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Fannie Mae: What Happened In Vegas Does Not Stay There. by Guest PostOctober 24, 2014, 11:32 am
Fannie Mae: What Happened In Vegas Could Impact the Entire Country by Investors Unite
What Happened In Vegas Could Impact the Entire Country
There’s a fine line between making more credit available to homeowners with shaky credit and getting back into the subprime mortgage business. We’re a little concerned about which side of the line FHFA Director Mel Watt will fall down on.
Watt was in Las Vegas the other day speaking to the annual conference of the Mortgage Bankers Association. Our favorite report is from Mortgage Daily News:
“He acknowledged that fears of being forced to repurchase large numbers of loans after they have been sold to one of the two government sponsored enterprises (GSEs) Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) has created unease among lenders almost from the start of the mortgage crisis.”
We’re sure the bankers found it reassuring that he “acknowledged” concerns. It doesn’t seem to be stopping him from inching toward a really bad idea. The headline on the Vox article said it all: “Obama’s Latest Plan to Boost the Economy? Bring Back Subprime Mortgages.” From their article:
“The significance of the speech is that the FHFA is going to be less of a tight-ass in a number of regards, essentially upping the level of subsidy that is provided to mortgage lenders. This will make it cheaper for some wannabe home buyers to buy homes, it will increase the value of some existing homeowners’ houses, and it will generate plenty of profit-seeking opportunities for realtors and banks.”
“… Watt also wants Fannie Mae and Freddie Mac to start buying riskier loans — loans with down payments as low as 3 percent, a move bolstered by similar action from other regulators.”
“… it’s an awfully odd way to give the economy a short-term boost. If the government wants to subsidize new home purchases, it could offer a $1,000 rebate check to anyone who buys a new home. Even better, we could offer a $1,000 check to everyone and let them buy whatever they want with it. The difference is that cutting checks would require a new spending authorization, while Watt’s actions are ‘free.’”
“But ‘free’ in this case simply means that the costs are hidden. If you let banks pass on the costs of improperly documented or excessively risky loans, that simply means the US government is assuming those costs. In any given year the odds of a giant house price crash are low, so no actual costs will be incurred. But every once in a while these things do blow up, and the bailout bill arrives.”
Another fundamental problem here is that Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are not allowed to retain capital built through their profits, and therefore cannot absorb the increased risks this loosening of lending rules will create for the entities.
The legislative proposals in Congress (Corker-Warner-Johnson-Crapo) claim that restructuring Fannie Mae and Freddie Mac under their new rules will be the best solution for protecting the housing market and protecting taxpayers against another financial meltdown. Except that none of the proposals include the fundamental piece of following the rule of law and giving shareholders’ their due before revamping the entire system.
An important, yet overlooked, job in a political organization is the person who scouts out locations for major announcements. Surely that person was on vacation when location was decided for Watt to announce the federal government would be rolling the dice on home mortgages. We like how the Wall Street Journal said it:
“But unlike most of the players around a Mandalay Bay poker table, Mr. Watt is playing with other people’s money. He’s talking about mortgages that will be guaranteed by the same taxpayers who already had to stage a 2008 rescue of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) that eventually added up to $188 billion. Less than a year into the job and a mere six years since Fan and Fred’s meltdown, has he already forgotten that housing prices that rise can also fall?”
That’s an excellent question.
There’s a ton of coverage of Watt’s remarks, and we’ve saved you the legwork of having to track it all down yourself (see below). Happy reading …
San Francisco Chronicle: The U.S. Government Tries to Get More People Buying Houses
Washington Examiner: Don’t Expect Easier Credit from Watered-Down Mortgage Rule
New York Times: U.S. Regulators Approve Eased Mortgage Lending Rules
Seeking Alpha: The Reason Fannie Mae And Freddie Mac Shares Are Rising Today
The New Republic: The Mortgage Industry Is Strangling the Housing Market and Blaming the Government
MReport: FHFA Director Talks Next Steps for Fannie Mae, Freddie Mac
HousingWire: MBA’s Stevens: Final Risk Retention Rule Works for Mortgage Bankers
Politico: The Risk Retention Rule’s Winners and Losers
Politico: Regulators Unveil Risk Retention Rule
Bloomberg: Bankers Buried in Lawsuits Say New Mortgage Rules Fall Short
Bidness: FHFA is Pushing the Revival of the Mortgage Finance Fiants As It Releases New Guidelines on Life-of-Loan Exclusion Terms
http://www.valuewalk.com/2014/10/fannie-mae-happened-vegas-impact-entire-country/
If the warrants are exercised and commons are diluted would the preferred shares be imune or rather share price of preferred not impacted?
Fannie Mae and Freddie Mac Structurally unsound
America restores the weak lending standards that led to the housing crash
Oct 25th 2014 | New York | From the print edition
Timekeeper
WHEN politicians bashed Wall Street for its reckless mortgage lending in the wake of the subprime crisis, bankers retorted that it was the politicians’ enthusiasm for expanding home ownership, even if it meant small deposits and low credit standards, that had really fomented the disaster. Yet that enthusiasm is undimmed: in a speech on October 20th Mel Watt, head of the Federal Housing Finance Authority (FHFA), announced plans to reintroduce mortgages with deposits as low as 3% through Fannie Mae and Freddie Mac, the two government-backed housing giants it regulates.
Both Fannie and Freddie were bailed out during the financial crisis. There was much talk in Congress of winding them down; in the meantime, they tightened loan requirements to limit the risk to taxpayers. But that changed when Barack Obama appointed Mr Watt, a congressman from North Carolina and long-term evangelist for home ownership.
Fannie and Freddie do not issue mortgages. Instead, they buy them from banks and guarantee the securities into which they are bundled for resale. Over the past two years many big mortgage lenders have paid billions of dollars in fines and been forced to buy back piles of dud loans on the grounds that they did not conform to Fannie’s and Freddie’s rules. These settlements were controversial, in that the pair had actively sought out risky mortgages to satisfy their mission to promote “affordable housing”.
In response, many banks have stopped lending to riskier borrowers. The new rules announced by Mr Watt are supposed to entice them to resume by narrowing the circumstances under which they can be held at fault. The banks, which hold buckets of surplus deposits and are eager for safe ways to deploy them, are pleased, since the risks of making loans with low deposits will once again rest with Fannie and Freddie.
This week a consortium of federal agencies also announced new standards that would permit banks to securitise and sell mortgages without retaining a 5% stake—leaving them little incentive to maintain high lending standards. In 2011 these agencies had suggested that such securities should only include mortgages with a minimum deposit of 20% and monthly repayments of no more than 35% of the borrower’s income. In the end they raised the loan-to-income ratio to 43% and dropped the minimum deposit entirely. The reason for the weaker standard, they said, was the concern that “additional constraints on mortgage-credit availability” might “disproportionately affect LMI (low-to-moderate-income), minority or first-time homebuyers.” Whether the lack of constraints might disproportionately affect taxpayers, the regulators did not say.
http://www.economist.com/news/finance-and-economics/21627699-america-restores-weak-lending-standards-led-housing
Truth update 10/23/14- Wolves in sheeps clothing. Edit:6:19pm
23 Thursday Oct 2014 Posted by timhoward717 in Fannie Mae Freddie Mac
Tim and everyone, I am more confident now than at any other time in our fight that Fannie and Freddie will not go anywhere, and we will prevail. The democrats will not turn this over to a possible GOP president in 2016. If you had the view I have you would understand my confidence. The importance of the legal issues is becoming far less important due to the political changes. Keep in mind that not only do we face our opponents that want to destroy Fannie and Freddie at any cost, but also be aware of wolves in sheep’s clothing. By this, I mean that many of the comments made here, and a variety of other message boards come from people who are both shorting and swing trading. They post comments that appear well intentioned, but are designed to plant seeds of doubt and instill fear in people. You would not believe the amounts of these comments that we discard before they even make it online. Others we delete if we feel they are made with these motives. There are several different ideas as to how this will play out, and I encourage people to read several of our past posts to get up to speed as to how we feel things are transpiring.
