wider problems in the financial system.
U.S. prosecutors have been criticized by investors and politicians for not bringing criminal charges against senior bank executives and major financial institutions for mortgage fraud.
Several banks, including JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) , have paid multi-billion dollar penalties.
The charges against Abacus and its executives were over the sale of allegedly fraudulent loans to Fannie Mae between 2005 and the beginning of 2010.
Prosecutors claimed the defective loans falsely represented applicants' credit worthiness, employment, income and source of downpayments. They claimed the bank and its managers trained and directed the routine falsification of documents.
"We can't discover the falsity underlying these loan documents and then sit around, waiting for a mortgage awarded based on them to stop performing," Manhattan Assistant District Attorney Rachel Hochhauser told the jury in her summations.
During the trial, the jury heard the testimony of five former employees of Abacus who pleaded guilty to crimes connected to the case. Several others also pleaded guilty, prosecutors said.
But in Abacus's closing arguments, the bank's lawyer, Kevin Puvalowski, called the state's case "a bizarro prosecution," and said Abacus's loans went to borrowers capable of paying them, as shown by the fact that they did so.
The bank has one of the lowest default rates in the country, the attorney said, citing a rate of about 0.3 percent versus a nationwide average of 6.6 percent, 20 times higher.
"The supposed victim in this case, Fannie Mae, hasn't lost a dime," Puvalowski said.
The bank attorney could not be reached for comment after the partial verdict. Tam's lawyer, Thomas Rotko, and Wong's lawyers, Andrew Muccigrosso and Sanford Talkin, said their clients had maintained their innocence and they were pleased the jury agreed.
A spokeswoman for the Manhattan District Attorney declined comment with the jury still deliberating. A spokesman for Fannie Mae also declined comment.
Abacus bank acquitted of all charges in N.Y. mortgage fraud trial
http://finance.yahoo.com/news/abacus-bank-acquitted-charges-n-163249428.html
NEW YORK, June 4 (Reuters) - Abacus Federal Savings Bank , which caters to the Chinese-American community in New York, New Jersey and Pennsylvania, was found not guilty on Thursday of all charges related to the sale of allegedly fraudulent mortgages to Fannie Mae, prosecutors and defense counsel said.
A jury in New York state court in Manhattan acquitted the bank of mortgage fraud and falsifying business records after a three-month trial.
A day earlier, the jury acquitted the bank of conspiracy and grand larceny charges. It also found two executives at the bank not guilty of some 80 counts each.
Abacus is believed to be the only bank to face a criminal trial in the United States on charges of mortgage fraud in the run-up to the 2008 financial crisis.
Unlike other banks, however, Abacus's loans did not have a high default rate. Its loans are still performing, with monthly mortgage payments being made by borrowers.
Times journalist hits White House for growing secrecy in Fannie Mae case
http://www.minnpost.com/political-agenda/2015/05/times-journalist-hits-white-house-growing-secrecy-fannie-mae-case
By Dave Beal | 02:51 pm
Times journalist hits White House for growing secrecy in Fannie Mae case
REUTERS/John Pryke
Gretchen Morgenson cited the secrecy as yet another sign of a pattern that Margaret Sullivan, the public editor at The Times, has called the administration's "unprecedented secrecy and attacks on a free press."
The Obama administration, instead of becoming more forthcoming in the wake of recent criticism from shareholders of the Federal National Mortgage Association (Fannie Mae) and from Sen. Charles Grassley, R-Iowa, has become even more secretive.
That's the word from Gretchen Morgenson, the New York Times journalist who relentlessly monitors the financial sector and the government agencies that regulate it. She cited the secrecy as yet another sign of a pattern that Margaret Sullivan, the public editor at The Times, has called the administration's "unprecedented secrecy and attacks on a free press."
Morgenson noted that earlier this year, Reporters without Borders (a Paris-based nonprofit that promotes and defends freedom of the press), dropped the United States three places to 49th in its annual ranking of press freedom. "That ranking puts us behind such countries as Namibia, South Africa, Chile and Niger," she said. The report cited increased efforts by the U.S. government to track down whistleblowers and sources of leaks, particularly relating to national security.
Morgenson's comments were part of a talk she made last night in Minneapolis. She was the featured speaker at the annual awards banquet of the Minnesota Chapter of the Society of Professional Journalists.
Fannie Mae is the huge, government-controlled entity which, together with its much smaller and younger brother, Freddie Mac, still dominates the market for purchasing and guaranteeing home mortgages. Shareholders of both entities have been hammered since 2008. That September, the federal government rushed to bail them out in the financial meltdown, with $187.5 billion in taxpayers' funds. Now, finally back in the black, they have paid back $40 billion more than they received in the bailout, yet the government is still sweeping their profits into the U.S. Treasury.
Last month Morgenson reported on government secrecy that has followed the filing of a lawsuit by Fairholme Fund, a mutual fund company holding stock in both Fannie and Freddie. It charged in in the suit that the government's sweeps are improperly taking private property. Morgenson reported that the sweeps are also preventing both companies from building up a larger capital cushion to absorb future losses, should they arise.
The government responded to the lawsuit by listing 231 documents as off limits in the case. It cited "presidential privilege" in 45 of the documents — emails, draft memos and news releases. Grassley has been pressing the U.S. Justice Department for more disclosures about the sweep and for documents being withheld in the Fairholme litigation.
But last night, Morgenson noted that since her column, the Justice Department has asked the judge presiding in the litigation to seal yet more documents. Lawyers for the shareholders "say they've never seen anything like it," she said. "For the government's part, it has said these documents, which date as far back as 2008, must be kept under wraps because they may roil the markets," she added. "That is completely absurd."
As for Wall Street, Morgenson also told her audience that when she came to The Times in 1998, "I had no idea that I would be in for 17 years of financial chicanery and crises, each one more damaging than the last.
"In fact, as a beat, Wall Street is the gift that keeps on giving."
Fannie Mae: Fact Checking John Carney
this is a bit old, but pretty accurate
http://www.valuewalk.com/2015/04/fannie-mae-fact-checking-john-carney/
Posted By: Guest PostPosted date: April 04, 2015 12:20:49 PMIn: Politics3 Comments
Fannie Mae: Fact Checking John Carney by Investors Unite
To paraphrase an old saying, Wall Street Journal reporter John Carney never lets the facts get in the way of a good column.
His latest distortion– a response to the recently released paper co-authored by William Isaac and former Senator Bob Kerrey—is that recapitalizing the GSEs is a “bad deal” for taxpayers. The Isaac-Kerrey paper has a central thesis: While the government had every right to drive a hard bargain in its restructuring of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), once it makes a deal, it needs to live up to that deal. Its decision to change the terms of the deal by enacting the third amendment sweep sets a bad precedent, and has led to dangerous exposure for the taxpayer by leaving Fannie and Freddie undercapitalized.
Carney doesn’t agree with the paper, and that is his right. But in trying to rebut the paper, he gets facts wrong.
So here’s a quick rebuttal back to Carney from Investors Unite:
– Carney is wrong in claiming that Fannie Mae and Freddie Mac can’t rebuild capital. HERA allows Director Watt to suspend dividend payments to the federal government for this purpose.
– Carney is also wrong to say that allowing them to rebuild capital is allowing them to come back to life without addressing the flaws that previously existed. First, HERA addressed these flaws and the entities have been reformed. Second, it’s still up to policymakers (specifically FHFA) to determine the outcome of the conservatorship.
– Carney’s logic that the sweep protects the taxpayer more than allowing Fannie and Freddie to rebuild capital makes no sense. We don’t allow any large institutions to operate with no capital. Why are Fannie and Freddie any different?
– Carney’s Buffett analogy is not really a good one; Buffett put money into Goldman Sachs Group Inc (NYSE:GS) before the Treasury acted. So that really isn’t an example of private capital working alongside government.
Investors Unite is pleased to be having this debate. Not long ago, nobody was talking about the lack of capital at Fannie Mae and Freddie Mac – a direct result of the third amendment sweep and the government’s decision to strip them of 100% of their profits. Now everybody is talking about capital, and that’s a good thing for investors, and for the American taxpayer.
Singling Out Fannie and Freddie
BY MarketWatch
— 10:09 PM ET 05/18/2015
https://eresearch.fidelity.com/eresearch/evaluate/news/basicNewsStory.jhtml?symbols=FNMA&storyid=201505182209MRKTWTCHNEWS_SVC000432&provider=MRKTWTCH&product=NEWS_SVC&sb=1
A road map for the future of housing finance shows there won't be a return trip for Fannie Mae ( FNMA ) and Freddie Mac ( FMCC )
That is good news for taxpayers and home buyers; not so much for those hoping the companies might be released from government control.
The Federal Housing Finance Agency, which regulates the mortgage giants, released critical details Friday about the so-called single security (http://www.wsj.com/articles/fannie-freddie-on-track-to-issue-single-bond-1431707622)that would replace separate mortgage-backed debt issued by Fannie and Freddie. The FHFA said the companies were on track to complete the final structure of the single security by year-end.
The single security will resolve differences between the types of disclosures and timing of payments around mortgage bonds backed by Fannie and Freddie. But the biggest benefit would come from improved liquidity for such debt.
Currently, Fannie's securities are far more liquid than Freddie's, with trading volume on a typical day for the former about 10 times that of the latter. As a result, Freddie has to compensate investors by rebating guarantee fees (http:// www.wsj.com/articles/fannie-freddie-cant-purge-em-merge-em-heard-on-the-street-1399842482). Since all income of both companies is currently swept to the Treasury, this cost is borne by taxpayers.
The issuance of a single security would not only eliminate the need for this rebate, it would result in greater overall liquidity in the market for mortgage securities. That could lower mortgage rates.
Of course, Fannie would be giving up an important competitive advantage. The company itself says the single security would "adversely affect" its results by hurting its ability to compete to buy mortgages from banks.
So it is clear the single-security project isn't something a private company would voluntarily pursue. But this only highlights the status of Fannie and Freddie as wards of the state and likely forecloses any scheme to restore the two to their precrisis status quo. Back then, the two were private companies and fierce competitors. The single security is a feature of a market in which they are more utilities.
This could also be a prelude to a more dramatic change. The single security could be opened up to private guarantors, perhaps backed by reinsurance purchased from Treasury. That would eliminate a critical barriers to entry into the mortgage-guarantor market: the liquidity advantage enjoyed by Fannie and Freddie.
More immediately, the single security will make the bond market reflect what has been reality since 2008, if not before: No matter which company is issuing securities, the U.S. taxpayer is really the one standing behind it.
