Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
July 10, 2014, 4:20 p.m. EDT
Radian Provides Comment on Proposed GSE Requirements for Private Mortgage Insurer Eligibility
-- Extended transition period of more than two years to comply with PMIERs’ financial requirements -- -- Radian expects ability to comply within the transition period without a need to raise external capital -- -- Company to address several aspects of draft requirements during public comment period, including those that could increase homebuyer costs and restrict credit access --
PHILADELPHIA, Jul 10, 2014 (BUSINESS WIRE) -- Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group Inc., today commented on the proposed Private Mortgage Insurer Eligibility Requirements (PMIERs) developed by Fannie Mae and Freddie Mac (GSEs) and issued by the Federal Housing Finance Agency (FHFA), which were released earlier today. The proposed PMIERs are intended to provide revised requirements that the GSEs will impose on private mortgage insurers (MIs), including Radian Guaranty, to remain eligible insurers of loans purchased by the GSEs.
“Radian fully supports the need for strong counterparties to Fannie Mae and Freddie Mac, and the need for well-defined standards against which private mortgage insurers should be measured,” said Radian Guaranty President Teresa Bryce Bazemore. “We believe appropriately structured PMIERs will better position our industry to continue serving its critical role in the housing finance market, including providing worthy borrowers with access to homeownership.”
The proposed PMIERs reflect limited initial input from Radian. The company will provide additional commentary to the FHFA on several areas of the proposed PMIERs during the public comment period, which is expected to end on Monday, September 8, 2014. Among these areas, Radian will note that the proposed capital requirements are more onerous than Radian’s historical default experience suggests would be needed to withstand a severe stress event.
The company’s comments will also outline how the proposed PMIERs are inconsistent with the FHFA’s stated goal of expanding access to mortgage credit and reducing taxpayer risk by increasing the role of private capital in the mortgage market.
Bazemore added, “We look forward to continuing our dialogue with the FHFA and the GSEs as they gather input on the PMIERs. We are proud of our strong working relationship that was also in place as Radian met all of its obligations during the greatest economic stress in our company’s history, paid more than $5 billion in claims, and strengthened our capital levels to support continued low downpayment lending.”
Radian will host a conference call at 6:00 p.m. Eastern time today to discuss the proposed PMIERs and their potential impact on the company. Details for the conference call may be found below; the proposed PMIERs and additional information may be found on Radian’s website at www.radian.biz/pmiers .
TIMEFRAME AND EXPECTATION FOR COMPLIANCE
After the public comment period ends, the FHFA is expected to review and consider input before publishing the final PMIERs. All aspects of the PMIERs are expected to become effective 180 days after their final publication. Approved insurers will be given an extended transition period of up to two years from the final publication date to be in compliance with the financial requirements of the PMIERs. Based upon an estimated final publication date of the end of 2014, Radian expects a transition period through January 1, 2017.
Radian remains an eligible mortgage insurer with the GSEs and expects to be able to fully comply with the PMIERs within the transition period. The company has
approximately $800 million of currently available liquidity;
the potential to monetize or utilize its financial guaranty business, which had $1.2 billion of statutory capital and an additional $376 million in claims-paying resources as of March 31, 2014; and
the potential to leverage various other options, if needed, including external reinsurance.
Radian Asset received approval from the New York Department of Financial Services to pay an extraordinary dividend to Radian Guaranty of $150 million. Radian Asset expects to request an additional dividend in 2015.
Radian Chief Executive Officer S.A. Ibrahim added, “We are confident that Radian will be able to comply with the proposed PMIERs within the transition period. Based on our holding company cash position and other potential options, we do not expect compliance with the PMIERs to require Radian to raise external capital.”
Ibrahim continued, “We do believe that these proposed requirements, if not modified, have the potential to increase the cost of borrowing for future homebuyers, and could also restrict access to credit. This may impact many low- to moderate-income, deserving borrowers, including certain minority groups, who are particularly vulnerable today based on lower credit scores and limited savings for a downpayment.”
CONFERENCE CALL
Radian will discuss the proposed PMIERs in a call today, starting at 6:00 p.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz . The call may also be accessed by dialing 800-230-1093 inside the U.S., or 612-288-0329 for international callers, using passcode 331702 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two hours after the call ends for a period of thirty days, using the following dial-in numbers and passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international callers, passcode 331702.
http://www.marketwatch.com/story/radian-provides-comment-on-proposed-gse-requirements-for-private-mortgage-insurer-eligibility-2014-07-10
Fannie Mae, Freddie Mac: FHFA Seeks Public Input
by VW StaffJuly 10, 2014, 4:24 pm
More to follow… this is the latest from the FHFA, which just broke regarding Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)
Washington, DC – The Federal Housing Finance Agency (FHFA) is seeking input on draft requirements that would apply to private mortgage insurance companies that insure mortgage loans owned or guaranteed by Fannie Mae and Freddie Mac. These requirements would apply only to private mortgage insurers that are currently approved to do business with Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) and those seeking approval in the future.
Fannie Mae Freddie Mac Glassman
Fannie mae
FHFA’s strategic plans for Fannie Mae, Freddie Mac
“Mortgage insurance counterparties must be able to fulfill their intended role of providing private capital, even in adverse market conditions,” said FHFA Director Mel Watt. “FHFA’s Strategic Plan calls on Fannie Mae and Freddie Mac to strengthen the requirements for private mortgage insurance companies that do business with them in order to reduce Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s overall risk exposure and protect taxpayers.”