We have been working on the “Summary of truth” and welcome everyone’s involvement. I hope to have a conference call in the next week or so to go over this, as well as share, more candidly about our overall situation. We are trying to work out the details for the call in a away that ensures our ability to stay anonymous. If anyone has any ideas about that or has ideas concerning the “Summary of Truth” please email us at timhoward717@yahoo.com Keep the Faith!
Edit:
The surge leading into last weeks MBA conference and especially late afternoon Monday was the more “inside crowd” catching on to what I have been saying since May.
http://timhoward717.com/
This should be stickied but will probably be deleted. Off topic but a tribute to one of the greats
“Why do people say "grow some balls"? Balls are weak and sensitive. If you wanna be tough, grow a vagina. Those things can take a pounding.”
? Betty White
LOL
Government BailoutsOctober 23, 2014 To the Editor:
Re “Megarich Plaintiffs, Legally Adrift” (Op-Ed, Oct. 20): Steven Rattner lumps together two cases, A.I.G. and Fannie Mae/Freddie Mac, that raise entirely different legal issues. The A.I.G. case questions whether government has the power to dictate bailout terms. The Fannie/Freddie case questions whether government can unilaterally and retroactively change a bailout package years after private investors made decisions based on the original terms.
The government invested in Fannie and Freddie preferred stock carrying a 10 percent dividend. It changed its mind and decided to confiscate all earnings of Fannie and Freddie in perpetuity — despite the fact that the government recovered its entire investment with interest and will likely book a $200 billion profit on the sale of its common stock in the two government-sponsored entities.
Moreover, the government placed Fannie and Freddie in a “conservatorship” to preserve their assets and restore them to health, which cannot happen if they are stripped of all earnings.
I do not envy those in government who have to deal with the next crisis if this decision stands; they will have no credibility.
WILLIAM M. ISAAC
Sarasota, Fla., Oct. 21, 2014
The writer is a former chairman of the Federal Deposit Insurance Commission and a senior managing director for a consulting firm.
http://mobile.nytimes.com/2014/10/24/opinion/government-bailouts.html?referrer=
Retiement funds can then buy.
Nomura Says FHFA Can't Back Up Timeline In MBS Suit
By Aebra Coe Law360, New York (October 22, 2014, 4:33 PM ET) -- Nomura Holding America Inc. told a New York federal court Tuesday that the Federal Housing Finance Agency can’t back up its contention that it was oblivious before 2008 that Fannie Mae and Freddie Mac were sold toxic residential mortgage-backed securities — a claim that would sink the bank's statute of limitations defense.
Nomura said FHFA’s motion for summary judgment on the bank’s statute of limitations defense must be rejected because disagreement over the facts of the timing of the agency’s illumination make the defense an issue...
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Yes a repost in case somebody missed it and has access to law 360
I would like an informed individual with acces or otherwise to comment on this articles relevance.
http://www.law360.com/articles/589091?utm_source=rss&utm_medium=rss&utm_campaign=articles_search
Does anybody have access to law 360?
Nomura Says Date FHFA Knew MBS Were Bad Is Dubious
Share us on: By Aebra Coe
Law360, New York (October 22, 2014, 4:33 PM ET) -- Nomura Holding America Inc. told a New York federal court Tuesday that the Federal Housing Finance Agency can’t back up its contention that it was oblivious before 2008 that Fannie Mae and Freddie Mac were sold toxic residential mortgage-backed securities.
Nomura said FHFA’s motion for summary judgment on the bank’s statute of limitations defense must be rejected because disagreement over the facts of the timing of the agency’s illumination make the defense an issue for a jury.
“Plaintiff’s motion cannot be granted unless no reasonable jury...
http://www.law360.com/articles/589091?utm_source=rss&utm_medium=rss&utm_campaign=articles_search
This sounds really important. Somebody smarter than please follow up on this
Nomura Says Date FHFA Knew MBS Were Bad Is Dubious
Nomura Holding America Inc. told a New York federal court Tuesday that the Federal Housing Finance Agency can’t back up its contention that it was oblivious before 2008 that Fannie Mae and Freddie Mac were sold toxic residential mortgage-backed
http://www.lexisnexis.com/legalnewsroom/banking/b/newsheadlines/archive/2014/10/22/nomura-says-date-fhfa-knew-mbs-were-bad-is-dubious.aspx
Cheap mortgages until the next realestate bubble bursts.
Plaintiffs in lawsuit and maybe quietly buying. 2 possible reasons
Divided U.S. SEC adopts mortgage rule, decries lax lending
By Sarah N. Lynch
WASHINGTON (NEWS.GNOM.ES) – U.S. securities regulators adopted a rule on Wednesday designed to avert another financial crisis, but two officials dissented, saying it did not do enough to discourage banks from lending to borrowers with shaky credit and then passing the mortgage risk to investors.
The Securities and Exchange Commission approved the so-called “risk retention” rule by a 3-2 vote, while the U.S. Federal Reserve is expected to approve it later Wednesday.
The rule requires banks to keep at least 5 percent of the risk on their books when they securitize loans. This “skin in the game” is aimed at aligning the bank’s interest with investors that buy the loans.
But two Republican commissioners said they could not support the rule in part because they believe its exemption for low-risk mortgages is too broad and does not sufficiently crack down on lax underwriting standards. They also said the rule perpetuates the dominant role of government-sponsored enterprises like Fannie Mae in the housing market.
“Today could have been the day when the commission and its regulatory partners … stood strong, resisted political and special interest group pressure, and courageously seized this golden opportunity to address the failed federal housing policy that was one of the central causes of the financial crisis,” said Republican SEC Commissioner Daniel Gallagher.
Before the financial crisis, banks pumped up lending volumes, little concerned about the risks since they planned to unload the loans. The system imploded when subprime mortgage borrowers started defaulting.
The dissents by Gallagher and Michael Piwowar were widely expected, after they published a letter to the editor in the Wall Street Journal in June.
Other banking and housing regulators gave their nod on Tuesday. The agencies are required by the 2010 Dodd-Frank Wall Street financial reform law to implement the rule.
Their concerns, however, reflect the broader public debate about the delicate balance between mortgage lending standards and the need to protect investors.
The most hotly contested issue centers on the scope of an exemption for ordinary “qualified” residential mortgages. In 2011, regulators originally proposed defining qualified mortgages as those requiring borrowers to make hefty down payments.
Regulators scrapped the plan after the industry pushed back, saying it would stifle the housing market for lower-income buyers.
In Wednesday’s final rule, the definition of a qualified mortgage is much looser than first proposed in 2011, and aligns with a definition in a separate rule by the Consumer Financial Protection Bureau.
In a study, SEC economists said the exemption is now so broad that the “same economic incentives” for the banks that existed prior to the financial crisis “may persist.”
SEC Commissioner Luis Aguilar, a Democrat who voted in favor of the rule, on Wednesday acknowledged some outstanding concerns with the scope of the exemption.
But, he said, the rule contains a safeguard that allows regulators to periodically review how it defines a qualified residential mortgage, and has asked SEC staff to provide annual updates.
http://news.gnom.es/business/divided-u-s-sec-adopts-mortgage-rule-decries-lax-lending
Dissenting Statement at Open Meeting Regarding Final Rule on Credit Risk Retention
Commissioner Michael S. Piwowar
Oct. 22, 2014
Thank you, Chair White.
