IMFnews...Wednesday, Jul 9, 2014

DB Sizes Non-QM Market at $50 Billion for 2014

By Brandon Ivey
bivey@imfpubs.com

About $50 billion in loans that don'?t meet standards for qualified mortgages will be originated this year, according to analysts at Deutsche Bank Securities. DB also predicts that the non-QM market will expand significantly, but only after the GSEs exit conservatorship.

Fannie Mae and Freddie Mac loans are exempt from the 43 percent debt-to-income ratio limit for QMs until the start of 2021 or until they exit conservatorship, whichever occurs first. DB estimates that half of current GSE originations would be non-QMs if the exemption didn'?t exist.

Non-QM origination volume could rise above $400 billion a year if the GSEs are no longer in conservatorship, according to the analysts. ?The non-QM market can be huge if GSE/agency loans are not exempted,? they noted.

Deutsche Bank Securities suggested that the current size of the non-QM market will create a significant net demand for whole loans and non-agency mortgage-backed securities that include non-QMs. The analysts said non-QMs are more likely originated for prime, high net-worth homeowners in an effort to reduce the increased liability associated with the loans.

Citigroup May Settle with DOJ

The rumor mill is once again spitting out chatter that Citigroup is working on a $7 billion agreement with the Department of Justice to settle mortgage ?malpractice? claims tied to loan quality. It should be noted that this would be money going to the DOJ and would not wind up at Fannie Mae, Freddie Mac or the FHFA.

The Senate has just confirmed Julián Castro as HUD Secretary with a vote of 71-26.

Senate Floor voting on HUD secretary nominee Julián Castro right now. As assumed, it looks like he will receive the necessary votes for approval.

Senate Floor live stream

Navycmdr, thanks for posting these.

Phillip Swagel...you need say no more. In the last few years, he, along with Mark Zandi have been two of the Administration's biggest non-governmental mouthpieces helping to push for winding down the GSE.

Navycmdr, I like it. William M. Isaac, another big financial talking head speaking out for our side. The connection is most likely his pal, Ralph Nader.

FYI, I have checked Judge Lamberth's court calendar and nothing listed yet for the Perry case, but I hope Jonathan Macey and Logan Beirne are right and it takes place this month. Fingers crossed.

Glad to see you're still "chillin' it" Obit.

That video scenery reminds me of some time spent in western NC and TN area. In the heart of good old Appalachia.

Dollars1, sorry, when I posted the UST link earlier I hadn't read all of your recent posts. I see now you where looking for conformation before the EOD via a tweet or something. Well, at least now we know the "check has cleared". Hopefully the link will help others also.

Just to name a few...housing reporter for POLITICO, Jon Prior and analyst Joshua Rosner cover the GSEs pretty well with their tweets.

Dollars1, although a day behind, you can go here to see Daily Treasury Statement. Under Quick Links click on Current and Back Issues. Yesterday's should be up sometime today.

Daily Treasury Statement

Thank you very much for taking your time to do this. I'm very curious as to what his reasoning for backing CWJC is, as well as his ties to the BPC. Don't let him fool you with phony statistics as he's shown he doesn't mind misinterpreting important statistical facts to back his reasoning.

A very good article on what congress may actually be thinking regarding the big banks and CWJC. I like her take on things.

The Big-Bank Bugaboo Theory

Karen Petrou on the Big-Bank Bugaboo Theory

Created on Friday, 23 May 2014 14:30

As you know, Senate Banking couldn’t agree on what to do with GSE reform during its mark-up of the Johnson-Crapo bill. It did, though, send one clear message: if it’s big and a bank, bye-bye; if it’s big but not a bank, belly up to the bar.

The bill as reported by Senate Banking tracks not just the 2013 Corker-Warner proposal, but also the subsequent leadership draft. It hopes to preserve trillions in thirty-year, fixed-rate mortgages and at the same time to replace the GSEs with private capital. Instead of these behemoths, private guarantors would hold the first ten percent loss position in eligible MBS. A federal backstop designed to be catastrophic reinsurance would then stand by.

Whether this would work as desired in terms of trillions of cheap middle-class mortgages is one big question. How it answers demands to protect affordable and multi-family housing is also disputed, as is whether the ten percent first-loss tranche is deep enough and if private capital can really be counted upon. All of these questions are critical, but for another day.