Fannie Mae and Freddie Mac are required by their charters to obtain an acceptable form of credit enhancement, such as private mortgage insurance, for loans they purchase or securitize that have loan-to-value ratios that exceed 80 percent. Pursuant to this obligation, each Enterprise has maintained eligibility requirements for approved mortgage insurers for many years. Private mortgage insurance from a sound counterparty helps reduce the credit risk exposure to Fannie Mae and Freddie Mac and shifts the first-loss exposure from taxpayers to the private market.
Fannie Mae, Freddie Mac directed to revise, expand and align their risk management requirements
As Conservator, FHFA has directed Fannie Mae and Freddie Mac to revise, expand and align their risk management requirements for mortgage insurance counterparties. The draft Private Mortgage Insurer Eligibility Requirements reflect a multi-year effort to produce a clear and comprehensive set of standards. The updated financial requirements incorporate a new, risk-based framework that ensures that approved insurers have a sufficient level of liquid assets from which to pay claims. The draft requirements also include enhanced operational performance expectations and define remedial actions that would apply should an approved insurer fail to comply with the revised requirements. FHFA, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have consulted with state insurance commissioners and private mortgage insurers that are currently approved to do business with Fannie Mae or Freddie Mac regarding the draft requirements.
FHFA is requesting input for itself and the Enterprises within 60 days or by September 8, 2014. Input should be submitted to the Federal Housing Finance Agency, Division of Housing Mission and Goals, 400 7th Street, SW, Ninth Floor, Washington, DC 20024 Attn: Mortgage Insurance Eligibility Project or via FHFA.gov.
http://www.valuewalk.com/2014/07/fannie-mae-freddie-mac-fhfa-seeks-public-input/
Fannie-Freddie Propose Liquidity Standards for Mortgage Insurers
Clea Benson and Zachary TracerJul 10, 2014 4:05 pm ET
July 10 (Bloomberg) -- Private mortgage insurers looking to do business with Fannie Mae and Freddie Mac would have to hold minimum amounts of liquid assets under new standards proposed today by the companies and their regulator.
To back loans packaged into securities by the U.S.-owned mortgage-finance giants, insurers would have to hold liquid assets worth at least 5.6 percent of their risk exposure, and possibly more depending on the quality of the loans they cover. The standards were released for public comment before they are finalized.
“Mortgage insurance counterparties must be able to fulfill their intended role of providing private capital, even in adverse market conditions,” Melvin L. Watt, director of the Federal Housing Finance Agency, said in an e-mailed statement.
Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. The new standards are designed to ensure there’s no repeat of what happened after the financial crisis, when a plunge in home prices pushed about half the industry out of the business, including PMI Group Inc. and Triad Guaranty Inc. Fannie Mae and Freddie Mac were saddled with losses when insurers were unable to meet their obligations.
Survivors led by MGIC Investment Corp. and Radian Group Inc. have raised fresh funds so they can sell more coverage as home sales recover. Those companies received permission from some state regulators to keep selling coverage after their levels of risk relative to capital breached limits.
Market Share
The insurers, which win almost all of their business on Fannie Mae and Freddie Mac loans, have regained market share after the Federal Housing Administration raised how much it charges for similar coverage, and the firms loosened standards and lowered fees as housing stabilized. Their coverage is also becoming increasingly important to the mortgage market as more new loans get made for home purchases, rather than refinancings.
Private firms provided 38 percent of mortgage insurance in the first quarter, up from 32 percent from a year earlier and 15 percent in 2009, according to data from newsletter Inside Mortgage Finance. Private insurance covered 13 percent of new mortgage debt in the first quarter, up from 9 percent a year earlier and 4 percent in 2009. Investors including George Soros and Kyle Bass have backed mortgage guarantors Essent Group Ltd. and NMI Holdings Inc., started after the crash. Both firms went public last year. Arch Capital Group Ltd. acquired assets from PMI to start its own mortgage guarantor, while Essent struck a deal to buy technology from Triad.
American International Group Inc.’s United Guaranty Corp. was the top seller of private mortgage insurance in the first quarter of this year, according to data compiled by Inside Mortgage Finance. AIG used funding from its U.S. bailout to help support the unit.
Radian was the No. 2 seller of the coverage and MGIC was No. 3. Genworth Financial Inc., which also offers life insurance and long-term care coverage, is fourth.
http://washpost.bloomberg.com/Story?docId=1376-N8I77W6JTSEJ01-76Q5K8314K8AUV0QFKJ9B83OAS
You are off your meds again.
Ok, back on the couch.
Wow $4.04 it continues to surprise me.
Yes, after spending some time on the couch I have determined that it is not a fear of missing out that keeps me in this stock. It is GREED. I am ok with that. Oh and fighting the righteous fight and being David against Goliath and being patriotic and oh yea...GREED.
Time to Buy the Year's Worst?
http://www.forbes.com/sites/tomaspray/2014/07/10/time-to-buy-the-years-worst/
The DJ US Mortgage Finance Index (DJUSMF) has lost just under 11% so far this year. It includes Fannie Mae (FNMA) and Freddie Mac (FMCC).