Write to John Carney at john.carney@wsj.com (mailto:john.carney@wsj.com)
-John Carney; 415-439-6400; AskNewswires@dowjones.com
Here is a decent website with a bunch of links to FnF info/research/blogs/twitter and stuff in general
http://gselinks.com/
Should Fannie Mae and Freddie Mac Really Be AAA Rated?
http://www.thestreet.com/story/13121002/1/new-fannie-freddie-rules-may-let-mortgage-insurers-take-more-of-fha-led-market.html?puc=yahoo&cm_ven=YAHOO
By Jon C. Ogg April 21, 2015 1:05 pm EDT
Fitch Ratings recently reaffirmed the sovereign ratings of the United States of America as being AAA for the long-term foreign and local currency Issuer Default Ratings (IDRs). That call was from April 13, 2015, and now as a follow-on call, Fitch has announced that it has affirmed the AAA ratings for Fannie Mae and Freddie Mac on the Long-Term Issuer Default Ratings.
What is interesting here, despite all the calls to break up Fannie and Freddie from regulators and politicians, Fitch also assigned a Stable Rating Outlook. Tuesday’s action pertains to Fannie and Freddie’s IDRs and unsecured debt. The move may not seem like major news for shares of Federal National Mortgage Association (FNMA), Fannie Mae, nor for Federal Home Loan Mortgage Corporation (FMCC), Freddie Mac, on the surface. Still, this may matter more than other “affirmations.”
Generally speaking, 24/7 Wall St. does not cover OTC stocks. That being said, Fannie and Freddie are systemically important entities to the housing market in America. Even if they are government-sponsored enterprises (GSEs), and even if many people in the public and in politics want them wound down, there has yet to be a viable alternative presented that all sides can live with. It is not as if the big banks in a post-recession deep regulatory environment can step in and fill the gap that would be left if Fannie and Freddie disappeared.
The view of 24/7 Wall St., particularly after seeing the ratings and outlook call, is that it seems like a credit ratings agency would no longer be throwing AAA ratings out there if it worried that the government was likely wind-down these GSEs.
Fitch said:
The ratings of Fannie Mae and Freddie Mac are directly linked to the U.S. sovereign rating, based on Fitch’s view of the U.S. government’s direct financial support of the two housing GSEs. The rating linkages are further articulated in Fitch’s report ‘Rating Linkages to the U.S. Sovereign Rating’, dated July 18, 2011.
The housing GSEs are among the most active issuers in the capital markets, benefiting from meaningful financial support from the U.S. government. A key rating driver and Fitch’s rationale for aligning the GSEs’ ratings to the U.S. government rating is the U.S. Treasury’s Senior Preferred Stock Purchase Agreement (PSPA). Under the PSPA, the U.S. Treasury is required to inject funds into Fannie Mae and Freddie Mac to maintain positive net worth, so that each firm can avoid being considered technically insolvent by their conservator. Under the PSPA, the remaining funding available to Fannie Mae and Freddie Mac is $117.6 billion and $140.5 billion, respectively.
Fitch noted that Fannie Mae and Freddie Mac’s subordinated debt require the deferral of interest payments if the firms fail to maintain specified capital levels. Still, Fitch went on to say:
However, in a 2008 statement, the Director of FHFA stated that the GSEs would continue to make interest and principal payments on the subordinated debt, even if the minimum capital levels are not maintained. Fitch’s ‘AA-‘ ratings on the subordinated debt are reflective of the conservator’s willingness to support these obligations and the current timeliness of interest and principal on these obligations.
24/7 Wall St. wants to think beyond just a ratings agency call on Fannie Mae and Freddie Mac here. Do Fannie Mae and Freddie Mac look or feel like AAA entities to outside investors? Maybe not on their own after what was seen in the recession’s aftermath, but throw on the implied guarantee of Uncle Sam and you have a different story.
The stock market bottomed in March of 2009, so the bull market in stocks is now over six years old. The recession may be closer to being five years in the past now, which means that many borrowers and consumers have fading memories of the pain of the housing bubble. Will Fannie and Freddie get blamed for their roles in the next housing market correction (or worse)? Now consider how much the U.S. Federal Reserve owns in mortgage-backed securities that were bought during quantitative easing.
New Fannie, Freddie Rules May Let Mortgage Insurers Take More of FHA-Led Market
http://www.thestreet.com/story/13121002/1/new-fannie-freddie-rules-may-let-mortgage-insurers-take-more-of-fha-led-market.html?puc=yahoo&cm_ven=YAHOO
By James Passeri
NEW YORK (TheStreet) -- Private mortgage insurers, which underwrite loans for homebuyers who can't afford a 20% down payment, stand to benefit from looser capital requirements that give them the cash to expand just as the largest insurer, the federal government, faces pressure to pull back.
The criteria for companies such as Mortgage Guaranty Insurance (MTG - Get Report) and Radian (RDN - Get Report) to obtain "approved insurer" status -- which lets them insure loans bought or held by big government-backed lenders like Fannie Mae (FNMA) -- were spelled out in an update of the Private Mortgage Insurer Eligibility Requirements that relaxed standards proposed in July. The requirements have been under review for years by lenders and government officials seeking to prevent a repeat of the 2008 financial crisis while keeping credit available for buyers.
Must Read: Why the Fed May (Almost) Never Raise Interest Rates
The changes, effective Dec. 31 for existing insurers and immediately for new applicants, boost investor confidence by eliminating uncertainty about how exacting new criteria would be. They also free up cash for the mortgage insurers, which control 15% of the market in the U.S., to expand their customer base. By far the largest insurer is the U.S. government, which has insured more than 34 million properties through the Federal Housing Administration since 1934.
"It's now time to accelerate the discussions regarding proposals that would allow private mortgage insurers to further reduce [risk]" -- the risk of unpaid mortgages shouldered by Fannie Mae, Freddie Mac (FMCC) and, ultimately, taxpayers -- said Mortgage Guaranty CEO Patrick Sinks to investors on a conference call Tuesday. Such proposals include replacing government insurance on loans with down payments above the 20% level, and deepening coverage on loans requiring smaller down payments.
Mortgage Guaranty shares have jumped 6% since the new rules were announced Friday, benefiting partly from a better-than-expected earnings report Tuesday and comparatively low customer delinquencies in the first quarter. Shares of Radian, a competitor set to report earnings on April 30, have climbed 5%.
The new rules were approved at the same time the FHA faces pressure to send business to the private sector in order to comply with its own capital requirements mandated by Congress, said Mark Palmer, an analyst with BTIG.
"Technically, the government needs to feed more of its business to private players," he said.
The new requirements are designed to prevent a recurrence of mortgage-insurance failures, which were common during the financial crisis. Companies lacked sufficient capital to pay mounting claims, intensifying losses at Fannie Mae and Freddie Mac. Both of these government-sponsored enterprises buy loans from original lenders, freeing them to extend more credit. They're required by their charters to obtain "credit enhancement," typically mortgage insurance, for loans made with a down payment of less than 20%.
The revised standards make certain that "private mortgage insurer counterparties are able to fulfill their role of providing reliable credit enhancement for loans acquired by Fannie Mae, even in adverse market conditions," said Andrew Bon Salle, the organization's executive vice president for single-family business, in a statement Friday.
Both the new requirements and last summer's draft require "approved insurers" to maintain liquid assets of at least $400 million or a variable amount tied to a risk-based schedule, whichever is greater. The biggest change from last summer's proposal relates to mortgages issued prior to the 2008 financial crisis, or "legacy loans," which will now require insurers to post substantially less capital relative to risk, said Bose George, a managing director with Keefe Bruyette & Woods.
"In the near term, the announcement doesn't do anything but provide stability," he said. "But they now know what their capital is so they can move forward."
Treasury Department: Fannie, Freddie Bailout Wasn’t A Loan
http://blogs.wsj.com/developments/2015/04/21/treasury-department-fannie-freddie-bailout-wasnt-a-loan/?mod=yahoo_hs
Fannie Mae
Federal Housing Finance Agency
Freddie Mac
Sen. Charles Grassley
Treasury Department
By Joe Light
At the beginning of the month, U.S. Senator Charles Grassley (R., Iowa) sent the U.S. Treasury Department a letter asking a simple question that has been on the lips of shareholders of Fannie Mae and Freddie Mac for years.
“According to news reports,” he wrote, “the initial loan provided to Fannie and Freddie by Treasury is paid off. Will Treasury’s arrangement with FHFA terminate? If so, when? If not, why not?”
In its response to Mr. Grassley on Tuesday, the Treasury Department for the first time clearly laid out its response. In a nutshell, according to the department: The bailout wasn’t a loan, but an investment on which taxpayers are now being compensated.
After getting taken over by the U.S. government, mortgage-finance companies Fannie Mae and Freddie Mac took a bailout of about $187.5 billion. In return for that money, the government acquired a class of “senior preferred” stock that initially paid a 10% dividend.
In 2012, the Treasury and Federal Housing Finance Agency, which controls Fannie and Freddie under a conservatorship, changed the terms of the agreement, sending nearly all of the companies’ profits to the government when they have earnings, but not requiring a payment when they have losses.
To date, the companies have paid the government more than $228 billion, $40 billion more than they took in the bailout.
That’s led some of the companies’ shareholders, and some politicians, to argue that the companies should be allowed to retain earnings, having repaid the “loan” Treasury extended them during the crisis.
In the letter to Mr. Grassley, Acting Assistant Secretary for Legislative Affairs Randall DeValk wrote that the government “did not make an ordinary loan” to Fannie and Freddie, but rather that it “took on an enormous risk when rescuing the enterprises in the middle of a financial crisis – a risk for which any private investor would have demanded substantial compensation.” He wrote that taxpayers continue to bear risks from Fannie and Freddie which in part explains why the companies’ profits continue to be swept.
In other words, the Treasury argues, the dividends paid so far should be treated as compensating for that risk rather than as a repayment of a loan.
In addition to asking why the Treasury Department continues to sweep the companies’ profits, Mr. Grassley asked how the sweep agreement impacted the FHFA’s regulatory authority over Fannie and Freddie and its capital controls over the companies. The department didn’t answer those questions, instead referring them to the FHFA.
In the letter, Mr. DeValk also said that the Treasury Department changed the terms of the bailout agreement in order to avoid a situation in which Fannie or Freddie would need a bailout from the department in order to pay the set 10% dividend.
The change in terms “ended the vicious circle of taking funds from Treasury — meaning the taxpayers — to pay the Treasury the fixed dividends,” Mr. DeValk wrote.
In his initial inquiry to the Treasury, Mr. Grassley also expressed concern that the Treasury Department and Department of Justice had asserted executive privilege to protect certain documents in a lawsuit that shareholders have brought challenging the profit sweep. Mr. DeValk in his letter did not address those issues.
A spokeswoman for Mr. Grassley said Treasury “addressed some of Sen. Grassley’s questions but referred him to another agency for most of the others.”
“He’ll continue to pursue the answers from FHFA as Treasury suggested and from the Justice Department on his questions including whether the Administration has invoked executive privilege to withhold relevant documents from the public,” she added.