Let me begin by saying how much I appreciate the great efforts from the Commission staff working on the rule, especially those in the Divisions of Corporation Finance and Economic and Risk Analysis and the Office of General Counsel. Unfortunately, despite their efforts, I cannot support the adoption of the final joint rule to implement the credit risk retention requirements of Section 15G of the Securities Exchange Act of 1934 (the “Exchange Act”),[1] as added by Section 941(b) of the Dodd-Frank Act.[2]
As a joint rule promulgated under the authority of the Exchange Act, such rulemaking must comply with the requirements of Section 23(a)(2) of the Exchange Act to consider the impact on competition[3] as well as Section 3(f) of the Exchange Act, which requires, when determining whether an action is necessary or appropriate in the public interest, consideration of whether the action will promote efficiency, competition, and capital formation, in addition to the protection of investors.[4]
Today’s adopting release includes a section entitled “Commission Economic Analysis” that discusses the considerations of our own economists with respect to the joint rule. Glaringly absent, however, is an economic analysis from any of the other rulemaking agencies – the Office of the Comptroller of the Currency, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation and, in the case of residential mortgage securitizations, the Department of Housing and Urban Development and the Federal Housing Finance Agency. The lack of any such efforts is particularly troubling given the significant number of discretionary choices made in promulgating the final rule.[5] Most importantly, the Commission’s economists did not prepare a specific economic analysis addressing the scope of the underwriting exemptions for qualified mortgages and other assets from the risk retention requirements, since those provisions were to be adopted by the banking regulators alone.[6]
Last December, when the Commission considered another joint rulemaking regarding prohibitions on proprietary trading and certain relationships with private funds – Section 619 of the Dodd-Frank Act, more commonly known as the Volcker Rule – I was advised that economic analysis was not required because that rule was being promulgated under Section 13 of the Bank Holding Company Act, which does not require economic analysis. Today, however, we are promulgating a joint rulemaking under the authority of the Exchange Act, which contains certain explicit requirements. The rulemaking agencies thus have a duty to comply with the requirements under that act, a duty they have failed to perform.
The failure of the other rulemaking agencies to expressly adopt an economic analysis is all the more important given the broader economic concerns that the joint rule raises. The Commission’s economic analysis observes that the intended benefits of securitization include reduced cost of, and expanded access to, credit for borrowers, ability to match risk profiles for specific investor demands, and increased secondary market liquidity.[7] Yet, the Commission’s economic analysis notes that mandatory risk retention could impose significant costs on the financial markets.[8] These costs are likely to be passed on to borrowers, either in terms of increased borrowing costs or loss of access to credit, and thus will cut directly against the intended benefits of securitization.
The Commission’s economic analysis also indicates that if risk retention is too low, it may not adequately align the incentives of investors and sponsors.[9] On the other hand, an excessive level of risk retention may lead to less availability of capital, increased borrowing rates, and a more limited supply of credit.[10] Despite the clear need to appropriately calibrate the level of risk retention in order to avoid significant unintended consequences, the staff states that it has not determined an optimal level of retained risk and yet the agencies are adopting the imprecise and arbitrary statutory risk retention level of five percent.[11] It is most unfortunate that, rather than choosing to pursue an informed course of action to determine optimal levels of risk retention – which certainly differ among asset classes with different risk profiles – banking and housing regulators have decided to throw up their hands and simply decide that getting it done is more important than getting it right. For instance, the final release is dismissive of the alternatives identified by commenters in the context of open market collateralized loan obligations.
More broadly, I remain concerned about the continued dominant role in housing finance played by the two government-sponsored enterprises (GSEs) that required the largest taxpayer-funded bailouts in history – the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). According to the most recently posted conservator’s report, these two GSEs account for 78% of all residential mortgage backed securities issuances and, when combined with Ginnie Mae issuances, total nearly 100% of the market.[12] These GSEs currently have a competitive advantage over private securitizations due to lower funding costs as a result of an explicit federal guarantee.[13] One result of the dominance and competitive advantages of the GSEs has been the crowding out of the private sector in housing finance – and let’s not forget that the entire securitization process was a private sector innovation.
I am also troubled by last week’s news – the timing of which was undoubtedly coordinated with this week’s rulemaking – that the Federal Housing Finance Agency is pushing Fannie Mae and Freddie Mac to consider programs that would make it easier for borrowers to obtain mortgage loans with down payments as low as three percent.[14] As prominent housing market scholar Mark Calabria remarked, “[t]hree percent [down payments] can disappear and become zero real quick…This is the sort of thing that gets people underwater.”[15]
Given the apparent ease with which the majority of this Commission working hand-in-hand with the Administration’s housing market policy makers are willing to further entrench the government in this market and continue to crowd out the private lenders, I have considerable skepticism as to whether taxpayer-backed GSE-sponsored securitizations will ever be subject to the risk retention requirements and be forced to operate on the same level playing field as private securitizations.[16]
Thank you and I have no questions.
http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370543243405#.VEgFUyhOlEI
U.S. Bancorp's Davis Skeptical of FHFA Changes to Loosen Credit
by Brian Collins
OCT 22, 2014 2:36pm ET
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WASHINGTON — U.S. Bancorp is not planning to change its approach to mortgage lending despite efforts by regulators to reduce buyback risk and encourage lending to borrowers with lower credit scores and downpayments.
Richard Davis, the bank's chief executive, dismissed the proposed changes as a "good sound bite."
Davis said the bank will continue to originate Fannie Mae and Freddie Mac loans and sell them off.
"We will continue to do what we are doing now, which I think is sufficient for the near term," Davis said Wednesday during a conference call on the bank's third quarter earnings.
The CEO said it will take a while before he is convinced that it is safe to make loans to borrowers with lower downpayments and FICO scores. Until then, U.S. Bancorp will "stay on the sidelines," he said, due to concerns about compliance and litigation risk.
The Minneapolis-based bank took a $200 million expense in the third quarter to settle litigation claims by the Department of Justice over Federal Housing Administration loans
The CEO stressed that he is waiting for a private market to develop that will enable U.S. Bancorp to sell lesser quality loans to investors without guarantees.
"Once we see that appetite," Davis said, U.S. Bancorp might be willing to loosen its underwriting standards.
http://www.nationalmortgagenews.com/news/servicing/us-bancorps-davis-skeptical-of-fhfa-changes-to-loosen-credit-1042949-1.html
Why regulators are making it easier to get a mortgage
By Dina ElBoghdady October 22 at 3:03 PM
Three years ago, in the dark days of the housing crisis, regulators pressed for a controversial rule change aimed at cracking down on shoddy and dishonest lending practices. Now they’re rolling back their plans.
The original proposal called on lenders to hold a stake in the mortgages they sold to investors – specifically loans with less than a 20 percent downpayment. The government insisted such “risk retention” would encourage more prudent lending. No longer would banks be off the hook if they offloaded loans that later went bad.
But then came fierce pushback from an unusual alliance. Not only did the industry oppose the plan, but so did housing advocates. Both sides, which rarely agreed on anything up to that point, said the change would force lenders to boost interest rates and fees on many low downpayment loans -- and shut too many people out of the housing market.
This week, six agencies are on track to adopt a milder version of the proposal. The decision highlights a dramatic shift in focus for the government now that a full housing recovery is taking longer than expected. The immediate source of angst for regulators is no longer what the industry did to gin up business back then, but rather what they’re not doing now: lending to the broader population.
Various regulators have acknowledged that a tough regulatory environment unintentionally steered lenders to serve only top-notch borrowers, and now they’re trying to encourage lenders to ease up.
The agency that oversees Fannie Mae and Freddie Mac said this week that it might soon lower the downpayment requirements from five percent to three percent for loans backed by the two firms. The Federal Housing Administration, a popular source of low downpayment loans, is considering lowering the fees it charges borrowers on the loans it insures. The nation’s top housing official, Housing and Urban Development Secretary Julian Castro, recently said it’s time to “remove the stigma” tied to promoting homeownership. Castro said boosting the homeownership rate is at the top of his agenda.
And now, banks that package loans into securities and sell them to investors will not have to retain a five percent stake in mortgages with less than 20 percent down, according to the plan unveiled this week. They need only hold a stake in loans belonging to borrowers with too much debt relative to their income.
Jim Parrott, a former housing adviser in the Obama White House, said the original plan was so onerous that it unleashed a backlash that continues to play out in housing policy decisions today. “It was that really aggressive early move that woke people up,” Parrott said. “It was the first time that people snapped to attention and recognized the impact that regulation could have on access to credit. It was a crystallizing moment.”
The practical and political realities caught up with regulators, said Mark Calabria, a former Republican staffer on the Senate banking committee who is now at the Cato Institute. With the financial crisis receding, nobody wants to be accused of sabotaging the American dream of homeownership – even after taxpayers sunk billions of dollars to keep Fannie and Freddie solvent at the height of the crisis.