The daily chart shows that after the January drop, the index has been in a trading range, lines e and f.
There were three attempts to push above the 6.50 area before the index turned lower.
The drop back below its 20-day EMA suggests a test of the daily starc- band in the 6.10 area.
There is further support now at 5.92, line f.
The sideways pattern in the relative performance (lines g and h) is consistent with an industry group that is lagging the overall market.
The trading range in the OBV has already been completed as it dropped below support (line j) at the end of June.
This suggests that the index may soon also drop to new correction lows.
Exerpt from Maloni's blog
Commentary on Peter Wallison
The AEI’s Peter Wallison, a week or so ago, penned a repeat of his allegations that Fannie and Freddie were the cause of the 2008 financial meltdown, ignoring, once again, the role of the major financial institutions who went outside the F&F systems to create and sell worldwide more than $2 Trillion of worthless private label mortgage backed securities (PLS), which their broker network created.
http://www.thecuttingedgenews.com/index.php?article=84458&pageid=13&pagename=Analysis
A friend offered this pithy description of Wallison‘s work (aided by Ed Pinto’s equally vapid research).
“Wallison is housing policy's version of a Creationist: ignoring mountains of hard evidence that refute his ideological convictions, while positing a mythologized story that falls flat without a willful suspension of disbelief. Yet, like Creationists, he has a ready audience for his material.”
http://malonigse.blogspot.com/
Seems like there is expectation of some good news tomorrow from Judge (Judy) Sweeny. We are doing well today on a down market.
Our financial crisis amnesia
Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too.
Alex J. Pollock | The Wall Street Journal
July 10, 2014
Reuters
Lehman Brothers name moves across a news ticker in New York's Times Square September 15, 2008.
Share on email Share on facebook Share on twitter Share on google_plusone_share Share on linkedin Download
It is now five years since the end of the most recent U.S. financial crisis of 2007-09. Stocks have made record highs, junk bonds and leveraged loans have boomed, house prices have risen, and already there are cries for lower credit standards on mortgages to "increase access."
Meanwhile, in vivid contrast to the Swiss central bank, which marks its investments to market, the Federal Reserve has designed its own regulatory accounting so that it will never have to recognize any losses on its $4 trillion portfolio of long-term bonds and mortgage securities.
Who remembers that such "special" accounting is exactly what the Federal Home Loan Bank Board designed in the 1980s to hide losses in savings and loans? Who remembers that there even was a Federal Home Loan Bank Board, which for its manifold financial sins was abolished in 1989?
This article is available by subscription to The Wall Street Journal. The full text will be posted to AEI.org on Monday, July 14.
http://www.aei.org/article/economics/our-financial-crisis-amnesia/
I believe Jack is talking about investing where as you seem to be a trader. Two different animals.
Is this the inside info that triggered Goldman’s MBS ‘big short’?
By Alison Frankel
July 9, 2014
Goldman Sachs
It is an axiom of the financial crisis that Goldman Sachs realized before any of the other big banks that the mortgage-backed securities market was going to implode in 2007. Goldman dumped MBS and shorted the market, turning a profit in its mortgage department when every other major financial institution suffered record losses.
So what tipped Goldman to start off-loading its MBS exposure at the end of 2006? In a new brief in its securities fraud case against the bank, the Federal Housing Finance Agency has an intriguing theory.
According to the conservator for Fannie Mae and Freddie Mac, Goldman received a report on December 10, 2006 from the CEO of Senderra, a subprime mortgage lender partially owned by Goldman. Goldman had taken a stake in Senderra — a relatively small mortgage originator — to stay informed about the state of the mortgage market, according to FHFA.
In the December 10 emailed report, Senderra CEO Brad Bradley supplied grim market intelligence. “Credit quality has risen to become the major crisis in the non-prime industry,” he wrote to Kevin Gasvoda, the head of Goldman’s whole loan trading desk. “We are seeing unprecedented defaults and fraud in the market, inflated appraisals, inflated income and occupancy fraud.”
Gasvoda forwarded the proprietary report to other Goldman executives, along with what he called a “very telling” follow-up email from Senderra that warned of “irrational” mortgage originators chasing “any loan which smells of quality.”
Four days later — after the confidential Senderra report circulated within the bank — the head of Goldman’s mortgage department met with senior bank officials, including CFO David Viniar, to discuss how Goldman could take advantage of the imminent mortgage meltdown. That very day, according to the FHFA brief, Goldman launched the sell-off of its MBS holdings.
“Goldman had unique and confidential access to the dire warnings directly provided by its own affiliate and proprietary originators that the sub-prime mortgage market was experiencing ‘unprecedented defaults and fraud,’” the brief said. “Yet Goldman failed to respond, except to the extent it sought to profit through shorting the market.”
FHFA’s lawyers at Quinn Emanuel Urquhart & Sullivan contend that the Senderra report is just one of the reasons that Goldman should not be permitted to argue to a jury that it conducted a reasonable investigation of the mortgage loans underlying the securities it sold to Fannie and Freddie.
The agency has asked the judge overseeing the Fannie Mae and Freddie Mac litigation, U.S. District Judge Denise Cote of Manhattan, to grant summary judgment precluding Goldman from asserting a so-called due diligence defense when the case goes to trial on Sept. 29.