It's all about the politicians "fixing" the problems...so they can go back and "fix" them again and again and again...oh...and while they are at it...they get to stay in office and draw one hell of a nice paycheck and retirement. 95% of the politicians don't give a crap about the masses...it's all about controlling who they let in to that exclusive 1% club that they have access to.
Fannie and Freddie Restart Risky 'Affordable Housing' Programs
By Elizabeth MacDonald
http://www.foxbusiness.com/industries/2015/04/17/fannie-and-freddie-restart-risky-affordable-housing-programs/
Mortgage finance giant Fannie Mae just debuted its new “HomePath Ready Buyer Program,” which lets first-time homebuyers get up to a 3% rebate of a home’s purchase price if they buy a Fannie Mae property, so long as they complete an online homebuyer education course which costs $75.00.
The new HomePath Ready Buyer Program, as described by Fannie Mae, could create $4,500 in savings on a $150,000 home for first-time buyers, (defined as borrowers who have not owned a home in the prior three years).
In addition to the 3% rebate, Fannie Mae will refund the cost of the homebuyer education course. Still many of the borrowers targeted for the new programs don’t earn more than their area’s median income
This new program comes after Melvin Watt, director of the Federal Housing Finance Agency, announced last December that Fannie Mae and Freddie Mac would soon start buying mortgage securities backed by 30-year loans with just 3% down payments, which banks largely halted delivering two years ago, instead demanding 20% down.
All part of the Obama Administration’s push to make homeownership affordable to a bigger group of borrowers. Watt says the government now wants to expand the opportunity for homeownership to credit-worthy borrowers who have enough income to afford a loan, but have not saved enough for a larger down payment.
Watt has testified the loans are safe due to guardrails like these: Strong credit scores, housing counseling, and private mortgage insurance. Lenders also get protection from legal liability if they sell loans to borrowers who spend no more than 43% of their income on debt, plus the new program will not allow balloon or interest payment only mortgages.
But is this new effort good for taxpayers and the economy, or is this similar to programs that led to the subprime mortgage crisis and housing crash? Is the federal government acting once again like the boozy bartender handing out free drinks at the frat party?
Will taxpayers be on the hook for another mega-bailout, given that Fannie and Freddie combined were one of the biggest bailout cases of all, at $187.5 billion? Though the two have paid back their taxpayer bailout, and then some, housing analysts have decried free, easy money as the reason for the housing meltdown, arguing, if borrowers can't afford a house, they should rent until they can.
Another argument: why are these supposedly private sector companies still acting like gigantic federal slush funds doing the whim of politicians and mortgage executives seeking to make a buck? The business of Fannie Mae and Freddie Mac is mortgage finance, to offer liquidity in the form of mortgage securities, not housing policy. Fannie Mae and Freddie Mac do not lend mortgages, but rather they buy them from banks, bundle the loans as securities, and then sell them the secondary mortgage markets.
After the housing collapse, and the bankruptcy of Fannie Mae and Freddie Mac, officials in Congress and the Administration argued the two giants’ massive role must be reduced in the housing market, with numerous hearings in Congress on how to wind down these two government-sponsored enterprises.
Jeb Hensarling, chairman of the House Financial Services Committee, has said that the Administration’s new push 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” and that they “must be rejected.”
Banks, which aided and abetted the housing bubble, were hit with hundreds of billions of dollars in losses due to defaults and write-downs, and the U.S. economy suffered a severe downturn more than seven years ago.
Critics also argue that, if the housing market turns negative again and prices drop, borrowers with a tiny amount of equity in their homes can quickly go upside down in their loans, owing more than their homes are worth. Borrowers also could face higher costs over the life of these low-down payment loans, including higher interest rates and fees for mortgage insurance.
The latest “affordable housing” push by the Administration comes as mortgage originations have declined precipitously. Lenders sold about $1.12 trillion in mortgages in 2014, down nearly 40% versus a year earlier; and the lowest amount sold since 1997, says the Mortgage Bankers Association. Despite the trillions of dollars flowing through the housing market over the decades, the U.S. homeownership rate plunged to 64.4% from 69.2% in 2004.
First-time buyers have stayed on the sidelines, struggling with high debt, as the housing market has been on an upswing. Usually first-timers make up four out of ten borrowers, but that number plunged to just a third in 2014, says the National Association of Realtors. Fannie’s inventory is loaded with thousands of houses seized in foreclosure, and it needs to move those homes off its books to bring more flexibility to its balance sheet.
However, both Fannie and Freddie already guarantee investors against losses on loans with down payments of as little as 5%, mortgages which require private mortgage insurance. The Federal Housing Administration also already offers mortgages with down payments of as little as 3.5%. FHA is supposed to keep a capital cushion equal to 2% of the value of its outstanding mortgages, but it is years away from achieving that benchmark.
A little history here. Thirty years ago, almost to the day, the Dept. of Housing and Urban Development pushed Fannie to lower down payments to 3%. Both Fannie and Freddie were pushed by the Clinton Administration and Congress beginning in 1992 to increase the number of mortgages sold to poor and moderate income homeowners, after the national media reported banks were redlining neighborhoods and not selling loans there.
Fannie and Freddie then stepped into low or no documentation loans, and later subprime mortgages, leading to their collapse. By 2011, Congress pushed for new rules instructing FHFA to adjust loan prices and guarantee fees to reflect market risk of losses, but critics argue the new programs appear to put those efforts in reverse.
I would think it is.....
Libel and Slander
Also found in: Dictionary/thesaurus, Medical, Encyclopedia, Wikipedia.
Libel and Slander
Two torts that involve the communication of false information about a person, a group, or an entity such as a corporation. Libel is any Defamation that can be seen, such as a writing, printing, effigy, movie, or statue. Slander is any defamation that is spoken and heard.
Collectively known as defamation, libel and slander are civil wrongs that harm a reputation; decrease respect, regard, or confidence; or induce disparaging, hostile, or disagreeable opinions or feelings against an individual or entity. The injury to one's good name or reputation is affected through written or spoken words or visual images. The laws governing these torts are identical.
To recover in a libel or slander suit, the plaintiff must show evidence of four elements: that the defendant conveyed a defamatory message; that the material was published, meaning that it was conveyed to someone other than the plaintiff; that the plaintiff could be identified as the person referred to in the defamatory material; and that the plaintiff suffered some injury to his or her reputation as a result of the communication.
To prove that the material was defamatory, the plaintiff must show that at least one other person who saw or heard it understood it as having defamatory meaning. It is necessary to show not that all who heard or read the statement understood it to be defamatory, but only that one person other than the plaintiff did so. Therefore, even if the defendant contends that the communication was a joke, if one person other than the plaintiff took it seriously, the communication is considered defamatory.
I would love to see someone...or possibly the current lawsuits ask some pointed questions.
1. Please explain how the FHFA is following the law, and it's fiduciary responsibilities to the GSE's by agreeing to the 3rd amendment sweep.
2. Please explain the meaning and understanding of the 5th amendment as it pertains to "takings"
"The Fifth Amendment provides that private property shall not be taken without just compensation."
Makes one wonder if he's fishing for some bullchit response to further bury them.
How in the world can taking ALL of the profits from the GSE's be fiscally sound...that's a direct contradiction to their status...and the FHFA's responsibility as CONSERVATOR.
Mr. Lew and Holder: Tear down this wall of secrecy on Fannie, Freddie profit sweep
Support or oppose ‘3rd amendment sweep’
Trey Garrison
April 8, 2015
http://www.housingwire.com/articles/print/33496-mr-lew-and-holder-tear-down-this-wall-of-secrecy-on-fannie-freddie-profit-sweep
The head of the Senate Judiciary Committee wants to know why the government is so adamant about keeping 150,000 pages of evidence related to the controversial 2012 “third amendment sweep” confidential – and regardless of whether you support GSE recapitalization or the status quo – it’s a question that needs answering.
If it’s a good, legal, moral and fiscally sound idea for the government to lay claim to all of Fannie Mae and Freddie Mac’s profits at the expense of shareholders, then the reasoning and framework that went into it should be public.
That’s simply not a negotiable point, no matter where you land on this.
The only good reason to cover all this up is… well, to cover it up.
Claiming presidential and executive privilege just doesn’t cut it. What is this, a Russian kleptocracy?
First a little background: GSE shareholders have been demanding to know why the government in 2012 arbitrarily decided to divert all of the GSE profits to the Treasury, rather than fulfilling their obligation to repay taxpayers, as required by the original bailout agreement that put them in conservatorship. The Third Amendment changed the 10% cash dividend paid to Treasury to a system where the GSEs pay all of their quarterly profits to Treasury.
The third amendment sweep has been shrouded in government-mandated secrecy from the outset.
The government sued to block the plaintiffs like Fairholme Funds from viewing some 800,000 pages of documents. Only the attorneys can view the documents. Last fall even managed to block plaintiffs from bringing in J. Tim Howard, the former Fannie CFO, from serving as an advisor to the plaintiffs’ attorneys.
In short, the government wants to keep everything related to their decision to sweep GSE profits tighter than Dick’s hatband.
There’s simply no excuse for this. Not even for this notoriously secretive White House. (This isn’t some sort of partisan, anti-Obama spin on my part. An analysis by the Associated Press published just last month found that, “The Obama administration set a record again for censoring government files or outright denying access to them last year under the U.S. Freedom of Information Act.”)
Maybe there will be some high-level pressure to break the stalemate. Back to what started this, Senate Judiciary Committee Chair Charles Grassley of Iowa sent a letter Tuesday to the Department of Justice and to the Treasury demanding details about the decision and an explanation for all the secrecy.
“The taxpayer has a right to know what has transpired. But, instead of transparency, there appears to be an invocation of executive privilege. If true, this is cause for concern,” Grassley’s letter to Attorney General Eric Holder and Treasury Secretary Jack Lew says.
The full letter from Grassley to Holder, sent to HousingWire, can be read here. The letter to Lew can be read here.
Here are the questions that Grassley wants answered – and frankly, anyone who believes in honest and open government should demand be answered. Because this is important for GSE shareholders, but it’s downright critical if you believe in transparency in government and in limiting government abuse.
Has the President personally invoked executive privilege over documents related to the Fannie Mae, Freddie Mac and Treasury Third Amendment agreement? If so, when? If not, why are DOJ attorneys citing that privilege as a reason to withhold those documents?
Does the Third Amendment cause a breach of any of FHFA’s statutory duties to ensure that each regulated entity operates in a safe and sound manner? Please explain.
During the negotiation of the Third Amendment between Treasury and FHFA, did DOJ communicate with any of the entities involved regarding its legality? If so, please describe those communications in detail.
Under what legal authority was the Third Amendment authorized?
Prior to litigation, did DOJ discuss with Treasury and/or FHFA the need to assert privileges, including executive privilege, over certain documents?