The one decision Senate Banking seemed able to make on a bipartisan basis across the ideological divide is that if anyone’s getting into the game other than Fannie and Freddie, it isn’t a big bank. Due to fears that large banks could become market oligarchs, Senate Banking’s 13-9 vote to approve Johnson-Crapo validated a ban on big banks taking on the GSE’s guarantor role.

Does it matter from a business point of view that Congress wants to quash big banks? Yes, albeit not necessarily right now. Johnson-Crapo may be going nowhere, but the rewrite of financial regulation is fast and furious.

In the new era, financial regulation is quietly turning into a three-track system. On the first, best-laid track are community banks, which get preferred treatment – see a raft of new rules, FRB Gov. Tarullo’s recent call to carve them out of Volcker and compensation standards, and all of the reform bills FinServ approved on Thursdays that apply only to smaller banks.

The stand-still on rules for large non-banks leads some to think nothing is changing for them, but non-banks are actually on a very important second track because bad news for big banks gives them important strategic advantage. With the exception of SIFI designees – of whom there are very few so far – non-banks get to chug along largely unimpeded by current rules or prospective hurdles. The Johnson-Crapo bill is in fact premised on their ability to take over from the GSEs – for all the talk of small lenders, everyone on the Hill knows they haven’t enough capital in aggregate to take over from the GSEs. Big firms are the answer and, if they can’t be banks, they’ll have to be something else. Congress doesn’t know what that is, but it likes whatever it might be better than big banks.

That’s at the heart of the problem Johnson-Crapo epitomizes: big banks are on a third track heading nowhere that any shareholder wants to go. That most of the new rules are justified is undisputed. That all of them make a difference is already clear in the radically different business models that big banks are being forced to adopt. That this isn’t enough for big-bank critics is understandable – it’s hard to let bygones be bygones when the 2008 crisis cost trillions in lost wealth, lost homes, and lost jobs.

But, if big banks are going to be sidelined – and Johnson-Crapo suggests strongly that this is the new political reality – the U.S. has erected a new financial-market paradigm not on purpose, but rather by default. Sometimes engineering by accident has surprisingly good results, but mostly it leads to costly clunkers. If the new financial system can’t intermediate efficiently without big banks – and no one knows yet if it can – then arbitrary sanctions against some financial institutions based solely on the charters they hold and the assets they have gathered could have very perverse macroeconomic consequences.

Mathan22, as a MB, are you part of the MBA? If so, would you mind reaching out to David Stevens, the CEO of the MBA, and ask him why he is pushing so hard for the passage of Crapo-Johnson? He seems to now have the BPC (Bipartisan Party Center) doing his bidding and they are supposedly pushing hard for a Senate floor vote.

He seems somewhat charismatic, but not very bright. I believe he and the analyst Josh Rosner have verbally sparred on a few occasions only to have Josh put him in his place....although he strikes me as a guy that isn't smart enough to realize when he's lost.

Any help you could provide on getting Stevens' thoughts on the subject could be helpful for us here imo.

TIA

You're welcome. While I hope for good news, I don't expect it. He will probably touch on the successes for HARP & HAMP and the need to bring private capital back into the mortgage market. He may mention Watt's upcoming Chicago town hall meeting, but then again he may try to distance himself from that relationship. lol Maybe speak of HUD and Castro too.

I wouldn't be surprised to hear him mention Housing Finance Reform, but hopefully the GSEs won't come up.

Here you go. Lew speaks at 4:45pm today.

THURSDAY: Treasury Secretary Lew to announce new efforts to assist struggling and prospective homeowners, provide more affordable options for renters
6/23/2014
Page Content?
WASHINGTON – On Thursday, June 26, 2014, U.S. Treasury Secretary Jacob J. Lew will deliver closing remarks at the Making Home Affordable (MHA) Fifth Anniversary Summit, which will bring together key stakeholders from across the country to discuss best practices in the MHA program.

During his remarks, the Secretary will announce additional policies to assist struggling homeowners, provide more affordable housing options for renters, and expand access to credit for borrowers. These new efforts build on previous Administration initiatives that helped stabilize the housing market by providing direct assistance to struggling homeowners and transforming the manner in which the housing industry responded to the financial crisis.