“The American public has mixed feelings on housing,” Calabria said. “They don’t like bailouts, but they like cheap credit.”
Before the Great Depression, homebuyers were often required to put down 50 percent or more on a home. But after the Depression and World War II, the government sought to stimulate the housing market by dramatically lowering downpayment requirements, allowing buyers to put down five percent or less on loans backed by some federal agencies.
The nation’s home ownership rate jumped, from 43.6 percent in 1940 to 64 percent in 1980, where it stayed for many years. The norm for downpayments settled at about 20 percent around that time, but the low-downpayment loans continued to be available for borrowers who met relatively strict criteria.
That went by the wayside as home prices soared at the start of the past decade. Banks began offering a new breed of low-downpayment, or no-downpayment, loans to a far wider range of borrowers, including many who were poor credit risks. Those mortgages were often linked to other risky lending practices, which contributed to the foreclosure crisis.
It was in that environment that Congress directed regulators to come up with rules that would require banks to retain some risk in the loans they sell. The Treasury Department oversaw the process, and six agencies were tasked with crafting a final plan. Most of them expect to vote on the revised plan this week. The Federal Deposit Insurance Corporation voted in favor of it Tuesday; the Securities and Exchange Commission passed it Wednesday.
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/22/why-regulators-are-making-it-easier-to-get-a-mortgage/
Regulators’ New Mortgage-Lending RDules Will Benefit Fannie-Freddie And Borrowers
Published: October 22, 2014 at 3:06 pm
Efforts by US regulators to tighten mortgage-lending standards, owing to the housing bubble during the financial crisis, might have gone too far. They have deprived many Americans of the ability to get access to loans for housing.
Regulators are now planning to incorporate strategies that would ease mortgage lending in the hope that the housing market would recover. On Tuesday, federal regulators announced they would waive the 20% down-payment requirement for loans. As a result of this requirement, borrowers will no longer have to pay a 20% down payment in order to get a loan.
Instead, the regulators decided to go ahead with easier conditions to apply for a loan, which would only require banks to document the ability of borrowers to repay the amount and ensure that the outstanding amount stays below a particular threshold.
The belief that US regulators are in favor of giving the housing market a push was reinforced when it was announced earlier this week that the mortgage finance giants, Fannie Mae (FNMA) and Fannie Mac (FMCC) will be expanding credit in the housing market.
The Federal Housing Finance Agency (FHFA), which regulates both Fannie and Freddie, announced through its Director, Mel Watt, that Fannie and Freddie will now be guaranteeing loans with down payments as low as 3%.
The government-sponsored enterprises (GSEs), Fannie and Freddie, also agreed with lenders on Monday over specifying the events that would lead lenders to repurchase the loans initially bought by the GSEs.
Mr. Watt laid out six different situations that would trigger a loan buyback by lenders from Fannie and Freddie. This effort will enable lenders to now loan out more easily to borrowers with low credit history. Initially lenders were reluctant to give out loans as they feared penalties in the event of a loan buyback.
These changes come amid the slow-growing housing market as the home-sales figures in the country have grown only 2.4%. Despite being the highest this year, the growth in US home sales is still 2% lower than last year, according to the National Association of Realtors.
According to Inside Mortgage Finance, a decline in the number of refinanced loans has greatly contributed toward weak lending this year, as mortgage-backed securities issued this year are half the value relative to 2013. Moreover, the total lending for home purchases was $734 billion last year, which the Mortgage Bankers Association forecasts to drop 13.5% to $635 billion by the end of 2014.
Proposed modifications from the regulators toward the existing lending market are attributed to the deteriorating condition of the US housing market. Elimination of the 20% down-payment clause was supposed to be replaced by a 5% risk-retention by banks, stemming from the mortgages that the banks would package and sell to investors.
However, banks will no longer be required to assume the 5% risk, so long as the debt-to–income ratio of borrowers does not surpass 43%. Those loans sold to Fannie and Freddie will be exempted from the risk-retention clause.
Despite the housing market-revival efforts from regulators, critics have pointed out the permanent role of the US government in the mortgage market. According to one critic at the American Enterprise Institute, the loosening of standards might spur another housing bubble.
http://www.bidnessetc.com/27787-regulators-new-mortgagelending-rdules-will-benefit-fanniefreddie-and-borrow/2/
Yes apples and oranges. Just enjoy the Carny clown. To me it stinks of desperation on the government's part if they are enlisting (paying for) the assistance of such a hack who is so willing to prostitute himself professionally. The more he writes the less he will be taken seriously.
Judge dismisses Massachusetts suit against Fannie, Freddie
By Dena Aubin
NEW YORK | Wed Oct 22, 2014
By Dena Aubin
NEW YORK, Oct 22 (Reuters) - A federal judge has dismissed a lawsuit brought by Massachusetts Attorney General Martha Coakley that accused mortgage finance giants Fannie Mae and Freddie Mac of violating a state law meant to prevent financially troubled residents of the state from losing their homes.
Filed in June, the lawsuit said Fannie and Freddie blocked a state program that let Massachusetts nonprofit groups buy foreclosed homes and resell them to the original homeowners.
The lawsuit said Fannie and Freddie stopped such buybacks on homes that the two groups either owned or guaranteed, citing policies that prohibit them from selling a home when the original borrower has the first right to buy it.
Coakley's lawsuit also named as a defendant the Federal Housing Finance Agency (FHFA), the conservator for Fannie and Freddie. The agency directed the two government-controlled companies to enforce the home-sale restrictions.
In an order on Tuesday dismissing the suit, U.S. District Judge Richard Stearns said the 2008 U.S. Housing and Economic Recovery Act, passed to address the housing crisis, curbs courts' power to "second-guess" the FHFA's business judgment.
The act expressly prohibits courts from taking any action to restrain the functions of the FHFA as conservator, Stearns said.
Fannie Mae spokeswoman Callie Dosberg declined comment. A spokeman for Freddie Mac did not immediately respond to requests for comment. An FHFA spokesman declined comment.
In a press release announcing the lawsuit, Coakley said Fannie and Freddie had been "roadblocks to progress" in addressing the foreclosure crisis.
Coakley, a Democrat, is in a close race with Republican businessman Charlie Baker for Massachusetts governor. Brad Puffer, a spokesman for Coakley, said she is considering all options, including appeal.
"We brought this case to protect Massachusetts homeowners facing foreclosure, help stabilize communities, and to give all families the protection provided by state law, even if they happen to have a loan held by Fannie Mae or Freddie Mac," he said in a statement.
The lawsuit accused Fannie and Freddie of violating a state foreclosure law proposed by Coakley and approved in 2012 that prohibits creditors from blocking home sales to nonprofits solely because the property would be resold to the former homeowner.
Originally filed in Suffolk Superior Court, the lawsuit was removed to U.S. District Court in Massachusetts in July.