Grassley now joins a coalition of 17 conservative and free-market public policy groups who have demanded these records be opened.
Last fall the informal alliance sent a letter to the ranking members of the House Finance Services Oversight and Investigative Subcommittee urging them to demand more transparency and accountability.
This shouldn’t be an issue just for partisans on the side of Fannie and Freddie shareholders.
This is an issue that transcends GSE reform. This is about holding government accountable for its actions, and putting a full stop to the incremental but inexorably increasing veil of secrecy descending on government activities at all levels.
Current as of April 06, 2015
Bailout Recipients
Fannie Mae
RECEIVED FROM TAXPAYERS - $116,149,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $136,335,000,000.00 BILLION DOLLARS
Profit to the Taxpayer - 17.3966 % - 20.206 BILLION DOLLARS
Fannie Mae has paid $8.5911 BILLION dollars OVER the 10% dividend to date.
Freddie Mac
RECEIVED FROM TAXPAYERS - $71,336,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $91,806,000,000.00 BILLION DOLLARS
Profit to the Taxpayer - 28.6951 % - 20.470 BILLION DOLLARS
Freddie Mac has paid $13.336 BILLION dollars OVER the 10% dividend to date
This equates to a total paid back to date of 228.161 BILLION dollars.
Initial bailout total for both GSE's - $187,485,000,000.00
Amount repaid to date for both GSE's - $228,161,000,000.00
Profit to the "taxpayer" - $40,676,000,000.00 BILLION
This equates to an overage of 21.6956 % combined paid to the Treasury by both GSE's.
**************
AIG
RECEIVED FROM TAXPAYERS - $67,835,000,000.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $72860967492.00 BILLION DOLLARS
Profit to Taxpayer - 07.40911 % - 5.025 BILLION DOLLARS
GM
RECEIVED FROM TAXPAYERS - $50,744,648,329.00 BILLION DOLLARS
TOTAL REPAID TO DATE - $39,334,175,747.00 BILLION DOLLARS
GM Still OWES the Taxpayers $11.41 BILLION DOLLARS.
Interesting read
http://finance.yahoo.com/news/biggest-outrage-atlanta-crazy-teacher-091500508.html
The Biggest Outrage in Atlanta’s Crazy Teacher Cheating Case
One of the defining issues of this millennium has been the bifurcation of the criminal justice system, with one set of rules for ordinary people and another for elites. We’ve learned that justice is a commodity to be purchased rather than a universal value delivered without prejudice.
That’s the proper backdrop to the news of convictions in the Atlanta test cheating case. Eleven educators were found guilty of racketeering charges — something typically reserved for organized crime — for feeding students answers to standardized tests, or changing test sheets after they were turned in.
If you don’t remember these kinds of creative prosecution strategies during the financial crisis, that’s probably because no prosecutor ever used them. Teachers ordered to falsify tests and the superiors who demanded it, amid desperation to save schools from destruction, deserve no mercy from the court. Bankers who ran a criminal enterprise to engage in the largest consumer and investing fraud in world history deserve our thanks.
Related: The Government Is Finally Cracking Down on Legal Loan Sharks
The eleven educators convicted — middle-school teachers, a principal and school administrators — were among 35 initially charged; many copped a plea. But the initial state investigation found this to be a widespread practice in the district, involving 44 schools and almost 180 education personnel. And Atlanta was not alone: There have been stories of cheating in 40 different states across the country.
We can debate the reasons why. Federal money from the No Child Left Behind (NCLB) law has been tied to standardized testing. Schools that fail to meet performance levels can be shut down. Atlanta’s school superintendent implemented even more rigorous rules than the feds: Any principal not meeting achievement targets within three years would get fired, and teacher evaluations, along with bonuses, were based in part on test scores.
Many view those standards as unrealistic and utopian. In high-poverty areas with at-risk kids disinclined to performing well on standardized tests, the drive to hit those benchmarks and pressure from administrators creates huge temptations to cheat. And we’re seeing it everywhere.
As recounted by The New Yorker, at one middle school, the principal informed teachers they had to cheat to keep the school above the NCLB threshold. Dissenters were transferred to other schools or placed on a track to be terminated. The cheating became routinized, with teachers tearing open sealed test sheets with razor blades and fixing the answers. They justified it to themselves as doing it for the school, for the children even. The tests didn’t properly evaluate student performance in their view, and the kids needed stability, not upheaval through shifting schools every couple years.
None of this excuses the misconduct, it sets a context for it. And it matches almost precisely what went on at every level of the mortgage market before, during and after the housing bubble. Mortgage brokers used Wite-Out and exacto knives to falsify income tax data for unqualified borrowers to get them into loans. They employed Coke vending machines as light boards to trace forgeries, putting people into garbage loans they didn’t purchase. The loans got sold to Wall Street banks, which routinely lied to investors, who purchased bundles of mortgages packaged into securities, by telling them that the loan quality exceeded underwriting standards.
Related: DOJ Is Still More Bark Than Bite When It Comes to Corporate Crime
When the loans predictably defaulted, mortgage servicing company employees were instructed to lie to customers, claim to have lost loan modification applications when they actually shredded them, and push customers into foreclosure, which maximized servicer fees. One set of workers at Bank of America testified that they received Target gift cards as bonuses for causing foreclosures among customers.
In the foreclosure process, these same companies, with help from “default services” specialists and “foreclosure mill” law firms, fabricated and forged the legal documents required to enforce the terms of the mortgage, because all that documentation was either lost or never recorded. Workers would sign each other’s names, use each other’s notary stamps, pretend to work for other companies, and assign mortgages from the company they didn’t work for to the one they did.
The job pressures faced by the Atlanta educators differed little from the job pressures faced by line-level workers at mortgage origination, securitization, servicing, foreclosure mill and default services shops across the country. In both cases, the workers performed their jobs under threat of termination. Supervisors watched everyone to ensure compliance. The fraud became institutionalized. And after a while, people stopped asking whether what they were doing was in any way legal.
Related: Risky New Mortgage Rules Could Take Us Back to 2008
So let’s see how the justice system dealt with these two cases. When mostly African-American educators at poor schools in Atlanta cheat on tests, they get the book thrown at them. Ten of the 11 convicted on Thursday went directly to jail while they awaited sentencing; Superior Court Judge Jerry Baxter only spared the eleventh because of her imminent pregnancy. They each face up to 20 years. With Baxter quoted as saying “they have made their bed and they’re going to have to lie in it,” it’s difficult to expect much leniency. Even higher-ups got drawn into the criminal justice net; the former Atlanta School Superintendent, Beverly Hall, only avoided conviction for looking the other way at obvious fraud because she was too sick to stand trial. She died of breast cancer earlier this year.
As for the entire housing market, top to bottom, you can count the number of people who went to jail on one finger. Lorraine O’Reilly Brown was the CEO of a default services company called DocX, which filed over 1 million false documents in courts and county offices from 2003 to 2009. This was industry practice, but only Brown went to jail for it, with the claim that she committed a conspiracy of one, allegedly defrauding banks by concealing the fraudulent document scheme. Apparently when banks contracted DocX to create documents they should have legally already had in their possession, they never expected them to be fake.
Outside of Brown, nobody who authorized any falsification, no superiors at DocX parent company Lender Processing Services (now Black Knight), nobody at a major mortgage servicer, no mortgage origination manager, and certainly no executive of any Wall Street bank ever faced the full wrath of Judge Jerry Baxter or any other authority figure forcing them to don a jumpsuit and spend 10 to 20 thinking about what they did. Despite the clear criminality of the enterprise, nobody thought to use a RICO statute on banks and their affiliates, or do anything beyond settle for cash.
Related: How a Twisted Double Standard Saved Citigroup Millions
The darkly amusing part of all this is that the harsh sentence in the Atlanta case is seen as a necessary counter to the temptation to cheat caused by the testing regime. So prosecutors devote huge amounts of resources (the district attorney called it the most complex case of his career) and judges dole out long sentences, all to keep teachers in line. No similar deterrent has been created for the industry that sells Americans the most important financial product of their entire lives. We send messages to teachers; we send bailouts to bankers.
You don’t have to consider the Atlanta teachers innocent to know something has gone terribly awry in the country when filling in bubbles on Scan-Tron sheets can get you 20 years, but stealing people’s homes and defrauding pension funds can’t get you indicted. The only way you could see what the justice system has granted bankers as in any way commensurate with what it does to ordinary people is if you grade on a curve.
Fannie Mae: Investors Being Heard ‘Round Capitol Hill On Blackburn Bill
Posted By: Guest PostPosted date: April 04, 2015 10:30:20 AMIn: PoliticsNo Comments
Fannie Mae: Investors Being Heard ‘Round Capitol Hill on Blackburn Bill by Investors Unite.
http://www.valuewalk.com/2015/04/fannie-mae-investors-being-heard-round-capitol-hill-on-blackburn-bill/
The passion and engagement of its members is the reason Investors Unite continues to make progress in raising awareness, particularly among policymakers, of the high-stakes issues at the center of the Third Amendment sweep and the ongoing conservatorships of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC): shareholder rights, taxpayer protection and the rule of law.
Having so many of you engage through the PopVox civic-engagement platform supporting legislation from Congresswoman Marsha Blackburn (R-TN) shows how strong we are when we work together when we exercise our Constitutional rights to petition the government.
The Popvox platform lets you “vote” on legislation and it sends a letter directly to your representative informing the office whether you support or oppose a particular bill.
As you know, Blackburn’s bill would require Fannie Mae and Freddie Mac to stop sending their profits to the U.S. Treasury, instead using them to build a pool of money the GSEs can draw on in the event of a significant loss. So far, every single voter who has gone to that page supports the bill! At last check, there were votes cast from nearly every state and a number of voters posted comments, such as this one from a person in Texas:
“I support H.R. 1673 The Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act because [the] 3rd amendment sweep is not the kind of action our country should be known for. Nor is it fair to shareholders, nor is it good for taxpayers. It is embarrassing. This bill can help right a serious wrong.”
Here’s a comment from a voter in New Jersey:
“I support H.R. 1673 The Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act because the integrity of our laws and charters matter. They are the very foundation of our democracy. Do the right thing and return to shareholders what is theirs. The GSE’s capital is not for the [T]reasury [D]epartment to keep.”
Follow this link to the PopVox page for Rep. Blackburn’s bill that achieves the dual-goals of ending the illegal Third Amendment Sweep and protecting taxpayers (robust capital reserves diminishes the need for a taxpayer-funded bailout).
Our Investors Unite Summit in January was so successful because the offices we visited recognized that we want to be part of the discussions, part of the solution. We can do that by respectfully engaging with them and providing them with the facts and our opinions.