Goldman’s diligence, according to the Fannie and Freddie conservator, was at best “ramshackle” and at worst a tool of deception. Either way, FHFA said, the bank did an inadequate job, as a matter of law, of assuring that underlying mortgage pools lived up to its promises to investors.
In addition to the Senderra email revelation, the other marquee accusation in FHFA’s new brief is that Goldman did conduct independent investigations on the value of some of the properties whose mortgages it bought from originators — but the bank supposedly used that information for its own benefit rather than for the benefit of MBS investors.
The alleged duplicity involved a key MBS benchmark, the ratio between the size of each underlying mortgage and the actual value of the mortgaged property, otherwise known as the loan-to-value ratio, or LTV. (If the property is worth less than it’s mortgaged for, homeowners are likelier to walk away from their loans, which diminishes the stream of revenue to MBS noteholders.)
In about 170 instances, according to the FHFA brief, after Goldman ran its own checks on properties with apparently outsized mortgages, it kicked those loans back to the mortgage originators from which it had purchased them. FHFA’s brief said that Goldman then repurchased 11 of those mortgages from originators at a discounted price, based on its finding that the value of the property didn’t justify the size of the loan.
But according to the FHFA brief, when Goldman included the repriced loans in MBS pools, it did not tell investors that the loan-to-value ratio was out of whack. “Goldman used these ‘final values’ to negotiate lower prices for itself,” FHFA said, “but it reported LTV ratios to investors based on the originators’ stated values — which Goldman believed to be false.”
I’m sure Goldman’s lawyers at Sullivan & Cromwell will have lots to say about FHFA’s allegations when they file their response to FHFA later this month. For starters, Goldman will probably emphasize that FHFA has claimed it renegotiated prices on a grand total of 11 underlying loans, of the tens of thousands at issue in the case.
You can also expect the bank to argue that the Senderra report in December 2010 was old news: The mortgage industry was already rife with talk of loose underwriting standards and borrower fraud. In fact, according to a joint summary judgment brief filed in June by three of the remaining FHFA defendants, including Goldman, Fannie Mae and Freddie Mac knew those rumors as well as anyone in the MBS marketplace. (Unfortunately, most of the banks’ specific evidence of what Fannie and Freddie were told in 2006 is redacted.)
Summary judgment is supposed to rest on undisputed facts, and Goldman will certainly claim that the facts here are in dispute. On the other hand, Judge Cote, as you know, has consistently sided with FHFA in this litigation, which is why banks have already coughed up $15 billion in settlements with the agency. With a trial date only weeks away, is Goldman willing to risk adverse summary judgment rulings that will increase FHFA’s leverage?
Goldman still has one potential trump card — a motion that could end the litigation and make all of the banks that have settled with FHFA wish they’d stuck it out too. But you’ll have to wait until my post tomorrow to find out what Goldman’s Hail Mary is!
http://blogs.reuters.com/alison-frankel/2014/07/09/is-this-the-inside-info-that-triggered-goldmans-mbs-big-short/
Sun Trust to end investigation with $320 million payoff
BY DEAN SEAL dseal@dailyprogress.com | Posted 50 minutes ago
Sun Trust Mortgage Inc. has agreed to pay up to $320 million to end a criminal investigation into allegations that it misled customers under a federal program to help home-owners avoid foreclosure, prosecutors and the company said Thursday.
A news release from the federal Department of Justice on Thursday said the Richmond-based mortgage company made "material misrepresentations and omissions to borrowers" participating in its Home Affordable Modification Program, which was established a year after the housing crisis to help homeowners avoid defaults and foreclosures.
Between $179 million and $274 million will be used to compensate about 22,000 borrowers for the damage caused by SunTrust's mismanagement of the program.
More than 1,000 of those borrowers reside in the Western District of Virginia, said Brian McGinn of the U.S. attorney's office.
The company, a division of Atlanta-based Sun Trust Banks Inc., had received $4.85 billion from the Troubled Asset Relief Program to fund HAMP in 2009, which gave homeowners the chance to restructure their mortgages to set better terms and lower monthly payments.
The program allowed homeowners to apply for the more favorable terms and, initially, screened them within 20 days before putting them on a 90-day trial period where they needed to make the reduced monthly payments. If homeowners remained current on the payments, the modifications would become permanent.
Pressured to increase its number of borrowers, SunTrust soon began offering the 90-day trial period if the bank thought the borrower would qualify based on verbal information, according to a statement of facts in the settlement.
Issues arose when Sun Trust was unable to provide verification to borrowers within 20 days, or when the trial periods extended far past 90 days without SunTrust telling borrowers whether they would qualify for the permanent loan modification.
Borrowers were regularly on trial periods that lasted "close to, if not more than, a year," the statement of facts said. When borrowers began the program, they were unable to explore other options that could have helped save their home.
Further, Sun Trust improperly reported as many as 75 percent of its customers as delinquent during the trial period even though they were current on their payments, severely damaging the credit scores of these borrowers and increasing their costs from higher interest rates for credit applications, higher insurance costs and lost job opportunities, the statement said.
SunTrust also wrongly charged many borrowers for interest at higher, unmodified rates during these extended trial periods, and improperly denied the loan modifications for some borrowers.