Before speaking at the Summit, Secretary Lew will meet with homeowners and tour a housing counseling center in the Washington, D.C.-area. Additional details regarding this visit will be announced in coming days.
.
WHO: U.S. Treasury Secretary Jacob J. Lew

WHAT: Closing Remarks at the Making Home Affordable Fifth Anniversary Summit

WHEN: Thursday, June 26, 2014
4:45 PM EDT

WHERE: U.S. Department of the Treasury Department
The Cash Room
1500 Pennsylvania Avenue, NW
Washington, D.C.

Members of the media who would like to attend should RSVP to Ronda Buckmon at Ronda.Buckmon@treasury.gov with the following information: full legal name, Social Security number, date of birth, and country of citizenship. The deadline to RSVP is June 25 at 2:00 PM. The event will also be webcast live at http://www.treasury.gov/press-center/Video-Audio-Webcasts/Pages/Webcasts.aspx

link to webcast:

Closing Remarks at the Making Home Affordable Fifth Anniversary Summit

Thanks for supplying that Dollars1. Yes, the media loves to spin and finds it easy when politicians do what they do best, say something that sounds specific without actually being specific.

I'm not predicting where we are headed today or even in the short-term, but IMO the MM CSTI could have been shorting this stock for the last few weeks. It has been rumored that CSTI is a big shorter of stocks in the past, usually in conjunction with NITE. CSTI has been very active at the top of the bid/ask during this ride down in June. I watch the MM's pretty closely at times and CSTI has stood out during this period. Again, this is just my opinion/observation. My hope is that, if this is true, CSTI is finished shorting and is now ready to ride Fannie back up over $4. MMs on the OTC, isn't it fun?

riskychick, please go back and watch Castro's hearing (I watched it live and re-watched it)from a few weeks ago. You (alone with many others) keep saying he said he wants to get rid of FnF, but it's simply not want he said. It's been proven time and time again on here. Posters have given others the info, they just "choose" to ignore it fort some reason.

I don't know if they're begging, but I find it interesting they had 5 days to respond and all they could come up with was half of a page (8 sentences) of text. Maybe they had Friday off, like most Gov't employees (even when they're still in their offices). lol

I guess when you keep saying the same crap over and over for almost a year, how many different ways can you say it? Their story is tired to say the least, let's hope Judge Sweeney agrees!

From the DEFENDANT’S STATUS REPORT
In accordance with the Court’s order dated June 19, 2014, defendant, the United States,
submits this status report. In its order, the Court requested that the parties propose date ranges for
document production pursuant to the Court’s February 26, 2014 order and in response to
plaintiffs’ April 7, 2014 document requests.
We provided the table below as part of the reply in support of our motion for protective
order and do not propose any changes to the date ranges therein. The date ranges we propose are
logically tied to the timeframes associated with the discovery topics identified by the Court in its
February 26 order.
Our proposal will facilitate production of all documents required to resolve the issues
identified by the Court without encroaching on internal decision-making processes within the
Department of the Treasury and the Federal Housing Finance Agency. The breadth of discovery
plaintiffs seek is simply not necessary or appropriate prior to a decision on our motion to dismiss.
The discovery set forth in the table below and the wealth of publicly-available documents,
including the administrative records filed in the District Court cases, more than adequately allow
plaintiffs the opportunity to respond to the arguments raised in our motion to dismiss. For the
reasons set forth in our motion and reply, we respectfully request that the Court issue a protective
order consistent with the table below.

From the PLAINTIFFS’ STATUS REPORT CONCERNING ESI DATE RANGES
CONCLUSION
The Court should order the Government to search ESI and produce responsive, non-privileged materials created from June 1, 2011 to March 31, 2013 and from April 1, 2008 to De-cember 31, 2008. The Government should also be directed to provide Plaintiffs with ESI search reports relating to any ESI searches it runs, so that Plaintiffs, and if necessary the Court, can monitor, on a search term by search term and a custodian by custodian basis, the number of doc-uments returned by the Government’s ESI searches and compare those results to the volume of documents actually produced by the Government or withheld as privileged.9

Here you go...per the timhoward717 blog.