The case is Commonwealth of Massachusetts v Federal Housing Finance Agency et al, U.S. District Court, District of Massachusetts, No 14-12878 (Reporting by Dena Aubin; Editing by Kevin Drawbaugh and David Gregorio)
http://mobile.reuters.com/article/idUSL2N0SH1G020141022?irpc=932
I thought that I had suddenly become some sort of dislexic
Can anyone make sense of this gobblygook
Opinion: Fannie Mae Forever
10/22/2014 1:38PM
Assistant Editorial Page Editor James Freeman on the Federal Housing Finance Agency’s announcement that taxpayers will guarantee risky mortgages. Photo: Getty Images
Transcript
This transcript has been automatically generated and may not be 100% accurate.
more good news the federal government wants EU and the taxpayer ... to back more risky mortgages assistant Editorial Page Editor James Freeman stays with me now James ... given that we just going through a housing prices because of doing this short memories it's ... it's kind of amazing were when I feel like I just the really the all media I think to have different ... interpretations of what was that the crisis but I think everybody realized ... more or less that it's a problem ... when you're winning keep a lot of money ... with and they're not paying too much of a down payment down ... what can happen when the market declines obviously there are out there squeezed very argument with wanted defaults ... the government agency that regulates this and specifically Mel Watt who runs the Federal Housing Finance Agency is now saying ... we'll figure out a way to come back to three percent down payment loans for Fannie Mae and Freddie Mac and ... the things the government agency so it went live problem of private ... lenders wanted to do this I wanna take the risk ... who cares that's their choice ... the put me behind the change yet that's that's what's happening here once again taxpayers who now are standing by in ... nine out of every ten mortgages roughly are gonna have to ... accept more risk in the in the loans that they do the film The private mortgage market is its is dead and buried have will nationalize once and for hours on forever you you do have something of a private market pride market can work you see it works above the ... so called conforming loan limits where Fannie and Freddie yet thank God are not allowed to land there someone that roughly seven hundred thousand dollars but it looks really are ... I toss money for the governing institutions so they ensure mortgages right they can only insurer to a certain amount right in the end of that side of ... what's called the jumbo market if it's a mortgagee eight hundred thousand nine hundred thousand above that ... you have a private market not just the loans but the ... modeling them and selling them as securities ... but there's not much of a private market because the government has taken such a big ... role here but it can work and it's ... it's not ... it's not going to ... happen I think until we give them a new Congress may be a new president is well into my fear mongering or should I really be afraid that were to blow up another housing bubble unseen Democrat well ... it does get pretty disturbing when you look it ... basically just six years later now politicians wanting to reply all the mistakes all the things that lead to trouble ... in the last Marines from here we get you can say we don't have easy credit from the Federal Reserve so you couple that ... with the loosening of mortgage standards and ... it gets are to be optimistic this is demand well offshore
http://www.wsj.com/video/opinion-fannie-mae-forever/21AE4BE5-1CDD-4275-9A4F-1718169F552F.html#
I guess longs need a better puppet
More Banks May Start Offering a 3% Down Mortgage
Amanda Gengler @Gengler
12:33 PM ET
Fannie Mae headquarters in Washington, DC Kevin Lamarque—Reuters
The nation's largest mortgage firms plan to once again buy loans where the borrowers put as little as 3% down.
Perhaps you thought the days of putting little money down for a home were gone. Well, not so fast. On Monday the CEO of Fannie Mae, Timothy Mayopoulos, announced that the housing giant planned to once again buy loans for which the borrowers put as little as 3% down. Mayopoulos told the crowd gathered at the Mortgage Bankers Association conference in Las Vegas that Fannie, which along with Freddie Mac supports the bulk of the mortgage market today, is working to finalize the details of the offering and gain regulatory approval to proceed. “We want this business,” he said.
So far no details have been announced about what income or credit score requirements borrowers making such small down payments will need to meet the group’s standards. Mayopoulos said more information would be released in the coming weeks. Both Fannie and Freddie previously purchased loans with 3% down but had stopped in recent years. Today the firms usually require at least a 5% down payment on most loans.
Melvin Watt, director of the Federal Housing Finance Authority, which regulates the two government enterprises, said his group was working with them to develop “sensible and responsible guidelines” for the 3% loans, in an effort “to increase access for creditworthy but lower-wealth borrowers.” He cited “compensating factors” in evaluating such borrowers, though he didn’t say what those factors would be.
A 3% down payment is not exactly nonexistent today. The Federal Housing Administration has been offering mortgages with as little as 3.5% down for years. Traditionally, most borrowers were lower income, and the amount they could borrow was capped, but today even higher income folks use FHA loans to buy homes in expensive areas (loan limits vary by state but are top out at $625,500). In recent years, these mortgages—which come with higher fees than traditional loans, as well as pricey mortgage insurance—have accounted for a larger than normal share of the market.
Now Fannie seems intent to grab some of that business. The low-down-payment loan, Mayopoulos promised, “will also be competitively priced, including against FHA execution.”
In a related move, FHFA’s Watt also announced that the agency is working to provide more details on when the housing giants can force a lender to buy back a loan that goes bad, which he hopes will encourage banks to loosen their lending standards. Over the past few years Fannie and Freddie have required lenders to buy back millions of dollars of bad loans, “sometimes for seemingly minor issues, such as missing a piece of paperwork,” said Keith Gumbinger, vice president at mortgage information publisher HSH.com.
“This clarification might allow lenders to look at riskier borrowers with less fear of having to buy these loans back in the future,” he said. He noted, though, that any changes are likely to be incremental: “It might let a few more borrowers in at the margin, but it won’t be like flipping a light switch where FICO scores down to 640 are now in.”
It’s important to note that Fannie and Freddie can’t force banks to lower their lending standards. In fact, most banks today require tougher standards than the government agencies impose, partially because they are fearful of having to buy back loans that go bad. For example, Fannie and Freddie will buy loans with FICO scores as low as 620, but most banks require at least a 660 or 680, Gumbinger said.
Similarly, lenders could always decide not to offer 3% down loans, even though Fannie and Freddie have agreed to eventually start buying them again. So it remains to be seen whether and how much the rule changes, when they are formally announced in the next few weeks, will ease the way for borrowers.
http://time.com/money/3529857/low-down-payment-mortgage-fannie-mae-freddie-mac/
Chairman Hensarling Comments on Risk Retention Rule
Washington, Oct 22 - Financial Services Committee Chairman Jeb Hensarling (R-TX) issued the following statement on the final risk retention rule adopted by federal regulators today – three years after the rule was first proposed. As required by the Dodd-Frank Act, the rule defines “qualified residential mortgage” (QRM) and exempts securitizations of QRMs from risk retention.
“Dodd-Frank gave regulators 270 days to prescribe regulations on risk retention, and three and a half years later those regulators are still struggling to get their act together while the housing market limps along and private capital sits on the sidelines. This rule is one more reason why Washington bureaucrats shouldn’t be picking winners and losers in the housing finance market. If risk retention is a good idea, it should be something that the market establishes, not that the government mandates.
“More convoluted top-down regulations from Washington aren’t going to build the sustainable housing finance system that helps Americans buy homes they can actually afford to keep. The better solution is to repeal the Dodd-Frank Act’s risk retention provision, end the federal government’s domination of the housing finance market, and put private capital at the center of the mortgage system. That’s exactly what the PATH Act does,” said Chairman Jeb Hensarling.
The PATH Act (Protecting American Taxpayers and Homeowners) was approved by the House Financial Services Committee last year. Included in the PATH Act are provisions that:
http://financialservices.house.gov/news/documentsingle.aspx?DocumentID=398415
end the nearly $200 billion taxpayer-funded bailout of Fannie Mae and Freddie Mac and phase out their failed taxpayer-backed business model;
remove artificial barriers to private capital in order to attract investment and encourage innovation; and
give homebuyers more informed choices about their mortgage options.
Divided US SEC Approves Risk Retention Rules By One Vote
By Brai Odion-Esene and Denny Gulino
--SEC's White: Must be Ready to Tweak QRM Rule if Mkt Changes
WASHINGTON (MNI) - With a one-vote majority, the Securities and Exchange Commission Wednesday signed on to one of the major Dodd-Frank reforms, requiring lenders to keep some "skin in the game" by retaining ownership of 5% of mortgage contracts rather than selling them to Fannie Mae and Freddie Mac.
The same rule is being adopted by all government financial regulators, in some cases without the bitter divisions evident in the SEC's vote.
SEC Chair Mary Jo White, in support of the controversial rule, said regulators must now monitor and be ready to adjust the definition of a Qualified Residential mortgage with the rule specifying a review within four years and every five years after that if not requested sooner by any regulator.
An evolving marketplace or the long-awaited overhaul of the GSEs could alter the context of the rule but for now, banks and mortgage brokers will no longer be able to pass a mortgage on to someone else as poorly underwritten subprime loans were in the runup to the financial crisis.
In keeping with a statute in the 2010 Dodd-Frank Act, the new rule has a variety of exemptions, including one for asset-backed securities collateralized exclusively by residential mortgages that are deemed to meet the test of a "Qualified Residential Mortgage."