Some homes were even improperly foreclosed upon during the trial periods, causing a range of financial harms for the slighted homeowners.
SunTrust has cooperated with the investigation and admitted fault and mismanagement of HAMP, and the executives and managers responsible are no longer with the company, the statement of facts said.
The company "did not have in place" the personnel or resources to properly manage the program, U.S. Attorney Timothy Heaphy said at a news conference Thursday.
The two-year criminal investigation that followed was the result of numerous complaints, Heaphy said.
"The criminal investigation uncovered that SunTrust so bungled its administration of the program that many homeowners would have been exponentially better off having never applied through the bank in the first place," said Christy Romero, special inspector general for the Troubled Asset Relief Program. "Unwilling to put resources in HAMP despite holding billions in TARP funds, SunTrust put piles of unopened homeowners' HAMP applications in a room."
"SunTrust's floor actually buckled under the sheer weight of unopened document packages," Romero said, calling SunTrust's negligence "appalling, miserable, inexcusable and repulsive."
In addition to the $179 million to $274 million in restitution to borrowers damaged by the program, $16 million will be made available to law enforcement agencies working on mortgage fraud. Another $10 million will be paid to government-sponsored enterprises Freddie Mac and Fannie Mae, and $20 million will be used to establish a fund for housing counseling agencies to aid distressed homeowners.
"Sun Trust has done the right thing by agreeing to this novel package of restitution, remediation and prevention, which represents a significant victory not only for SunTrust customers, but also for Americans who will receive counseling and other assistance when faced with financial challenges," Heaphy said.
"We recognize that there were deficiencies in our administration of HAMP during the recession, and through the improvements we have made to our internal processes and this restitution plan we are demonstrating our commitment to meet the high standards that we set for ourselves and that our customers expect," Sun Trust Mortgage CEO Jerome Lienhard said in a news release.
Sun Trust Mortgage will not face criminal penalties as a result of the settlement. Investigation into the individuals responsible for the mismanagement is ongoing, Heaphy said.
Last month, Sun Trust and the Justice Department also agreed to a $1 billion settlement to resolve allegations that the company underwrote and endorsed faulty mortgage loans between 2006 and 2012.
http://www.staffordcountysun.com/news/business/article_f6ab8dcc-07ac-11e4-873a-001a4bcf6878.html?mode=jqm
Fannie Mae Reform To Cause Housing Crisis 2.0: Bove
by Michael IdeJuly 09, 2014, 5:17 pm
If current policies remain in place, he expects the next president to face a crumbling housing market
It wasn’t long ago that Rafferty Capital Markets LLC VP of equity research Richard X. Bove declared victory on Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform, sensing a sea change in Federal Housing Finance Agency (FHFA) chief Mel Watts comments at the Brookings Institution. Now he has swung to the opposite extreme and is warning that unless the government changes course we could be looking at the making of another housing crisis.
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove
“In 2017, a new President will take office. S/he will be faced with a deteriorating housing environment that s/he never thought about during the election. However, the problems surfacing in housing will require immediate action. A bailout of the industry might be required costing well more than what occurred in 2008,” Bove writes. “If I am right that year will experience a hair raising recession driven by another catastrophe in housing.”
Bove writes about Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)
At the moment, there is no movement in bills or regulations related to housing finance:
• The Senate bill that would eliminate annie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) was approved by the Senate Banking Committee but it is not going to be debated on the Senate floor so it is effectively dead.
• The bills introduced by Maxine Waters (D., CA) and Jeb Henserling (R.,TX) related to the annie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) have gained no traction in the House of Representatives.
• There have been no major new initiatives by Mel Watt the Director of the Federal Housing Finance Agency (FHFA) since he delayed further gains in the annie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) guarantee fee.
• The Consumer Financial Protection Bureau (CFPB) is staying with the qualified mortgage guidelines that it has issued.
• As evidenced by the differences in the home finance bills in the Senate and House there is no agreement between the Democrats and Republicans as to what should be done to restructure Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).
• As evidenced by the negative votes cast on the Senate Bill in Committee, there is a deep chasm between what the President believes should be done and what is believed by the key Senators in his own party who voted against the President’s bill.
• The courts are still mulling over the filings made by both sides in the GSE lawsuits and it appears that a minimum of 800,000 documents are about to be made available to the plaintiffs although this has not happened as yet.
But Bove declares that this does not mean we are at an impasse. He states:
The nation has a defined set of policies in place for housing finance and if nothing is done to change them the nation will follow these guidelines.
A number of key philosophies are being implemented:
• The Administration has clearly indicated that its desire is to get out of the home finance business.
o It does not believe that every household should own its own home, and
o It strongly believes, and has articulated its view, that low income households should rent not buy housing units.
• The CFPB has put in place clear guidelines for originating mortgage loans that are in keeping with the Administration’s desire to push households toward renting
o Homeowners must put down 20%, and
o Limit their debt service payments to all sources to 50% of their income, so that
o Low income households or first time buyers cannot get qualified mortgage loans.
• Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) must
o Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) Get rid of 100% of their capital by January 1, 2018, and
o Shrink the size of their owned loan portfolios down to $250 billion apiece, and this is to be
o Liquidated over the next 10 years.
All of these policies are now in place and unless some action develops to change them; they will be realized. It appears that both the President and the Secretary of the Treasury are content with these Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) policies so that they feel no need to make any adjustments. The United States will get out of the home finance business and the private sector will pick up the slack as they see it.