PLAINTIFFS’ STATUS REPORT CONCERNING ESI DATE RANGES 2

Both Status Reports have been filed.

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
Today, June 23, 2014, 48 minutes ago Go to full article
[Status Report] (66)

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
Today, June 23, 2014, 49 minutes ago Go to full article
[Status Report] (65)

yep....742,700 shares bought @ $3.93. 2 cents above the ask at the time. $2,918,811, somebody big wanted in.

I find this part interesting….(pages 47-49)

THE COURT: Thank you. And it looks like there’s
one more note coming from Mr. Drisser (phonetic).
I will say this, given everything that’s been said
today -- of course I haven’t heard any evidence as yet, but
just based upon counsel’s arguments, what I’ve heard so far
tends to suggest that FHFA is -- I don’t want to say joined
at the hip with Treasury -- but it doesn’t sound like they’re
necessarily an independent entity that’s just not -- has no
connection to the Government. But having said that, I’m
keenly sensitive to the deliberative part, because that
would, then, clearly bring into play legitimately the
deliberative process. And I am very sensitive to the terrible
ramifications that will flow from the disclosure of sensitive
documents. So, I’m very sensitive to that, and that’s
because I, again, just from the arguments that have been
made, it certainly tends to suggest that -- haven’t taken
evidence yet -- but that FHFA is, in fact -- could be
construed as a Executive agency for purposes of making the
United States liable -- if, in fact, a taking has occurred.
But, you know, I haven’t made a decision on that.
I’m just saying based upon counsel’s -- Government counsel’s
arguments that have been tremendous advocacy on the part of
the Government, but, again, if you’re saying that FHFA is
dealing directly and is taking guidance from or working hand
and glove with Treasury, that -- and they’re helping --
assisting with setting policy, that tends to show that they
are, in fact, an entity of the United States. And I see Mr.
Drisser getting out his pen, so there may be two, which is
perfectly fine. I’ll let you finish writing your note to
your co-counsel, and then you can ask me whatever you like.

MS. HOSFORD: Your Honor, in response to the
statement you just made, we would just make the point that
FHFA does not act in just one capacity. There’s FHFA acting
as regulator, and then there is FHFA acting as a conservator.
We have argued that FHFA acting as the conservator is not the
United States, and there is ample case law to support that
position, but we do not -- we’re not imply -- we don’t mean
to imply or state that FHFA never acts as the United States.

THE COURT: I really -- thank you for that
clarification, because that certainly wasn’t coming through.
And I understand the distinction. I don’t know if it will
necessarily carry the day. I haven’t decided it yet. But
thank you, because that point was not coming through at all.

Thanks hvpatel. Can you also look at the "Oral Argument" that was just filed!

TIA

Third entry today [Oral Argument] in US Court of Federal Claims for Fairholme case.

Need PACER account.

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
?Today, ?June ?19, ?2014, ??1 hour ago
Go to full article
[Oral Argument]

New bank settlement!
FHFA Announces Settlement with RBS $99.5 million

News Release

FHFA Announces Settlement with RBS

FOR IMMEDIATE RELEASE

6/19/2014

?Washington, DC – The Federal Housing Finance Agency (FHFA), as conservator of Freddie Mac, today announced a settlement for $99.5 million with RBS Securities, Inc. (RBS). The settlement resolves claims against RBS in FHFA v. Ally Financial Inc. in the Southern District of New York, alleging violations of federal and state securities laws in connection with private-label mortgage-backed securities purchased by Freddie Mac during 2005-2007. A separate lawsuit involving RBS is not affected by this settlement, FHFA v. The Royal Bank of Scotland Group.?

This is the 15th settlem??ent related to the 18 PLS lawsuits FHFA filed in 2011. FHFA remains committed to satisfactory resolution of the remaining actions.

Settlement agreement follows (c?onfidential exhibit omitted).?

IMPORTANT REPOST

Status Report Order & Order out 31(now 58) minutes ago!
Someone with PACER please help. Maybe someone can tell timhoward717 and he can post it.