Rep. Blackburn’s legislation continues to receive positive press, with the latest coming from Value Walk writer Michael Ide. He writes that, “for once, there’s a proposal in Congress that Fannie Mae shareholders can get behind.” We would add that Freddie Mac shareholders are equally supportive of what Ide calls a “fairly neutral bill.” Here’s some good insight from the article:
“On its face the bill is agnostic about the ultimate fate of the GSEs, so it doesn’t seem like as much of a longshot as comprehensive reform bills. It’s a little surprising that the bill doesn’t also try to funnel money away from the National Housing Trust Fund, but that would give Democrats a strong reason to oppose it what’s otherwise a fairly neutral bill.”
Here’s a roundup of some news articles on Congresswoman Blackburn’s legislation. We’ll note that Politico Pro, one of the most widely read publications on Capitol Hill, had the news first, but the article is behind a paywall so we can’t give you a link for it.
Housing Wire: Congresswoman Wants to Put Fannie Mae, Freddie Mac Profits in Escrow
Seeking Alpha: Fannie Mae and Freddie Mac: New Bill Establishes A Secondary Reserve To Protect Capital
Inman Select: Proposed bill Would Place Fannie, Freddie Funds in Escrow
The MReport: Bill Seeks to Create Fannie, Freddie Escrow Account
MPA Magazine: GSE Reform Could Happen Sooner Than Expected
Fannie Mae: Fact Checking John Carney
http://www.valuewalk.com/2015/04/fannie-mae-fact-checking-john-carney/
Posted By: Guest PostPosted date: April 04, 2015 12:20:49 PMIn: PoliticsNo Comments
Fannie Mae: Fact Checking John Carney by Investors Unite
To paraphrase an old saying, Wall Street Journal reporter John Carney never lets the facts get in the way of a good column.
His latest distortion– a response to the recently released paper co-authored by William Isaac and former Senator Bob Kerrey—is that recapitalizing the GSEs is a “bad deal” for taxpayers. The Isaac-Kerrey paper has a central thesis: While the government had every right to drive a hard bargain in its restructuring of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), once it makes a deal, it needs to live up to that deal. Its decision to change the terms of the deal by enacting the third amendment sweep sets a bad precedent, and has led to dangerous exposure for the taxpayer by leaving Fannie and Freddie undercapitalized.
Carney doesn’t agree with the paper, and that is his right. But in trying to rebut the paper, he gets facts wrong.
So here’s a quick rebuttal back to Carney from Investors Unite:
– Carney is wrong in claiming that Fannie Mae and Freddie Mac can’t rebuild capital. HERA allows Director Watt to suspend dividend payments to the federal government for this purpose.
– Carney is also wrong to say that allowing them to rebuild capital is allowing them to come back to life without addressing the flaws that previously existed. First, HERA addressed these flaws and the entities have been reformed. Second, it’s still up to policymakers (specifically FHFA) to determine the outcome of the conservatorship.
– Carney’s logic that the sweep protects the taxpayer more than allowing Fannie and Freddie to rebuild capital makes no sense. We don’t allow any large institutions to operate with no capital. Why are Fannie and Freddie any different?
– Carney’s Buffett analogy is not really a good one; Buffett put money into Goldman Sachs Group Inc (NYSE:GS) before the Treasury acted. So that really isn’t an example of private capital working alongside government.
Investors Unite is pleased to be having this debate. Not long ago, nobody was talking about the lack of capital at Fannie Mae and Freddie Mac – a direct result of the third amendment sweep and the government’s decision to strip them of 100% of their profits. Now everybody is talking about capital, and that’s a good thing for investors, and for the American taxpayer.
Exactly...it's all a bunch of BS. Do they really think they can bring 5 friggin TRILLION dollars of private money into the housing market.....not in our lifetime...and at what cost to the public...they will create a fluster cluck of unprecedented proportions by attempting to force private capital to take over GSE guarantee's.
And imagine the cost to the homeowners. AFTER housing prices tank...few will be able to qualify, or be able to afford the costs of buying a home. Then there is the local, county, state taxes that will evaporate....all these people are doing is ensuring THEY have a political position and paycheck so they can "fix" what ain't broke.
Fiscal year 2016 Budget resolution
Check out the bottom of page 14.
http://budget.house.gov/uploadedfiles/fy16budget.pdf
"Our budget privatizes Fannie Mae and Freddie Mac. As long as they continue to enjoy federal support, taxpayers remain exposed to more than $5 trillion of outstanding commitments belonging to the firms. By putting an end to corporate subsidies and
15 |
A Balanced Budget for a Stronger America House Budget Committee | March 2015 taxpayer bailouts in housing finance, this budget e
nvisions the eventual elimination of Fannie Mae and Freddie Mac and ending their taxpayer guarantee."
Fannie Mae & Freddie Mac: Too Profitable To Dump?
http://www.realtytrac.com/news/mortgage-and-finance/fannie-mae-freddie-mac-too-profitable-to-dump/
Fannie Mae and Freddie Mac are back in the news, in large measure for the crime of being too profitable and raising a very uncomfortable question: When will shareholders get back their companies?
The two government-sponsored enterprises (GSEs) were seized by the federal government in 2008 at the height of the financial panic. At a time when many large financial institutions needed federal bailouts this did not seem unusual to most observers, however Fannie Mae and Freddie Mac were not banks, financial service companies or even auto companies. Instead, they were in the business of creating a “secondary-market” for mortgages, an electronic “place” where home mortgages that met certain standards could be bought and sold.
The existence of a secondary market has become crucial to the American housing market. It works this way: The First Local Bank of Wherever has enough capital to fund mortgages worth $50 million. It loans out all the money and once that happens it’s unable to create any additional mortgages because it has no more money to lend. The solution: First Local sells its mortgages on the secondary market, gets new capital and can now continue to finance local loans. The result is that local lenders are able to originate additional loans and interest rates are held down because of the widespread availability of capital.
Where do Fannie Mae and Freddie Mac get the money to buy local mortgages? That comes from massive investors in the U.S. and overseas from such sources as pension funds, insurance companies, sovereign funds and rich individuals.
Financial Strength
The government spent $1.7 trillion for bailouts but did it need to rescue Fannie Mae and Freddie Mac?
In July 2008, a few weeks before Fannie Mae and Freddie Mac were seized, the government reported that the companies had $1.5 trillion in unpledged assets. In effect, their reserves were so huge that the possibility of Fannie Mae and Freddie Mac failing was just about zero.
Unlike banks and auto companies, the Federal government did not merely write a check and bail out the GSEs. Instead, both companies were seized by the government with a “conservatorship,” an arrangement which gives the government control of the GSEs and continues at this time.
The conservatorship has been very lucrative. The government loaned $117.1 billion to Freddie Mac and so far has gotten back $136.4 billion. The story with Freddie Mac is much the same: $71.3 borrowed from the federal government and $91.8 returned. That’s a total of $188.4 paid out and $228.2 paid back, a profit of $39.8 billion.
It’s hard to ignore nearly $40 billion and the GSE income may be addictive for Uncle Sam. In addition, the current situation with Fannie Mae and Freddie Mac raises several other issues: First, there’s been an effort on Capitol Hill to replace Fannie Mae and Freddie Mac with new players. Second, when the government seized the two companies it paid nothing to the shareholders — a huge Constitutional no-no because the Fifth Amendment’s “taking clause” says the government must provide “just compensation” when grabbing private property. Third, the government plainly wants the GSE money flow to continue but a looming court suit may make that impossible.
New Players
A number of plans have been offered which would dump Fannie Mae and Freddie Mac and replace them with new entities, usually on the grounds of increasing opportunities for “private capital,” meaning big banks and Wall Street firms. In these proposals, however, the federal government would ultimately guarantee or insure the mortgages purchased by the new firms, meaning a situation exactly the same as the one now in place with Fannie Mae and Freddie Mac.
Why so much interest in replacing Fannie Mae and Freddie Mac? Profits.
It’s estimated that a switch to private-sector firms would increase mortgage costs by 1 percent. That may not seem like a lot but in the context of trillions of dollars in annual transactions it adds up. Of course, the higher costs would have to be paid by someone and that “someone” would be mortgage borrowers. Steeper mortgage costs would have other results as well such as fewer real estate transactions and reduced state transfer tax collections.
Government Liability
The federal government’s Fannie Mae and Freddie Mac ownership may be less certain than many people think.
When the government took over the GSEs it did so with a “conservatorship” and not a “receivership.” With a receivership investors lose everything because the receiver takes possession of the assets. With a conservatorship, according to the Federal Housing Finance Agency, “a person or entity is appointed to establish control and oversight of a company to put it in a sound and solvent condition.” In other words, a conservator does not take possession of the assets.
This distinction is a very big deal — especially for Fannie Mae and Freddie Mac shareholders. In 2013 the government announced a “Sweep Amendment,” which said that once all loans had been repaid it would simply keep all future GSE profits. This is a problem for two reasons: First, shareholders are not getting the money. Second, Fannie Mae and Freddie Mac cannot use retained earnings to grow because there are none — all the cash is going into federal coffers.
“If the government wanted to assume the powers of receivership,” said attorney Ted Olsen, “it could have chosen that course. Instead it chose conservatorship, and with the Sweep Amendment it overreached, exceeding the legal boundaries of the statute and failing to meet obligations of conservatorship.”
If the name “Ted Olsen” seems familiar it might be because he was the Solicitor General under President George W. Bush; the winning counsel in Bush v. Gore, the case which gave the 2000 presidential election to Bush; and — more recently — the winning co-counsel who argued Hollingsworth v. Perry, the 2013 Supreme Court case which overturned the same-sex marriage ban in California.
With Olsen the challenge to the federal conservancy — and to billions of dollars in new GSE revenue the government hoped to collect — is entirely credible. It closely follows the 1996 Winstar case, a Supreme Court decision which resulted in the payment of $30 billion in claims by savings-and-loan investors following government seizures.
The Illusion of Revenues
Politicians can say the deficit is smaller and no, we didn’t “raise” taxes, by collecting GSE money. The excess money paid by Fannie Mae and Freddie Mac — almost $40 billion so far — is enough to finance the entire fiscal 2014 cost of the Department of Housing and Urban Development.
With the lack of capital for reinvestment ordained by the Sweep Amendment, it’s very possible that GSE income will fall this year and that could encourage the government to raise G-fees, the charges exacted by Fannie Mae and Freddie Mac for their services. Those charges grew from .22 percent in 2009 to .51 percent in 2013 under the conservatorship.
What happens if G-fees increase? Mortgage borrowing becomes more expensive and that’s not good for either borrowers or home sales.