Fannie Mae, Freddie Mac reform deadlock could easily last until 2017
A lot can happen in the next few years, but considering President Obama has met with resistance from his own party on GSE reform in the Senate, and Republican intransigence shows no sign of letting up, legislative deadlock is one of the more likely outcomes. When the next president takes office Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) will be more or less insolvent, and will be unable to buy any new mortgages, in line with President Obama’s current plan for the GSEs.
Expensive mortgages could depress housing prices
But if Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) aren’t replaced with anything else, Bove predicts that 20 and 30 year fixed rate mortgages will all but disappear, guarantee fees from a mostly private secondary mortgage market will be higher, and interest rates will go up. All this means that monthly payments for new loans will go up, causing housing prices to fall. It’s a plausible scenario and one that FHFA and Treasury officials must have contemplated.
A major part of Bove’s long thesis on Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), which he has acknowledged as high risk from the beginning, is that a housing market without them is unthinkable and the government will eventually see the error of its ways. Homeownership is one of the most important ways that middle class families build and pass on wealth, and home owners reinvest in their communities in a way that renters don’t, which explains why Fannie and Freddie were founded in the first place. But in his latest letter Bove seems to be confronting the idea that Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) may be wound down all the same.
Share on StockTwits
Sign Up For Our Free Newsletter to never miss an article.
Tags:fannie mae FHFA FMCC FNMA freddie mac GSE reform homeownership housing crisis housing market housing prices new loans secondary mortgage
Post navigation
? Tesla Motors Inc, Apple Inc. Targeted In China
Justin Bieber Charged For Vandalism Over “Egging” Incident ?
https://www.valuewalk.com/2014/07/fannie-mae-reform-to-cause-housing-crisis-2-0-bove/
Holder won't meet with BofA CEO as mortgage talks stall: sources
Holder won't meet with BofA CEO as mortgage talks stall: sources
A combination of file photos shows U.S. Attorney General Eric Holder in Washington and Bank of America Chief Executive Brian Moynihan. Photo: Reuters
mail
print
View all 0 comments
Published: 5:03 AM, July 10, 2014
(Page 1 of 2) - NEXT PAGE | SINGLE PAGE
NEW YORK/WASHINGTON - Attorney General Eric Holder has formally refused to meet with Bank of America Corp Chief Executive Brian Moynihan to hammer out a multibillion-dollar deal, as talks to resolve probes into shoddy mortgage securities sold by the bank and its units remain at a standstill, according to people familiar with the matter.
In a letter sent in the second half of June, Holder told Moynihan that the parties remained too far apart for a meeting to be productive, one source said.
No negotiations between the second largest U.S. bank and the U.S. Department of Justice have taken place since the second week in June, several people said.
The attorney general said in the letter he had been following the talks and continued to get updates but was leaving the negotiations to the Justice Department's No. 3 official, Tony West, the one source said.
Reuters reported last month that Bank of America representatives had sought a meeting between Moynihan and Holder to resolve government investigations into potential misconduct by the bank and its units in packaging mortgages, primarily during the run-up to the financial crisis.
Bank of America has discussed paying about $12 billion to settle the probes, including a portion to help struggling homeowners, while the Justice Department had suggested a $17 billion settlement, sources said. The talks are being driven by an investigation into the bank's Merrill Lynch unit but also include the bank itself and its Countrywide unit, sources said.
Government negotiators declined to credit the bank with $6.3 billion Bank of America agreed to pay the Federal Housing Finance Agency in March over misrepresentations in mortgage-backed securities purchased by Fannie Mae and Freddie Mac between 2005 and 2007. The credit would essentially close the gap, a second source said.
While talks with Bank of America have not progressed in about a month, Justice Department lawyers have been occupied with resolving a similar case against Citigroup, sources said, which may be settled as early as next week.
An announcement on Citigroup could pave the way for renewed negotiations with Bank of America, sources said.
The Justice Department had threatened both banks with lawsuits.
http://www.todayonline.com/business/holder-wont-meet-bofa-ceo-mortgage-talks-stall-sources
How about mistery guest Warren Buffet and FnF investment
I don't know as a fact but if settlement $$$ is profit then the sweep will take it anyhow.
IMO D.O.J. brought the suit. Govt. Gets the spoils. If sweep was is found to be unlawful I guess the outcome could be different. For now it is just growing the pile of $$$ that Robin (Barry) Hood is stealing from FnF.
I dont like this (read)
U.S. Senate confirms Julian Castro as housing secretary
Wednesday, July 09, 2014 12:48 p.m. EDT
By Elvina Nawaguna
WASHINGTON (Reuters) - The U.S. Senate on Wednesday confirmed Julian Castro to lead the Department of Housing and Urban Development, placing the San Antonio, Texas mayor at the top of the agency in charge of housing at a time when the sector is recovering sluggishly.
Castro, a Democrat who was nominated by President Barack Obama, was confirmed on a roll call vote of 71 to 26 in the Democratic-led Senate. The 26 senators opposed to his nomination were Republicans.
He will replace Shaun Donovan, who has been tapped to lead the White House's Office of Management and Budget. Castro, who has the backing of industry groups such as the Mortgage Bankers Association and National Association of Realtors, has been praised for his housing and development programs in San Antonio, including revitalizing its downtown.