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
Today, June 19, 2014, 31(now 58) minutes agoGo to full article
[Status Report Order] (62)

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
Today, June 19, 2014, 31(now 58) minutes agoGo to full article
[Order] (62)

United States Court of Federal Claims - Recent Entries

Status Report Order & Order out 31 minutes ago!
Someone with PACER please help. Maybe someone can tell timhoward717 and he can post it.

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
?Today, ?June ?19, ?2014, ??31 minutes agoGo to full article
[Status Report Order] (62)

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
?Today, ?June ?19, ?2014, ??31 minutes agoGo to full article
[Order] (62)

United States Court of Federal Claims - Recent Entries

IMFnews...Thursday, Jun 19, 2014


GSE Investor Group Wants FHFA to Hike G-Fees

By Charles Wisniowski
cwisniowski@imfpubs.com

A coalition of investors in Fannie Mae and Freddie Mac stock wants the Federal Housing Finance Agency to increase the guaranty fees that the two charge their seller-servicers, a position that lenders won?t be too thrilled with.

In a comment letter to FHFA Director Mel Watt, Investors Unite Executive Director Tim Pagliara urged the agency to take into account ?the critical purpose of setting appropriate guaranty fees,? noting that the Finance Agency does not have a mandate (as conservator) to manage Fannie and Freddie as not-for-profits. Pagliara is also chairman and CEO of CapWealth Advisors.

Fannie and Freddie have ?profit-making purposes onto which public mandates are layered,? and they should charge g-fees that earn an ?appropriate market-based return on the capital employed,? whether its taxpayer fundsor private capital, Pagliara writes. G-fees are now north of 50 basis points.

?Increasing guaranty fees will provide more cash flow, with which the GSEs can build capital and be restored to ?safe and solvent condition,?? the letter added. ?Maximizing returns is not only consistent with, but arguably required by, the conservatorship.? The FHFA issued an official call for public comment on how the GSEs should calculate guaranty fees and whether the agency should proceed with a planned 10 basis point hike that was announced last year but postponed.

Short Takes: So, What?s Ed DeMarco Up to These Days? / Beat on the Brat Because of His (Lack of) GSE Knowledge

By Paul Muolo, Brandon Ivey, George Brooks
pmuolo@imfpubs.com, bivey@imfpubs.com, gbrooks@imfpubs.com

Former Federal Housing Finance Agency Acting Director Ed DeMarco is apparently weighing a few job offers, sources close to him told IMFnews. One is possibly a teaching position at Vanderbilt University. We were reminded that all of this is preliminary?

He may know how to run a decent race, but does economics professor David Brat ? the man who beat Rep. Eric Cantor in the GOP primary in Virginia ? know the history of the mortgage meltdown? In past comments Brat blamed Fannie Mae and Freddie Mac for igniting the housing crisis, according to several media reports, including The Wall Street Journal. It should be noted that Fannie and Freddie did not invent subprime lending nor did they securitize subprime mortgages. The GSEs also did not extend warehouse lines of credit to such major subprime lenders as Ameriquest, New Century and Option One. (Okay, so the GSEs bought Alt A loans and certain subprime tranches.) The funding of the subprime industry was facilitated by Wall Street. Then again, why let the facts get in the way of a good political race?.

Nice Obit.....Judge SWEENEY - COURTROOM 4, ROOM 501 - 11:00 a.m....

Hopefully MB is in attendance today and can add a human element to any transcript we may get our hands on later.

SunTrust to pay $968M to settle bad loan claims.

SunTrust to pay $968M

Staff
Atlanta Business Chronicle

SunTrust Banks Inc. on Tuesday reported a definitive agreement to pay nearly $1 billion to settle claims related to its origination of FHA-insured mortgages and its portion of the National Mortgage Servicing Settlement.

As previously reported, this includes $500 million in consumer relief and a $468 million cash payment for agreements in principle with the U.S. Department of Housing and Urban Development and the U.S. Department of Justice.

“As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage matters,” said William H. Rogers Jr., chairman and CEO of SunTrust, in a statement. “Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period.”

As of March 31, 2014, SunTrust had $179.5 billion in total assets of and $132.9 billion in total deposits.

No worries,my pleasure Dollars1.

Here is the filing from today...from the timhoward717 blog.