The SEC, as did the FDIC Tuesday, aligns the QRM definition with that of what some critics view as the excessively rigorous Qualified Mortgage template laid down by the Consumer Finance Protection Bureau that became effective early this year.
"It is therefore essential, in my view, that the rules we are considering today now include a commitment by the agencies to review the QRM definition at regular intervals, or at the request of any agency," White said.
Another "yes" vote, that of Commissioner Kara Stein, hinged on that qualification, Stein said.
A "no" vote, that of Commissioner Daniel Gallagher, was accompanied by a long statement of dissent with language uncommonly strong for a government agency top official.
The new rule, he said, "will ensure that the currently suffocating private mortgage market will continue to be stagnant or finally die off in favor of ensuring that the overwhelming majority of mortgages will be owned or guaranteed by the same federal housing agencies that led the country down the path of destruction," he said.
"The awfulness of today's rulemaking," he continued, "makes the oft-discussed issue of GSE reform all the more important." Gallagher added that he - a Republican appointee - hopes the version of GSE reform that eventually is passed is that written by the Chairman of the House Financial Services Committee, Jeb Hensarling - who wants to dismantle the entire Dodd-Frank Act.
The likelihood of that happening, even should Republicans add control of the Senate in next month's mid-term elections, is slim as long as Barack Obama stays in office to wield a veto pen.
White said the provision for review "will provide the agencies the opportunity to consider changed circumstances, including any changes to the structure and framework of the GSEs and these markets and whether additional regulatory changes affecting securitization should be made."
White said she has directed the SEC staff to monitor for changes in this market, including changes made by the CFPB to the qualified mortgage standard, developments in underwriting practices, delinquency rates, and trends in the securitization market generally.
"It is important that we closely monitor the implementation of this exemption to assess its impact," White said, noting the constant change in mortgage and securitization market conditions and evolution in underwriting practices.
"Responses to these changes may be reflected in modifications to the CFPB's definition of QM from time-to-time, which could then, under our rule, be reflected in the definition of QRM. But we cannot rely solely on this tool as a means to monitor the effectiveness of the QRM definition," she added.
The Federal Deposit Corp., Office of the Comptroller of the Currency, and the Federal Housing Finance Agency have already approved the risk retention rule. In addition to the SEC, the Federal Reserve Board and the Department of Urban and Housing Development are expected to approve the rule later in the day Wednesday.
The rule becomes effective in a year from when it is published in the Federal Register which is expected in the next few days.
http://www.theguardian.com/money/2014/oct/22/hsbc-first-trust-bank-guilty-breaching-competition-rules
HSBC and First Trust Bank have been found guilty of breaching competition rules by telling small businesses they must open a current account in order to take out a loan. The practice, known as bundling, has been prohibited since 2002 but the Competition and Markets Authority said it had uncovered evidence the two banks had breached these rules.
The findings came following an audit of the two banks and six others that have agreed not to bundle current accounts and loans. These are Bank of Ireland, Barclays, Clydesdale Bank, Danske Bank, the Lloyds Banking Group and The Royal Bank of Scotland Group.
Alex Chisholm, the CMA’s chief executive, said: “Breach of these undertakings is a serious matter and we have directed First Trust Bank and HSBC on the actions they must take to immediately correct the situation – so that it is clear to both their staff and their SME customers that obtaining a business loan is not dependent upon opening an account.”
Earlier this year, in a letter to the OFT, which was at the time overseeing the investigation, HSBC said “some HSBC staff will have informed SME customers that it was a requirement to take out a BCA [business current account] in order to obtain a loan.” The bank was also found to have been publishing misleading statements on its website that suggested to customers that they had to open a current account in order to get a loan.
The bank said in a statement: “HSBC takes its responsibility to UK business seriously and we regret that the bank has not been fully compliant with ‘bundling’ undertakings. Since the issue was discovered, we have been working with the CMA to implement a plan ensuring full compliance with the requirements, and will be regularly reporting back to the CMA.”
First Trust Bank, the Northern Irish operation of Allied Irish Banks, told the OFT earlier that it had uncovered six cases of bundling. During the course of the audit it then uncovered a further five cases, which it reported to the CMA. It said it has written to all affected customers.
Andrea Leadsom, the economic secretary to the treasury, said the government welcomed the report.
“Key to the government’s long term economic plan is increased competition and choice in the banking sector, so all customers can get the products that are right for them,” she said. “That’s why the government asked regulators to take decisive action to end the anti-competitive actions of some banks, who refused to lend money to smaller businesses unless these firms opened current accounts with them.”
The audits also revealed that at two other banks there was low awareness among relevant staff that customers could not be expected to take out a current account in order to get a loan. All eight banks will be required to carry out another audit and report to the CMA again by July 2015. The CMA is also asking any SMEs who think they might have been the victim of bundling to get in touch with it.
http://www.theguardian.com/money/2014/oct/22/hsbc-first-trust-bank-guilty-breaching-competition-rules
America's housing policy: The definition of insanity
Aaron Task
By Aaron Task 1 hour ago Yahoo Finance
If the definition of insanity is "doing the same thing over and over again and expecting a different result," then clearly Albert Einstein is not responsible for America's housing policies.
Federal Housing Finance Agency director Mel Watt on Tuesday unveiled new regulations that would make it easier for Americans to buy a house with little or no money down. The rules are aimed at private lenders who opposed a proposal that borrowers make a 20% down payment.
“Finalizing this rule represents a major step forward to providing greater certainty to the housing finance market and paves the way for increased participation by the private sector,” Watt said Tuesday at the Mortgage Bankers Association's annual conference held at the Mandalay Bay in Las Vegas (A casino? Really? The optics couldn't be worse.)
In 2013, less than 2% of the $1.6 trillion of MBS issued were so-called private-label securities, meaning they did not have government backing.
In separate but related news, Watt earlier this week announced that Fannie and Freddie are planning to guarantee loans with down payments as little as 3%, down from 5% previously and back to pre-crisis levels.
Insanity number one is the government bending to industry lobbying against proposed rules designed to tighten lending standards and force borrowers to have more "skin in the game" vs. less. The FHFA also loosened proposals to ensure banks have some "skin in the game" by forcing them to hold a small portion of the loans rather than bundling them together and selling them as mortgage-backed securities (MBS). The 5% "risk-retention rule" requires banks to hold onto 5% of loans they sell but exemptions "may enable the banks to hold less or nothing," The NYT reports.
Insanity number two is the federal government saying they want to encourage private lending but at the same time "shifting course on Fannie Mae and Freddie Mac, announcing plans to use the mortgage giants to expand credit rather than reducing their outsize role in the housing market," as The WSJ put it.
Fannie and Freddie already back 60% of all mortgages originated in the private market and guarantee 90% of all new mortgages underwritten, according to Investors Business Daily.
The root of all this insanity is a housing market that not only needs the Fed to keep rates at zero "for a considerable time" but also massive government-sponsored subsidies to maintain altitude. After two years of strength, the housing market has clearly cooled in recent months. From August 2013 to February 2014, the year-over-year increase in the Case Shiller national home price index exceeded 10%. The pace of increase has declined every month so far in 2014 and was at 5.6% in July, the most recent available, the slowest pace since November 2012.
The Obama administration, the Fed and the private lenders all share the same concern: That the housing market rebound is running out of steam and will start to rollover without additional incentives for banks to lend -- and Americans to borrow. The MBA expects total lending for home purchases to fall 13.5% in 2014, The WSJ reports.
In sum, we're going back to relying on banks to verify borrowers' ability to repay loans with little or no money down while Fannie and Freddie are lowering limits on what loans they'll guarantee. What could possibly go wrong?