He is expected to push the Obama administration's plan to shutter mortgage finance giants Fannie Mae and Freddie Mac , an effort that has so far stalled in Congress.
Some Democrats see Castro, a Latino, as a rising star in the party, and his new position puts him a step closer to a potential 2016 vice presidential run.
A graduate of Stanford University and Harvard Law School, Castro, 39 became the youngest mayor of a major U.S. city when elected in May 2009. He gained national prominence when he delivered the keynote address at the 2012 Democratic National Convention.
Castro told lawmakers during his first nomination hearing in June the current U.S. housing finance system was not working well for Americans and that he would support their reform efforts.
He said he would ensure taxpayers would not be on the hook again if another housing crisis struck, as they were when the government rescued Freddie Mac and Fannie Mae in 2008.
Castro also said he would ensure the Federal Housing Administration, a troubled government mortgage insurer under HUD that was forced to take $1.7 billion in taxpayer funds last year, would not need another rescue.
As the top U.S. housing official, he would be tasked with making homeownership more affordable for low-income buyers.
The FHA, which aims to help first-time and low-income borrowers, raised its mortgage insurance fees to bolster its finances. That action locked out thousands of potential buyers, and it now faces pressure to bring the fees down.
Castro told lawmakers it was possible to balance FHA's mission of helping low-income borrowers with the need to keep it financially sound.
"My perspective, whether it relates to the requirements for down payments or other measures, is that we achieve this balance to stay within the mission of the FHA - the historic mission to ensure that first-time home buyers, that folks of modest means who are creditworthy, that they have the opportunity to reach the American dream of homeownership," Castro said last month.
(Reporting by Elvina Nawaguna; Editing by Paul Simao)
http://wtvbam.com/news/articles/2014/jul/09/us-senate-confirms-julian-castro-as-housing-secretary/
I don't like the sound of this (read)
U.S. Senate confirms Julian Castro as housing secretary
Wednesday, July 09, 2014 12:48 p.m. EDT
By Elvina Nawaguna
WASHINGTON (Reuters) - The U.S. Senate on Wednesday confirmed Julian Castro to lead the Department of Housing and Urban Development, placing the San Antonio, Texas mayor at the top of the agency in charge of housing at a time when the sector is recovering sluggishly.
Castro, a Democrat who was nominated by President Barack Obama, was confirmed on a roll call vote of 71 to 26 in the Democratic-led Senate. The 26 senators opposed to his nomination were Republicans.
He will replace Shaun Donovan, who has been tapped to lead the White House's Office of Management and Budget. Castro, who has the backing of industry groups such as the Mortgage Bankers Association and National Association of Realtors, has been praised for his housing and development programs in San Antonio, including revitalizing its downtown.
He is expected to push the Obama administration's plan to shutter mortgage finance giants Fannie Mae and Freddie Mac , an effort that has so far stalled in Congress.
Some Democrats see Castro, a Latino, as a rising star in the party, and his new position puts him a step closer to a potential 2016 vice presidential run.
A graduate of Stanford University and Harvard Law School, Castro, 39 became the youngest mayor of a major U.S. city when elected in May 2009. He gained national prominence when he delivered the keynote address at the 2012 Democratic National Convention.
Castro told lawmakers during his first nomination hearing in June the current U.S. housing finance system was not working well for Americans and that he would support their reform efforts.
He said he would ensure taxpayers would not be on the hook again if another housing crisis stru
ck, as they were when the government rescued Freddie Mac and Fannie Mae in 2008.
Castro also said he would ensure the Federal Housing Administration, a troubled government mortgage insurer under HUD that was forced to take $1.7 billion in taxpayer funds last year, would not need another rescue.
As the top U.S. housing official, he would be tasked with making homeownership more affordable for low-income buyers.
The FHA, which aims to help first-time and low-income borrowers, raised its mortgage insurance fees to bolster its finances. That action locked out thousands of potential buyers, and it now faces pressure to bring the fees down.
Castro told lawmakers it was possible to balance FHA's mission of helping low-income borrowers with the need to keep it financially sound.
"My perspective, whether it relates to the requirements for down payments or other measures, is that we achieve this balance to stay within the mission of the FHA - the historic mission to ensure that first-time home buyers, that folks of modest means who are creditworthy, that they have the opportunity to reach the American dream of homeownership," Castro said last month.
(Reporting by Elvina Nawaguna; Editing by Paul Simao)
I have a fear of missing out. Or am I just rationalizing my own greed? Serious question.
Citigroup faces $7 billion mortgage reckoning
CNNMoney | July 9, 2014 08:25 am
Citigroup looks like it's next to face a reckoning for the mortgage crisis.
Published reports say Citi is close to $7 billion deal to settle charges that it packaged bad mortgages during the run-up to the financial crisis.
The amount is far more than the $4 billion Citi was reported offering to pay as recently as June. But the Justice Department is said to have threatened to sue the bank if it did not reach a larger settlement.
The settlement would be about half of the $13 billion settlement that rival JPMorgan Chase agreed to pay last November to settle similar charges, and is also smaller than a $9.5 billion settlement with Bank of America this past March.