JOINT STATUS REPORT REGARDING JUNE 18 STATUS CONFERENCE

JOINT STATUS REPORT REGARDING JUNE 18 STATUS CONFERENCE
Consistent with this Court’s Order of April 4, 2014 (Doc. 40), the parties hereby respectfully
submit this joint status report to alert the Court that, in light of the oral argument scheduled
for June 19, they do not believe that a status conference on June 18 is needed. The parties also
wish to inform the Court that in addition to the issues identified in the parties’ briefing on the
Government’s motion for a protective order, the parties may also seek the Court’s guidance at
the June 19 argument concerning their ongoing negotiations over the discovery of electronically
stored information (ESI), including proposed search terms, dates, and custodians.
The parties also wish to inform the Court that, absent further guidance from the Court,
they intend to follow the procedures outlined in this Court’s April 9 order (Doc. 41) with respect
to the June 19 oral argument. Accordingly, they will file another joint status report no later than
noon on June 18 identifying counsel for the parties who plan to participate in person or telephonically
as well as counsel in related cases who plan to attend or listen telephonically.

Not at all Dollars1. I only assume it's a joint filing because it states...

[Status Report (JOINT)] (59)

Joint could mean something else I guess, but it was my best assumption.

Looks like there was a joint filing about 4 hours ago, but I don't have a PACER account. If anyone does, please feel free to help? It would be much appreciated.

1:13-cv-00465 FAIRHOLME FUNDS, INC. et al v. USA
Today, June 17, 2014, 4 hours ago
Go to full article
[Status Report (JOINT)] (59)

Possible Status Report filing

IMFnews....Tuesday, Jun 17, 2014

Short Takes: HUD Nominee Castro Hedges on Eminent Domain / FHFA Associate Director Singh Departs / GSEs Clear Another Transfer Tax Hurdle

By George Brooks, Paul Muolo, Brandon Ivey, Charles Wisniowski
gbrooks@imfpubs.com, pmuolo@imfpubs.com, bivey@imfpubs.com, cwisniowski@imfpubs.com

The Senate Banking Committee held its nomination hearing for Housing Secretary in-waiting Julian Castro Tuesday morning. There were no fireworks to speak of, but the San Antonio mayor hedged a bit on the issue of eminent domain and its use in restructuring underwater home mortgages. Asked if he would bar the FHA from participating in any eminent-domain refinancing schemes, Castro replied, ?I would like to study the issue a little better. I need more details??

Manoj Singh, a top official at the Federal Housing Finance Agency, has left the agency for the private sector. According to associates close to Singh, he has accepted a position with American Express and will serve as a market risk oversight officer. At the FHFA he was involved in strategic planning to help attract private capital to the mortgage industry, a key goal of former Acting Director Edward DeMarco?

A three-judge panel of the DC Circuit Court recently upheld a lower court ruling against Kay County in Oklahoma, which has been trying to collect real estate transfer taxes from Fannie Mae and Freddie Mac. In rejecting Kay County?s bid to get the GSEs to pay a 1 percent ?documentary stamp tax,? the DC court?s finding became the latest in a growing number of judicial rulings to side with the GSEs. For the past three years, cash-strapped municipalities have been challenging a longstanding claim by the GSEs that they are exempt from real estate transfer taxes in connection with the recording of deeds when a property is sold or foreclosed on. The DC Circuit court joins federal courts in San Francisco, Chicago, Philadelphia, St. Louis, Cincinnati and Richmond to uphold the GSE transfer tax exemption, weakening the prospects by municipal plaintiffs to press their case to the U.S. Supreme Court.

Here is the Live webcast of Sec. of HUD and FHFA-IG Nomination Hearing

Nomination Hearing

Tuesday, June 17, 2014
10:00 AM - 12:00 PM
538 Dirksen Senate Office Building
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
will meet in OPEN SESSION to conduct a hearing on the nominations of The Honorable Julian Castro, of Texas, to be Secretary of the U.S. Department of Housing and Urban Development; and Ms. Laura Wertheimer, of the District of Columbia, to be Inspector General of the Federal Housing Finance Agency.

All hearings are webcast live and will not be available until the hearing starts. Individuals with disabilities who require an auxiliary aid or service, including closed captioning service for webcast hearings, should contact the committee clerk at 202-224-7391 at least three business days in advance of the hearing date.