Somewhere a young Angelo Mozilo -- maybe even the former Countrywide CEO himself -- is preparing to launch a new venture aimed at lending to Americans with poor credit and/or little savings for a downpayment. After all, it's a very lucrative business...and if things go awry, the taxpayer bails you out.
https://news.yahoo.com/america-s-housing-policy--the-definition-of-insanity-145304611.html
Fannie Mae, Freddie Mac CEOs Don’t Seem To Be Winding Down
by Michael IdeOctober 22, 2014, 10:39 am
Freddie Mac and Fannie Mae spoke at this week’s Mortgage Bankers Association convention, and both sound like their agencies have a long future ahead of them
Earlier this week at the Mortgage Bankers Association annual convention in Las Vegas, FHFA director Mel Watt gave us some more detail about the upcoming Common Securitization Platform (CSP) that will be used by Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), which raises questions about whether he really wants to wind down the GSEs. Remarks from Fannie Mae and Freddie Mac CEOs at the same convention also give the impression of agencies that intend to be around for a long time, as each outlined their vision for the future.
Freddie Mac priorities don’t look like an agency winding down
“GSE reform does not mean just legislative action,” said Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) CEO Donald, MBA reports. “Non-legislative GSE reform has been going on and continues to be strong and I personally expect it will affect us for the next few years, led by [the Federal Housing Finance Agency] in its role as conservator of the two GSEs.”
Layton says that he wants to reduce taxpayer exposure to the mortgages backed by Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), to move forward on CSP, and to increase market share among small lenders. The third goal doesn’t make sense if you believe that you are going to close shop in a couple of years, while the first and second are clearly aimed at answering Congress’s biggest complaints about the GSEs without actually requiring Congressional action.
Fannie Mae developing new tools for mortgage originators
“Our goal is to continue to be the leading player in the secondary mortgage market by being your most valued business partner. At Fannie Mae, we are focused on serving you, and we look forward to winning with you in the future,” said Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) CEO Timothy Mayopoulos.
Even once you get past the PR-speak, the message is clear: Mayopolous is focused on building Fannie Mae up, not tearing it down. The agency even announced another tool to help mortgage originators streamline the process of selling loans to Fannie Mae – the Collateral Underwriter to go along with Desktop Underwriter and Early Check – and apparently there are other free, automated tools under development. There’s still a lot of mess to sort out with the GSEs, but the people inside are planning on sticking around for a while
http://www.valuewalk.com/2014/10/fannie-mae-freddie-mac-ceos-dont-seem-to-be-winding-down/
Top Regulator Says Bank CEOs Meant Well — This Evidence Says Otherwise
By muslimanonymous
22 October, 2014 MERS Monster
10/21/2014 Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future; Host/Managing Editor, The Zero Hour
The head of one of Wall Street’s most important regulatory agencies argued recently that Big Bank CEOs never intended to break the law or engage in foreclosure fraud. Instead, Thomas Curry of the Office of Comptroller of the Currency tells us they weren’t cautious enough.
Internal documents obtained from a bank-backed venture several years ago seem to directly contradict this claim. These documents, which include training materials, PowerPoint presentations, and videos, suggest that the industry made a conscious attempt to bypass local jurisdictions and automate processes — in what can best be described as a fraud-friendly way.
As Comptroller of the Currency, Curry runs one of the agencies charged with keeping our banking system safe, ethical, and crime-free. It’s not an enviable task, but it’s critical to the safety of our economy. So it should have received more attention when Curry wrote in an industry publication that Wall Street suffered, not from a shortage of ethics, but from an inadequate “risk culture.”
Curry’s perspective differs markedly from those of leading figures like William Dudley, president of the Federal Reserve Bank of New York, who said last year that “There is evidence of deep-seated cultural and ethical failures at many large financial institutions.”
Wrote Curry:
“The problems that have come to light in the years since the financial crisis may not have been the result of conscious decisions on the part of senior management. I doubt, for example, that any large bank chief executive officer called together his senior executives and said, ‘Foreclosure paperwork is too time-consuming. Let’s start robo-signing the documents.’”
Unfortunately, that statement appears to be incorrect. Documents obtained from an industry-wide venture reveal that the nation’s leading mortgage lenders colluded to create a false-front company, driven by a back-end database, specifically for the purpose of bypassing local jurisdictions’ taxes and filing requirements. These banks were later to hire low-paid temp workers specifically to process foreclosures (JPMorgan Chase called them the “Burger King kids”).
The banking industry’s epidemic of mortgage-related fraud might not have been possible without the existence of the legal entity known as “MERS.” MERS made it possible to bypass local processes for recording changes in title and loan ownership by pretending that these mortgages were held by this artificial legal creation.
By creating the legal fiction that their loans had been owned by “MERS Inc.” all along, banks were able buy and sell them without notifying local jurisdictions — or, for that matter, the borrowers themselves. Eventually even that wasn’t efficient enough, so MERS’ backers created something called “MOM” — MERS as Original Mortgagee — ensuring that the bank which originated the loan would never be a matter of public record.
MERS also automated the process of transferring ownership by creating a back-end database. These transactions occurred invisibly to the outside world. This, in turn, made it possible to bundle mortgages in a variety of “innovative financial instruments,” many of which were falsely certified as “AAA” grade by ratings firms before being fraudulently misrepresented and sold to unwary investors.
To Thomas Curry’s point: Did senior executives know this was happening? This list of MERS owners is taken from one of the company’s PowerPoint presentations:
MERS PowerPoint slide
As you can see, the list includes AIG, along with a Who’s Who of major American banks like Bank of America, Citi, HSBC, Washington Mutual, and Wells Fargo — banks which have paid billions in fraud penalties since the start of the financial crisis. The owners also included Fannie Mae and Freddie Mac, whose record of mismanagement only began after those government-sponsored enterprises were privatized.
It seems unlikely that these corporations held an ownership stake in MERS without their CEOs’ knowledge.
http://www.muslimanonymous.info/top-regulator-says-bank-ceos-meant-well-this-evidence-says-otherwise/
Mortgage applications surge 11.6% on lower rates. Refis jump 23%; Trey Garrison
Mortgage applications increased 11.6% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending October 17, 2014.
This week’s results did not include an adjustment for the Columbus Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 11.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12% compared with the previous week. The Refinance Index increased 23% from the previous week to the highest level since November 2013. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index decreased 5% compared with the previous week and was 9% lower than the same week one year ago.
“Continuing concerns about weak economic growth in Europe and a few US economic indicators that came in below expectations caused a flight to quality into US Treasuries last week, leading to sharp drops in interest rates,” said Mike Fratantoni, MBA’s Chief Economist. “Mortgage rates have fallen close to 30 basis points over the last four weeks. Refinance application volume reached the highest level since November 2013 as a result, and the average loan balance for refinance applications increased to $306,400, the highest level in the survey’s history.”
The refinance share of mortgage activity increased to 65% of total applications, the highest level since December 2013, from 59% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.4% of total applications, the highest level since June 2008.
The FHA share of total applications decreased from 9.5% last week to 8.3% this week. The VA share of total applications increased from 8.8% last week to 9.6% this week. The USDA share of total applications fell from 1.0% last week to 0.8% this week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.10%, the lowest level since May 2013, from 4.20%, with points increasing to 0.21 from 0.17 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.03%, the lowest level since May 2013, from 4.14%, with points increasing to 0.20 from 0.10 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81%, the lowest level since June 2013, from 3.90%, with points decreasing to 0.07 from 0.08 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.28%, the lowest level since May 2013, from 3.41%, with points decreasing to 0.22 from 0.28 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 2.94%, the lowest level since June 2013, from 3.05%, with points decreasing to 0.37 from 0.38 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
http://www.housingwire.com/articles/31803?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29
Lots of interest from lots of types. Patriotic, greedy, investors, gamblers, traders,etc. I am patriotic and greedy! It makes feel less guilty about being greedy.
Well I sure hope you aren't looking for an arguement from me. $4.25 sounds great right now.
What? The govt. doesn't care? I guess we all know that but getting slapped in the face with it would be a healthy thing in the long run. It will never happen imo. There will eventually be a settlement if the evidence is too damaging. Again imo.
Seems mostly like carryover from yesterday. Check my posts of copied and pasted articles from earlier today. There are a few cheerleaders for us out there.
Hopefully the rule of law will supercede the good ole boys club rules.