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A Step in the Right Direction for Fannie Mae and Freddie Mac Shareholders
A bill was just introduced in congress that would keep Fannie and Freddie's profits out of the hands of the U.S. Treasury -- for now
http://www.fool.com/investing/general/2015/04/01/a-step-in-the-right-direction-for-fannie-mae-and-f.aspx?source=eogyholnk0000001
Source: www.futureatlas.com
Recently, a bill was introduced in the House of Representatives that would overhaul the way Fannie Mae (NASDAQ OTC:FNMA) and Freddie Mac's (NASDAQ OTC:FMCC) profits are handled. While this won't directly benefit the agencies or their shareholders right away, it could go a long way toward fixing both the agencies themselves and the current status of the shareholders, which many people believe isn't exactly fair.
The bill and what it would do
Rep. Marsha Blackburn (R-Tenn.) introduced the bill in order to create a place to put Fannie and Freddie's profits until Congress figures out what to do with the two government-sponsored enterprises. Basically, all of the agencies' profits would be placed into an escrow account, rather than straight into the Treasury's pocket as they have been since Fannie and Freddie became profitable several years ago.
For one thing, the bill could protect taxpayers from the need for further bailouts should the GSEs lose money. Under the current arrangement, 100% of the agencies' profits, as well as a chunk of their reserves, are sent to the Treasury as a "dividend" payment for the bailouts they received. This is fine while the agencies are making billions of dollars, but what happens if another decline in the housing market occurs and the agencies are facing losses? Having several billion dollars in escrow could prevent the taxpayers from having to inject any more cash into Fannie and Freddie.
Why shareholders should be happy
It's important to note that this bill wouldn't actually change anything about the current state of Fannie Mae and Freddie Mac or their current conservatorship. The agencies still won't be able to keep their profits as reserves or make any distributions to shareholders.
The newly created escrow fund wouldn't be under Fannie and Freddie's control. In fact, the bill clearly states that any reserve established under this act shall not be considered an asset of the enterprises, other than as part of a capital restoration plan once GSE reform actually takes place.
However, shareholders should still view this as a positive development. As I mentioned, all of Fannie and Freddie's profits are currently given to the Treasury -- an arrangement that many people argue is illegal. If capital were put into escrow, it could eventually be used to recapitalize the agencies and return them to an independent status.
Even under the most optimistic case for shareholders, the government has rights to about 80% of Fannie and Freddie, but 20% would certainly be better than 0%. Shareholders have made a solid argument that if the GSEs were allowed to recapitalize, shares could easily be worth 10 times what they are now.
What else needs to happen before shareholders get paid?
A creation of an escrow fund for Fannie and Freddie's profits would certainly remove one obstacle to a solution for shareholders. However, there is still a long road ahead before shareholders could potentially see any returns from their investment.
There are currently several lawsuits pending against the current arrangement, led by activist investors such as Bill Ackman and Bruce Berkowitz. A favorable outcome could change the profit-sharing arrangement, but this is an uphill battle. One judge has already dismissed several of the lawsuits, and a separate judge is set to hear arguments on several others.
Regardless of what happens, shareholders should hope this bill makes its way through Congress. If shareholders are successful in challenging the current state of the companies, having billions of dollars of capital reserves in escrow will make Fannie Mae and Freddie Mac much stronger independent entities.
Here are some facts for you....makes ya wanna pizz down the Fed's neck
Bailout Recipients
950
Recipients
$614B
Total disbursement
$390B
Total Principle returned to date
$278B
Total revenues from dividends, interest, and other fees
$53.2B
Total net to date
The GSE's have paid back a total overage of $37.9 Billion dollars which equates to 71.25% of the TOTAL Fed profit involving bailout recipients to date. This takes into account principle monies that have NOT been repaid by recipients even as they may still be repaying principle/dividends.
As of today, FnF has paid back a total of $37.9 BILLION in excess of what they drew from the treasury.
That equates to a total paid back to date of 225.4 BILLION dollars.
That is an overage of 20.225% combined. I think that is a little more than the 10% dividend ORIGINALLY agreed to.
Also, I thought I had read ( don't remember where ) That the Treasury did NOT request a commitment fee payment from either of the GSE's...so this article is filled with propaganda bullchit.
Fed Says Fannie and Freddie Have Not Repaid Taxpayers
http://blogs.wsj.com/moneybeat/2015/03/25/fed-says-fannie-and-freddie-have-not-repaid-taxpayers/
The Federal Reserve has thrown cold water on the hopes of some investors that Fannie Mae FNMA -0.79% or Freddie Mac FMCC -0.42% might be returned to private control and start paying dividends to holders of their junior preferred or common shares.
The mortgage finance giants were rescued from collapse by the infusion of taxpayer funds and put into conservatorship in 2008. Since then, they have made payments to the government that exceed the rescue funds they received. Fannie got $116.1 billion and has paid $134.5 billion. Freddie has paid $91.0 billion after taking $71.3 billion.
Some investors have argued that the obligation of the companies to hand over all of their profits to the government should come to an end because taxpayers have been fully “repaid.” As well, investors have called for an end to their conservatorships and a return to private control.
A staff report from the Federal Reserve Bank of New York issued Tuesday pointedly disputes both points. In it, researchers for the New York Fed wrote: “Should these figures be interpreted to mean that the Treasury, and therefore taxpayers, have been ‘repaid’ by Fannie Mae and Freddie Mac, and that the two firms should now pay dividends to their regular shareholders again? The answer is no.”
The paper argues that taxpayers’ investment in the companies is entitled to a “substantial risk premium,” justifying payments in excess of the bailout. As well, government support has boosted profits at the companies by lowering their funding costs, according to the paper. It also notes that the government has never collected the commitment fee both companies promised to pay in exchange for the government’s ongoing commitment to provide emergency funding.
Far from being returned to control of shareholders, the researchers argue the companies should be wound down. Failure to do so would be a “colossal missed opportunity to put U.S. residential mortgage finance on a more stable long-term footing,” the paper concludes.
Another Fannie Freddie bailout? No way: Dick Bove
CNBC.com
https://homes.yahoo.com/news/another-fannie-freddie-bailout-no-140900727.html
The buzz about another possible bailout of Fannie Mae and Freddie Mac doesn't make any sense, says Dick Bove. Here's why.
In the past few weeks, there have been a series of articles in the press suggesting that Fannie Mae (FNM/$2.45) and Freddie Mac (FMCC/$2.35) may need an additional bailout from the government. The fear is that the companies are losing money; that their capital is being depleted; and that they will be forced to draw down more funds from the taxpayer. These articles are the result of what appears to be coordinated press leaks by the government itself apparently focused on creating more populist anger at the two institutions.
It is working in one area: Investors in the stocks panicked and the shares of these companies are down approximately 20 percent since the articles appeared.
It is working in one area: Investors in the stocks panicked and the shares of these companies are down approximately 20 percent since the articles appeared.
Read More There's a new mortgage crisis brewing: Bove
To be honest, I am having a great deal of difficulty in determining what is going on. Here's why: In 2012, the government put in place a program that would wipe out Fannie Mae and Freddie Mac by depleting the capital of both companies by 2018 – i.e., taking capital down to zero. And the government is doing just that. I would like everyone to repeat this 100 times. The government is putting Fannie and Freddie out of business because it wants to do this. More specifically, the Treasury and the FHFA are executing the program, unfailingly -- not even deviating from it in the fourth quarter of 2014, when the companies recorded unrealized losses on derivatives. As a result, the equity of both companies has plummeted.
Why, then, are there complaints that the program is working? Why would the government bail out companies that it has systematically been driving out of business? Why would it stir up a pack of sycophant reporters to create angst on the possible bailout of these companies? What is going on here?
Read More Housing's new worry: Repeat foreclosures return
Here's one possible conclusion: It is being increasingly recognized that the elimination of Fannie and Freddie means the following: a) the elimination of 30-year fixed rate mortgages; b) a significant reduction in home buying by first-time and low-income families; and c) the likelihood that all home prices immediately decline across the nation. No politician wants to be tagged with that burden. This is why the administration has offered no Fannie/Freddie legislation this year and the Senate Banking Committee has indicated that it will not deal with the issue either.
The only ones panicking over the bailout issue are the press and shareholders in these companies. Possibly they should stop and think before they act.
An Update on Fairholme’s Positions in Fannie Mae and Freddie Mac
By Santiago Solari 32 minutes ago
http://finance.yahoo.com/news/fairholme-positions-fannie-mae-freddie-150620853.html
Key Takeaways from Fairholme Capital's 4Q14 13F (Part 2 of 16)
Fairholme’s investments in Fannie Mae and Freddie Mac
From the third quarter of 2014, Fairholme decided not to disclose its preferred equity positions in Government Sponsored Entities (or GSEs), Fannie Mae (FNMA), and Freddie Mac (FMCC). Fairholme continues to remain invested in these two GSEs.
According to a letter drafted to its shareholders in 2015, Fairholme Capital holds sizable stakes in these two entities in all three funds. The largest of the funds, the Fairholme Fund (FAIRX), has an allocation of 4.5% in Fannie Mae and 3.5% in Freddie Mac.
FAIRX also has 49.1% of its assets in American International Group (AIG), 22.3% in Bank of America (BAC), and 7.1% in Sears Holdings (SHLD).
Lawsuit went in favor of the government
Fairholme Capital and a few other hedge funds lost a lawsuit filed against the US federal government in October 2014. The lawsuit was filed against the government for taking full claim on all profits earned by Fannie Mae and Freddie Mac.
Had the ruling gone in favor of the hedge funds, the federal government would have been legally forced to share its profits with private entities that had an ownership position in the GSEs. The unfavorable ruling had a significant role in FAIRX’s 2.72% loss in 2014.
Berkowitz’s investment thesis
Bruce Berkowitz views Fannie Mae and Freddie Mac as the dual cornerstone of the American way of life, as they provide liquidity and stability to America’s housing finance system. The GSEs have recovered from the crisis of 2008–09, as they have returned to simpler, low-risk business models that has enabled them to deliver $36 billion to the US Treasury since the bailout.
The Treasury’s current payoff from Fannie Mae and Freddie Mac is more than three times than that of all the other financial rescue programs of the Treasury put together, making this the nation’s most successful equity investment. Berkowitz believes that the two entities are highly valuable and expects them to generate earnings of at least~$21 billion a year under various scenarios going forward.
Investors seeking to gain exposure to investment-grade mortgage-backed pass-through securities issued by the GSEs can consider investing in the iShares MBS ETF (MBB).
Administrative Procedures Act
You may find this quite interesting
Administrative Procedures
Act
The Administrative Procedure Act (APA), Pub.L. 79–404, 60 Stat. 237, enacted June 11, 1946, is the United States federal statute that governs the way in which administrative agencies of the federal government of the United States may propose and establish regulations. The APA also sets up a process for the United States federal courts to directly review agency decisions. It is one of the most important pieces of United States administrative law. The Act became law in 1946.
The APA applies to both the federal executive departments and the independent agencies. U.S. Senator Pat McCarran called the APA "a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated" by federal government agencies. The text of the APA can be found under Title 5 of the United States Code, beginning at Section 500.