Mel Watt faces tough affordable housing question

By JON PRIOR | 6/16/14 11:17 PM EDT

Fannie Mae and Freddie Mac regulator Mel Watt will soon have to dive into the politically thorny debate over affordable housing, an issue that served as one of the key breaking points in recent Senate talks over what to do with the two mortgage finance giants.

The affordable housing goals for government-controlled Fannie and Freddie, last set by the Federal Housing Finance Agency in 2012, will expire at the end of the year and homeowner advocates expect a proposal from Watt, who heads the agency, to come in July at the latest in order to allow time for public comment before it goes into effect next year.

For Watt, who took over the agency in January, the issue may prove to be the toughest test yet for whether the former North Carolina congressman can walk the line between overseeing the immediate needs of the two companies and protecting taxpayers from losses while also addressing concerns that it remains too hard for low- and middle-income borrowers to get a mortgage.

“I think there is going to be a very important push with Mel Watt there,” said National Urban League CEO Marc Morial, whose organization wants the goals expanded.

Since becoming FHFA director, Watt has kept a low profile and avoided getting enmeshed in the congressional debate over housing policy — choosing instead to emphasize that he is carrying out the mandate given to the agency as part of the 2008 takeover of Fannie and Freddie.

But to what degree the two companies should support affordable housing has been a contentious issue, and it will be difficult for Watt to avoid getting caught up in the political crossfire when he releases the new set of goals.

For instance, key liberal senators, such as Democrats Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, decided not to support a bipartisan housing finance overhaul bill produced by Senate Banking Committee leaders earlier this year, in part, because it got rid of the companies’ affordable housing goals and these lawmakers weren’t satisfied with what would take their place. The bill was approved by the committee but is unlikely to get a floor vote.

Republicans point to the government’s push to make mortgages available to more lower- and middle-income borrowers as a contributor to the housing crisis and are critical of any attempt now to have Fannie and Freddie expand their role in this market.

“My suspicion is that Mel is going to send us on the path that we were on before the 2008 collapse,” said Sen. Mike Johanns (R-Neb.), who had voted for the Senate housing plan during a committee markup in May. “I hope I’m wrong.”

Housing advocates are pushing Watt to do more, arguing that he has the flexibility to expand the affordable housing goals without hurting Fannie and Freddie’s bottom line.

“I think he’s going to do what he believes he needs to do to execute his role as conservator but also in his role as a director of an agency that could help ease some of the tight credit in the market today,” said National Council of La Raza senior policy adviser Enrique Lopezlira.

Fannie and Freddie do not originate mortgages but instead buy them from lenders and package them into securities to be sold to investors. They guarantee full payment on these bonds as part of a system that ensures money will be there for new loans. They were rescued by taxpayers and taken over by the government in 2008, but policymakers have struggled to figure out what to do with the mortgage finance giants since.

Because the two companies continue to dominate the housing market, they have a big impact on how easy it is to get a mortgage.

FHFA said in its annual strategic plan released earlier this year that it would consider whether Fannie and Freddie could do more to reach underserved creditworthy borrowers, but Watt made no mention of the affordable housing goals in May when he delivered his only major policy speech.

An FHFA representative declined to comment.

Consumer groups have already dispatched letters and held meetings with agency officials to make their case for broader access to the mortgage market.

“Now that you have indicated a desire to lead the market towards a responsible loosening of credit, we encourage the goals rulemaking to reflect that expectation,” a collection of 22 advocacy groups and left-leaning think tanks, such as the National Community Reinvestment Coalition and the Center for American Progress, wrote in a May 23 letter to Watt.

The groups criticized Watt’s predecessor, former FHFA Acting Director Edward DeMarco, when the goals were last finalized in 2012 because they required that 23 percent of the loans the two companies finance go to low-income families. The groups thought this percentage was too low by historical standards and wanted the percentage set closer to 30 percent....

...on to page 2...
Read more: http://www.politico.com/story/2014/06/affordable-housing-mel-watt-107919.html#ixzz34u6BmLn6

Head of nail.....meet hammer...

Thanks navycmdr! You beat me to it by a minute.