Rattner: AIG, Fannie, Freddie Lawsuits “Extortion”
by Mark MelinOctober 21, 2014, 8:22 am
Claims by former AIG CEO Greenberg against the government, like claims by those suing over Fannie Mae and Freddie Mac, are meritless, as former US Treasury official issues a warning
Maurice Greenberg, the former chief executive officer of American International Group Inc (NYSE:AIG), better known as AIG, should be careful how hard he presses his lawsuit against the U.S. government regarding its bailout of the firm in the 2008 credit crisis, warns Steven Rattner in a New York Times opinion piece.
Steven Rattner: AIG bailout
Rattner is deep inside the bowels of the Wall Street elite, who, as chairman of Willett advisors, is running the investment arm of former New York Mayor Michael Bloomberg’s personal and philanthropic assets. He was former counselor to Treasury Secretary and has worked closely with Timothy Geithner. It was Geithner who, working with the New York Federal Reserve, was a critical component of the Wall Street bailout that provided generous terms to the large banks but acknowledges providing harsher terms to AIG, which is at the center of Rattner’s opinion piece.
American International Group Inc AIG Rattner
Rattner thinks what is happening with both Greenberg’s financial claims against the government and those hedge funds suing over the government takeover of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), are “meritless” and he takes it a step further, calling it “extortion.”
Rattner: AIG and the government rescue package
Rattner thinks Greenberg’s primary legal argument, that the government saved the big banks on less onerous terms than AIG and thus should be entitled to the same treatment, is irrelevant. What really matters, Rattner says, is that private funds would not touch AIG unless the government guaranteed the loans.
The logic is that at the time AIG directors voluntarily accepted the terms of the government rescue package. They need to take responsibility for their decisions. Hindsight being 20/20, now that AIG flourished and is now a successful ongoing business, Greenberg and his ilk can’t claim undue compensation. This is absurd, Rattner says in more diplomatic terms. They would have had nothing if the government didn’t bail them out.
In the case of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), Rattner notes that 2008 legislation made it clear these organizations were no longer being run for the benefit of investors. It takes particular “chutzpah,” Rattner notes, that some of the hedge funds bought their claims after the agreement was amended in 2012 – a move similar in some respect with the Argentine bonds purchased by the “holdout hedge funds.”
Stoller on AIG
The court cases against the government are not going well, Rattner highlights, as plaintiffs have lost at ever turn. But as financial journalist Matt Stoller noted, Greenberg’s lawyers may have taken a particularly aggressive tact, raising the issue of the New York Federal Reserve not being a government agency. This has yet to be positively concluded, which is odd given the organization’s importance in the economic system. Regardless of the truth behind this claim, it is undeniably a sensitive topic. In threatening to bring up a key insider issue and push hard in this respect, Greenberg’s lawyers might be hoping that the government backs off.
Perhaps this is where the warning to Greenberg that he “should be careful with how hard he pushes” is really targeted?
To read the full Rattner opinion piece click here
http://www.valuewalk.com/2014/10/rattner-aig-fannie-freddie/
FHFA Director Talks Next Steps for Fannie, Freddie
Author: Brian Honea in Daily Dose, Featured, Government, News, Secondary Market October 21, 2014 0
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MelWattThe Federal Housing Finance Agency (FHFA) is working to expand availability for mortgage credit in an attempt to give the housing market a lift, and is also working on ways to mitigate risk to GSEs Fannie Mae and Freddie Mac, FHFA Director Mel Watt said in a speech delivered on Monday.
Lenders have been faced with increased pressure from lawmakers in recent months to lower their standards for approving mortgage loans, including lending to those with lower credit scores. The industry's critics say the tough lending standards are preventing the housing market from making a full recovery because of the many would-be homeowners that are being excluded.
"As lenders, you play a central role in the overall housing market, and the work you do touches borrowers in communities across the country," Watt said in his speech. "You help individuals and families become homeowners. For many of them, this is the single largest investment they will ever make. To fulfill both sides of our shared responsibility, I hope our actions provide sufficient certainty to enable your companies to reassess existing credit overlays and more aggressively make responsible loans available to creditworthy borrowers. This will result in a housing market that is not only better for borrowers, but also better for the Enterprises and lenders and beneficial to our country."
Watt said that FHFA and the GSEs are all working together to revise the Representation and Warranty Framework in order to find that balance where lenders can manage their risk and the GSEs' credit box will be expanded at the same time. Revisions to the Framework that went into effect in May included allowing up to two 30-day delinquencies within 36 months of acquisition; providing loan level confirmations when mortgages either reach that 36-month benchmark or pass a quality control review; and eliminating automatic repurchases when the primary mortgage for a loan is rescinded, according to Watt.
The FHFA has continued to address the issue of life-of-loan exclusions, which are in place to protect the GSEs from fraud or non-compliance and they currently allow Fannie Mae and Freddie Mac to require lenders to repurchase the loan at any time during the life of the loan, Watt said. The current life-of-loan exclusions currently in place are open-ended and make it difficult for the lender to predict when one of the GSEs will enact them, Watt said, which is why a clearer definition of life-of-loan exclusions is needed. He said an agreement had been reached in principle to more clearly define life-of-loan exclusions.
"These changes are a significant step forward that will result in a better Representation and Warranty Framework and facilitate market liquidity without compromising the safety and soundness of the Enterprises," he said. "First, we are more clearly defining the life-of-loan exclusions, so lenders will know what they are and when they apply to loans that have otherwise obtained repurchase relief."
Watt said these exclusions fit into six categories: 1) misrepresentations, misstatements and omissions; 2) data inaccuracies; 3) charter compliance issues; 4) first-lien priority and title matters; 5) legal compliance violations; and 6) unacceptable mortgage products.
"Second, for loans that have already earned repurchase relief, we are clarifying that only life-of-loan exclusions can trigger a repurchase under the Framework," Watt said. "This is a straightforward clarification, but one that we believe will reduce confusion and risks to lenders."
FHFA is working with GSES to develop guidelines for loan-to-value ratios between 95 and 97 percent, Watt said.
"We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner," Watt said. "Additionally, FHFA continues to evaluate ways to refine and improve the loss mitigation and foreclosure prevention policies at the Enterprises, because we understand that many individuals and families are still facing the possibility of foreclosure and are looking for alternatives to stay in their homes."
http://themreport.com/news/secondary-market/10-21-2014/fhfa-director-talks-next-steps-fannie-freddie
Johnson, Crapo Ask Regulators for Details on Cybersecurity Measures
by Victoria Finkle
OCT 21, 2014 5:48pm ET
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WASHINGTON — Senate Banking Committee leaders are raising concerns about continued cyberattacks on the financial system and pressing regulators about their plans for fostering greater security within the industry.
Sens. Tim Johnson, D-S.D., chairman of the banking panel, and Mike Crapo, R-Idaho, the ranking member, penned a letter Tuesday to financial regulators and the Treasury Department, underscoring the dangers of attacks on banks and other institutions.
The move comes after several high-profile attacks against retails and banks over the past year, and President Obama's recent executive order mandating chip-and-PIN technology on government-issued debit and credit cards. Critics of the White House initiative have warned that far more action is needed to better protect banks and other companies from ongoing security breaches.
"While we recognize that federal agencies have heightened their attention to cybersecurity issues, we are writing to seek more information on the role your agency or Department is playing to protect our financial system from cyberattacks," the lawmakers wrote.
In their letter, Johnson and Crapo ask officials for details about how they obtain information related to cyberattacks, what they do to coordinate efforts across agencies and how the Financial Stability Oversight Council is involved in monitoring cyber risks. They also request details about the Federal Financial Institutions Examination Council's plan to help small institutions address "cybersecurity gaps."
The letter was sent to Janet Yellen, chair of the Federal Reserve Board, Thomas Curry, comptroller of the currency, Martin Gruenberg, chairman of the Federal Deposit Insurance Corp., Debbie Matz, chair of the National Credit Union Administration and Treasury Secretary Jacob Lew.
http://www.americanbanker.com/issues/179_203/johnson-crapo-ask-regulators-for-details-on-cybersecurity-measures-1070725-1.html