There is a similar Model State Administrative Procedure Act (Model State APA) which was drafted by the National Conference of Commissioners on Uniform State Laws for oversight of state agencies. Not all states have adopted the model law wholesale as of 2007. The federal APA does not require systematic oversight of regulations prior to adoption as suggested by the Model APA.[2]
Link to the "Administrative Procedures Act"
http://www.legisworks.org/congress/79/publaw-404.pdf
Reits borrow money ( and sell shares) and leverage that money to borrow more money. They then loan it to investors...builders...institutions... even individuals who want to invest in real estate. This is a typical Mreit.
They typically charge interest and possibly admin fees to the borrower. They make their money by the spread between their "carry cost" and their income from interest, fees, and associated costs they charge.
The carry cost is their total cost to borrow money.
As their cost to borrow money goes up, ( FED raising rates) the spread typically decreases between short term wholesale borrowing and retail lending....smaller spread...smaller profit margin.
They also have an inherent amount of default risk from borrowers that has to be taken into consideration. The higher default rates, the less profit. Also, as rates go up, many will refi to lower rates, thus reducing the profit spread again.
You can make a lot of money with Reits...if you get in at the right prices. There can also be quite a risk value as well...some of the other Reits that have a much higher leverage ratio than CIM have lost a lot of share value.
Their reasoning is to entice big money to buy into the company. Everything they have said indicates their move is a positive one for investors...we shall see how positive it is if/when the Fed raises interest rates.
House Republicans take aim at Dodd-Frank in budget plan
Reuters
http://finance.yahoo.com/news/house-republicans-aim-dodd-frank-160833670.html
WASHINGTON (Reuters) - Republican lawmakers took aim at the Dodd-Frank Wall Street reform law Tuesday, unveiling a plan that would gut regulators' authority to manage the collapse of big banks and give Congress direct control of the U.S. consumer finance bureau's budget.
The effort to repeal parts of Dodd-Frank is part of a broader fiscal 2016 budget plan released by the House of Representatives budget committee that calls for eliminating deficits and also repealing the president's signature Affordable Care Act.
The proposal, led by House Budget Committee Chairman Tom Price, pledges to make "great strides in repealing onerous policies enacted under Dodd-Frank that are hurting financial institutions both large and small."
Republicans have for years rallied against a measure in Dodd-Frank known as "orderly liquidation authority" which allows U.S. regulators to intervene in the event a large, risky bank collapses.
They have said the measure perpetuates government bailouts, and that any collapse of a large firm should be left to a bankruptcy court.
In the past, Republicans were unable to get any traction repealing the measure, largely because the U.S. Senate was controlled by Democrats.
The plan still faces major hurdles, including a likely veto from President Barack Obama if it ever reaches his desk.
Nevertheless, Republicans in the House are making a fresh push targeting bank resolution and other major Dodd-Frank provisions now that the Senate is also controlled by Republicans.
In addition to targeting resolution powers by banking regulators, the Republican budget plan also takes aim at the Consumer Financial Protection Bureau, a new regulatory agency that serves to protect consumers from predatory loan practices by credit-card and mortgage servicing companies.
The bureau's budget is not appropriated by Congress and is funded through the Federal Reserve. That has irked Republicans because it gives them less control over the regulator.
In addition to targeting the Dodd-Frank law, Tuesday's plan also calls for privatizing housing finance companies Fannie Mae and Freddie Mac, which were both seized by the government in 2008 after they nearly collapsed beneath the weight of bad loans.
"As long as they continue to enjoy federal support, taxpayers remain exposed to more than $5 trillion of outstanding commitments belonging to the firms," the plan says.
Fannie Mae, Freddie Mac Litigation Update
by Todd Sullivan, ValuePlays.
http://www.valuewalk.com/2015/03/fannie-mae-freddie-mac-litigation-update/
Judge Sweeney entered an order last night memorializing the parties’ agreement to complete jurisdictional discovery by June 29, 2015, and directing the parties to file a status report by Mon., July 13, 2015, letting her know how they want to proceed. A copy of that order is attached to this e-mail message.
When jurisdictional discovery is completed, Fairholme should then have what it needs to respond to the Government’s motion to dismiss (Doc. 20, filed Dec. 9, 2013) Fairholme’s complaint. The completion of jurisdictional discovery in Fairholme v. U.S. will also trigger:
(A) the filing of the Government’s motion to dismiss Arrowood v. U.S.;
(B) setting deadlines for the plaintiffs to file their responses to the Government’s motions to dismiss Cacciapalle v. U.S., Fisher v. U.S., and Washington Federal v. U.S.; and
(C) the filing of the Government’s answers to or motions to dismiss the complaints filed in Rafter v. U.S. and Reid v. U.S.
The Government will likely renew its request to stay further briefing until the D.C. Circuit has ruled on the pending appeals from Judge Lamberth’s decision. Speaking of those appeals, the parties are awaiting direction from the D.C. Circuit about how many words their appellate briefs may contain.
In early-April we should also see an appeal to the Eighth Circuit from Judge Pratt’s decision in Continental Western v. FHFA.
Additionally, Chapman has put together the definitive Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) litigation primer for us all:
GSE Litigation (pdf)
http://www.valueplays.net/wp-content/uploads/gselitigationsummary201503.pdf
Letter from Senator Pat Toomey
this is from YNB
greaterebano • 15 hours ago
Senator Pat Toomey - NICE FOR FnF
Letter from Senator Toomey: 3rd Amendment’s Chilling Effect
Dear [Constituent]
Thank you for contacting me about Fannie Mae and Freddie Mac. I appreciate hearing from you.
As you may know, Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase mortgages, pool those mortgages into mortgage-backed securities (MBSs), and then sell them to investors with a guarantee that the investor will be paid on time. With over $5 trillion on their balance sheets, the GSEs play an enormous role in today’s housing market.
In 2008 as the financial crisis erupted, the GSEs’ ability to meet their obligations came into doubt. On September 7, 2008, the federal government took control of them and extended a direct line of credit from the Department of the Treasury (Treasury). In return for supporting the GSEs, Treasury received senior preferred stock that carried a 10 percent dividend and warrants to purchase 79.9 percent of the common stock of each entity for a nominal price. The remaining 20 percent of the companies remained in the hands of private investors. From 2008 to 2011, Treasury supported the GSEs through the purchase of over $189 billion in senior preferred stock. Since 2012, the GSEs have not required further Treasury support.
On August 17, 2012, Treasury and the Federal Housing Finance Agency (FHFA) dramatically changed the terms of the original GSE support agreement in what has become known as the “Third Amendment.” Rather than receiving a 10 percent dividend on its preferred stock, Treasury would receive all GSE profits going forward. By claiming all future profits, Treasury effectively eliminated all remaining shareholder value.
While I believe that taxpayers must be fully repaid and receive a fair return on their investment, the Third Amendment unfortunately may have a chilling effect on future private investment in the housing market. If the government is willing and able to unilaterally change the rules of the game at any time, investors in Pennsylvania and across the country cannot be confident that they will not again find themselves in a situation in which the government wipes out the value of their investment. Lack of private investment could prevent us from successfully reforming the GSEs, protecting taxpayers, and encouraging affordable housing finance for all Americans. I therefore look forward to working with my Senate colleagues on both sides of the aisle on this issue.
Thank you again for your correspondence. Please do not hesitate to contact me in the future if I can be of assistance.
Sincerely,
Signature
Pat Toomey
U.S. Senator, Pennsylvania
Fannie Mae: Stegman Redefines Conservatorship
Posted By: valueplaysPosted date: March 07, 2015 07:42:46 PM
http://www.valuewalk.com/2015/03/fannie-mae-stegman-redefines-conservatorship/
Ok, so it is painfully obvious Michael Stegman either has no idea what conservatorship is, or simply doesn’t really give a rats ass what it is. Assuming he is not stupid (I am assuming he is a smart man), we can only surmise that he (and the White House) just don’t care. Below are his remark from yesterday regarding Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). What I have done is place in bold italics next to many of his statements vs what the FHFA told people conservatorship was all about and its goals and my comments. You’ll notice the lack of even remote similarity between the two:
Remarks by Counselor to the Secretary for Housing Finance Policy Dr. Michael Stegman Before the Goldman Sachs Third Annual Housing Finance Conference
3/5/2015
Good morning, and thank you, Carsten, for that kind introduction. It’s a pleasure to be with you today to engage on a very important issue for our country and our economy.
This morning, I want to discuss the state of housing finance reform and the path we see to a more sustainable mortgage finance system that meets President Obama’s principles and creates a housing finance system that will promote stability in the housing market and the broader economy, and therefore, benefits the American people. First, I’d like to briefly explain why Treasury is devoting significant resources to helping market participants create a robust and responsible non-government-guaranteed securitization market and then discuss our thinking about how to move forward on Fannie Mae and Freddie Mac reform.
Private Label Securities Initiative
The Administration believes that private capital should be at the center of the housing finance system. To that end, Treasury has been working with the industry to develop the structural reforms necessary to help bring the private label securities, or PLS, market back, and get investors off the sidelines. A key component of this effort is rebuilding trust among market participants, and to this end, Treasury published the results of an exercise last month that would provide greater transparency around credit rating agency loss expectations for newly originated mortgage collateral. The goal of this exercise and the broader PLS initiative is to improve confidence in post-crisis practices and encourage investors to return to a reformed PLS market.
Treasury views a diverse housing finance system that features multiple execution channels as essential to promoting competition, market efficiency, and consumer choice. We see the development of a healthy and responsible PLS market as an important component of a sustainable housing finance system and a complement to a reformed government-supported channel, an objective I will discuss in the remainder of my speech.
GSE Reform
With that in mind, let me turn my attention to the Fannie Mae and Freddie Mac. We are now well into the seventh year of Fannie Mae and Freddie Mac’s conservatorship. We cannot forget that the actions taken in the wake of the financial crisis to backstop the GSEs stabilized the housing market, protected the capital markets, and supported the broader economy.
Q: ?What are the powers of the Conservator?
???A: ?The FHFA, as Conservator, may take all actions necessary and appropriate to (1) put the Company in a sound and solvent condition and (2) carry on the Company’s business and preserve and conserve the assets and property of the Company.
What follows below is the antithesis of the above:
But as I have said many times, the status quo is unsustainable. Taxpayers remain at risk, market participants are uncertain about the government’s longer-term footprint in the mortgage market, and mortgage access and pricing decisions are not in the hands of market participants. The American people deserve better.
They deserve an efficient, sustainable, housing finance system that serves borrowers effectively and efficiently without leaving taxpayers on the hook for potential future bailouts. The critical flaws in the legacy system that allowed private shareholders and senior employees of Fannie Mae and Freddie Mac to reap substantial profits while leaving taxpayers to shoulder enormous losses cannot be fixed by a regulator or conservator because they are intrinsic to Fannie Mae and Freddie Mac’s congressional charters. And these charters can only be changed by law. That is why we continue to believe that comprehensive housing finance reform is the only effective way forward, not narrowly crafted ad-hoc fixes.
We cannot forget about the important progress made in the Senate during the last Congress and hope that the new Congress will afford the opportunity to again advance bipartisan legislation meeting our principles, even if it is too soon to tell what the ultimate prospects will be. The Administration remains ready, willing, and able to work in good faith with members of both parties to complete this important but unfinished piece of financial reform. As memories of the financial crisis fade, we cannot become complacent. The best time to act is when the housing market is well along the path to recovery and credit markets are normalizing, not on the precipice of a new economic shock when there is little time to be thoughtful.
We do recognize the myriad of challenges to achieving a bipartisan legislative consensus. But as I will explain shortly, we believe that significant progress can be, and is being made, prior to legislation, to help move the housing finance system towards a more sustainable future. While this progress is not a substitute for legislative reform, it can, over time, reduce the challenges to achieving a desired legislative outcome that puts in place a durable and fair housing finance system by advancing us down the path of transition.
Progress under Conservatorship
To that end, I’d like to highlight the steps forward that have been made under the conservatorship – progress that needs to be built upon. Important gains have been and continue to be made in de-risking and preparing the Enterprises for transition. The Fannie Mae and Freddie Mac’ critical housing finance infrastructure and technology – which was allowed to obsolesce in the years preceding the financial crisis – is being renewed and enhanced.
Furthermore, their business practices are being reformed. Between 1995 and 2008, management grew the GSEs’ retained investment portfolios, which are financed at government-subsidized borrowing costs, fourfold to a combined total of $1.6 trillion. Since entering conservatorship, those portfolios have been nearly halved, and they are required to shrink further to less than $500 billion in total by year-end 2018.
Q: ?Can the Conservator determine to liquidate the Company?
???A: ?The Conservator cannot make a determination to liquidate the Company, although, short of that, the Conservator has the authority to run the company in whatever way will best achieve the Conservator’s goals (discussed above). However, assuming a statutory ground exists and the Director of FHFA determines that the financial condition of the company requires it, the Director does have the discretion to place any regulated entity, including the Company, into receivership. Receivership is a statutory process for the liquidation of a regulated entity. There are no plans to liquidate the Company.
Isn’t this what is happening? A slow motion liquidation?
In addition to being a major source of Fannie Mae and Freddie Mac earnings, these portfolios remain a significant source of financial volatility and potential taxpayer risk. These portfolios, the pursuit of maximum earnings, and the drive to recapture market share through greater risk-taking left taxpayers holding the bag when the bets went wrong. In conservatorship, these practices have been replaced with a recommitment to more effective risk management, prudent underwriting, more appropriate pricing, and a greater emphasis on sustainable mortgage finance.
The Federal Housing Finance Agency (FHFA), as the independent regulator and conservator of the GSEs, is laying the groundwork for a future housing finance system based upon private capital taking the majority of credit risk in front of a government guarantee with greater taxpayer protections, broader access to credit for responsible borrowers, and improved transparency and efficiency. These measures include, among others, expanding and diversifying risk-taking among private actors, further focusing GSE businesses on meeting the mortgage finance needs of middle class households and those aspiring to join the middle class, and developing a securitization infrastructure that can serve as the backbone for the broader mortgage market over time. All of these initiatives are consistent with the long-term vision of providing secure homeownership opportunities for responsible middle-class families.
After the failure of both Fannie Mae and Freddie Mac, FHFA’s ability to stand in the shoes of their respective boards and senior management as conservator in order to set appropriate, statutorily-guided priorities and ensure follow-through has been good for the Enterprises and good for the American people. Preserving FHFA’s role in the future housing finance system merits serious consideration.
Administrative Vision
With that history in mind, I want to expand upon our vision for reforms that would transition the GSEs further along a path toward a future housing finance system while they still benefit from Treasury’s capital support. In turn, the progress we make today could serve both as a framework for, and reduce certain challenges associated with, achieving bipartisan legislative reform. Within the context of a continuing backstop, further de-risking the Enterprises is common-sense, prudent policy. Other
Fannie Mae and Freddie Mac: The Hedge Funds Weigh In
http://www.fool.com/investing/general/2015/03/06/fannie-mae-and-freddie-mac-the-hedge-funds-weigh-i.aspx
By Alexander MacLennan
March 6, 2015
Shares of Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) are among the most talked-about shares not listed on a major exchange. But don't let that be mistaken for lack of interest -- big investors are weighing in and being heard on the mortgage giants. But is it worth listening?
Bill Ackman
The activist investor behind Pershing Square is now one of the biggest investors in Fannie Mae and Freddie Mac, holding just under 10% of the common shares of each. On top of that, Ackman has taken out agreements with counterparties to effectively give him even more exposure to the value of Fannie and Freddie shares.
Although Ackman's Pershing Square took a hit last year when a case against the government to end the net worth sweep was thrown out, Ackman has not backed down and remains bullish on this investment. Not only is Ackman still bullish but he recently called the Fannie and Freddie investment the "best trade ... in capital markets."
No new word of additional Fannie or Freddie share accumulation has surfaced from Ackman but this is understandable given the current size of his investment in the government-sponsored enterprises.
In January, Ackman successfully pushed to have one of his cases voluntarily dismissed so that the ruling from the September Lamberth decision would not dispose of Pershing Square's claims as well. Nonetheless, he is still pressing forward with efforts to end the net worth sweep of Fannie and Freddie by challenging it in the courts.
Bruce Berkowitz
The man behind Fairholme Funds has been quite prominent in the Fannie Mae and Freddie Mac investment discussion. Like Ackman, Berkowitz is also suing the federal government to end the net worth sweep of the GSEs and has cases currently active in the courts.
But unlike Ackman, Berkowitz has primarily focused on the preferred shares of Fannie and Freddie, which currently comprise about 7.6% of Fairholme's investments. More recently, Berkowitz has begun adding common shares of the GSEs and added to his holdings again, as noted in Fairholme's annual report.
In the report, Fairholme added nearly 5 million GSE shares (3.1 million from Freddie Mac and 1.8 million from Fannie Mae). With the latest additions, the common shares account for just over 1% of Fairholme's portfolio.
According to Bloomberg, Berkowitz has remained bullish, saying on a recent conference call, "We've had our ups and downs, but we are making considerable progress in the court of federal claims." Berkowitz looks ready to continue the court battle, which is no surprise, given the potential upside he sees and the amount of money he has invested into the GSEs.
Richard Perry
Perry Capital was among the first of the hedge funds to push for an end to the net-worth sweep of Fannie Mae and Freddie Mac, and the effort continues today. After having its case dismissed in September, Perry Capital is appealing the ruling.
Compared to Ackman and Berkowitz, Richard Perry has been less vocal on the Fannie and Freddie situation recently, but the efforts to appeal the last ruling show he is still very much involved in the court battle.
Should you buy them?
Having big hedge fund investors on board is a positive for most investors, but one should still examine the underlying investment. As it currently stands, Fannie and Freddie are making billions of dollars each on an annual basis, but none of this is finding its way back to shareholders due to the net-worth sweep being conducted by the Treasury.
There have been various estimates of what Fannie and Freddie would be worth if shareholders prevail in their cases against the government. Assuming the 79.9% warrant stake is exercised, Ackman, in a colorfully titled presentation "It's Time to Get Off Our Fannie," has estimated shares will be worth $23 to $47 each outside of conservatorship. I have reviewed Ackman's calculations -- and I encourage potential investors to do so as well -- and I see them as reasonable and useful in establishing a range.
Of course, there are other risks to the companies. If the shareholder lawsuits fail, their profits will continue to flow to the Treasury, and shareholders will only receive something if Congress decides to give up this source of income. Fannie and Freddie are also subject to downturns in the housing market, as they are backing trillions of dollars in mortgages and have not been allowed to rebuild adequate capital due to the net-worth sweep.
Potential investors should also take into account the risk of a shakeup in the capital structure. Additional common shares may need to be sold to raise capital if the GSEs are released from conservatorship, or the senior preferred stake may end up being converted into common shares, as was done with the government-owned preferred stakes in American International Group and Citigroup.
Despite their recent share price increases, Fannie Mae and Freddie Mac remain high-risk, high-potential-return investments, and investors should only buy shares with money they can afford to lose. Overall, I am bullish on Fannie and Freddie for their upside potential but keep them in the high-risk part of my portfolio due to the wide range of possible outcomes.
What this means
Despite a setback last September, the biggest hedge fund players in the Fannie Mae and Freddie Mac cases are still bullish on their positions. This is demonstrated by the fact that their stakes were either maintained or increased as these investors put their money where their mouths are.
The court cases put forth by these investors are also continuing as the Lamberth decision is appealed and the case in the U.S. Court of Federal Claims under Judge Sweeney continues. Currently, investors should watch the progress of the Sweeney case where information will continue to be gathered as the government's request to put the case on hold was denied.
But what is also clear from fundamental analysis and the strategies of the hedge funds is that the Fannie and Freddie play is a long-term investment that will be decided through future court cases.
Alexander MacLennan owns common shares of Fannie Mae and Freddie Mac and warrants on American International Group. He also owns preferred shares of Fannie Mae. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Largest US banks all pass latest round of Fed 'stress tests'
http://finance.yahoo.com/news/largest-us-banks-pass-latest-round-fed-stress-213320070--finance.html
just a few cuts from the article
WASHINGTON (AP) — All of the nation's 31 largest banks are adequately fortified to withstand a severe U.S. and global recession and keep lending, the Federal Reserve said Thursday.
Industry analysts say the most critical tests for the industry will come next week. That's when the Fed will announce whether it's approved each bank's request, if one has been made, to raise dividends or repurchase shares. Those results will be based on how each bank would fare in a severe recession if it took such steps
The banks undergoing the stress tests included JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo and Co. — the four biggest U.S. banks by assets.
Industry lobbyists applauded the results Thursday and began a public push to get the Fed to approve next week the banks' plans to raise dividends or repurchase shares.
Raising dividends costs money. The government doesn't want banks to shrink their capital reserves, making them vulnerable in another recession.
Frank Keating, CEO of the American Bankers Association, said Thursday's results should allow banks "to pay dividends that help attract investors to fund future growth."
Citi was the biggest of five banks whose plans the Fed rejected last year. The regulators also said they found deficiencies in the capital plans of HSBC North America Holdings, RBS Citizens Financial Group, Santander Holdings USA and Zions. At the same time, the Fed approved requests from the other tested banks.
The banks can now amend their plans on dividend payments and stock buybacks to win Fed approval before it announces its decisions on those matters Wednesday.