Citigroup and other major banks bundled together mortgages made to homeowners during the housing boom ahead of the financial crisis, when rising home prices obscured shoddy underwriting practices and the riskiness of the loans.
When prices started to decline, loan defaults and foreclosures soared and investors, including government backed Fannie Mae and Freddie Mac, were left with billions in losses on those mortgage securities.
The Citigroup mortgage deal reportedly would include both a cash penalty and relief for homeowners with Citgroup mortgages. It reportedly could be announced within the next week.
Citigroup has been under increasing pressure from banking regulators, which has hurt its share price.
The Federal Reserve gave Citigroup a poor grade in its stress test in March and blocked its plans to return money to shareholders through a $6.4 billion share repurchase and an increase in its dividend.
By contrast, Bank of America initially won approval of its own share repurchase and dividend increase soon after its mortgage settlement, although it had to drop those plans after admitting an error in the calculation of its capital ratio.
Citigroup has also disclosed that its under investigation for alleged fraud and money laundering violations at its Mexican subsidiary Banamex.
http://m.hartfordbusiness.com/article/20140709/NEWS02/307099984
Inspector General Report Urges FHFA To Consider Lender-Placed Insurance Suits
7/9/2014
by
BuckleySandler LLP Contact
inShare
On June 25, the FHFA Office of Inspector General (OIG) published a report that urges the FHFA to consider whether to pursue servicers and insurers for alleged lender-placed insurance (LPI) losses. The OIG cited prior determinations by state insurance regulators that LPI rates in their respective jurisdictions allegedly were excessive and that those rates may have been driven up by profit-sharing arrangements under which servicers allegedly were paid to steer business to LPI providers. The OIG believes that Fannie Mae and Freddie Mac “have suffered considerable financial harm in the LPI market.” The OIG explained that using a methodology similar to that utilized by a state insurance regulator, it estimates that for 2012 alone the combined financial harm due to “excessively priced LPI” amounted to $158 million. The OIG acknowledged that its assessments did not consider compensation already received by Fannie Mae or Freddie Mac from repurchase requests. The report also notes that the FHFA has yet to complete an assessment regarding the merits of potential litigation to recover alleged financial damages associated with the LPI market, but recommends that the FHFA do so and take appropriate action in response. In its response to the report, the FHFA concurred and pledged to complete the review in the next 12 months. The FHFA also pointed out that its litigation assessment would differ from the review conducted by the OIG and would consider potential legal arguments and litigation risks, economic assessments, and relevant public policies.
http://www.jdsupra.com/legalnews/inspector-general-report-urges-fhfa-to-c-93689/
Regulatory Backpedaling
President Obama has done it. Former Fed Chair Ben Bernanke has done it. I think that we all have done it……backpedaling that is. Well if we have done it, it hasn’t had the same consequences as with the aforementioned figureheads. To state one thing, have the masses react negatively, and then nuance your way out of it with verbal spin control is a skill that not many have perfected. Both the President and the ex-Chairman had to learn quickly, as the physical and financial safety of the free world depended on it. Now we have our mortgage market. A lot has been said about how the powers that be were going to reign in the market before it got too hot and implement new procedures to insure that borrowers had more skin in the game, but they weren’t anticipating a 15% fall off in housing activity. Accordingly, the backpedaling has begun.
Former Congressman, Mel Watt, is the new head of the Federal Housing Finance Authority (FHFA). FHFA has regulates both Fannie Mae and Freddie Mac. Recently Mr. Watt was said that the mortgage giants should direct their focus toward making more credit available to homeowners. This was a wet towel to the face moment because just a couple months prior his predecessor stated that Fannie and Freddie needed to get out of the mortgage game and that the private sector needed to increase its percentage share of the marketplace. What a U-turn! Capitol Hill vowed to tamper the easy flow policies, rein in overly aggressive mortgage programs, and find a way to shutdown Fannie and Freddie. This is shocking news indeed.
The Treasury Department and the Fed both have made clear note of the fact that the lackluster housing market is major contributor to the tepid recovery. Recently sales of both new and pre-existing homes fell off of a proverbial cliff. New refinancings are almost non-existent and whole mortgage units at various banks across the country have been shuttered. Moreover, the new regulation requiring borrowers to put down 20% was a dagger to the heart, particularly in high cost states where the average home may be $450,000 or more. A $90,000 down payment is not readily available for the average borrower whose income doesn’t keep pace with the increase in housing prices. Maintaining this requirement forced banks that didn’t measure up, to hold 5% of the loan on its books to “share in the risk,” which most banks don’t want to do.
In the end, HUD got mad. The banks got mad and obviously the borrowers got mad too, as over 10,000 letters deluged the regulator’s offices. As such, they capitulated, and the FHFA backpedaled after having spoken so forcefully about making the market less reliant on Freddie Mac and Fannie Mae. It isn’t Mr. Watt’s role to “contract the footprint” of the two giants, but in effect that’s what FHFA did. Now they have to inform the American citizenry that loan sizes won’t shrink, but instead will grow. It’s a welcome announcement, but it gives the people less security in knowing when a regulator’s statement has any teeth.
I have seen a lot of people get in front of a microphone and talk tough. I am seen a lot of people make big claims about what they are going to do and to whom it will most certainly be done. However, I have also seen many a tough talker eat crow and it applies to the Federal government with regards to the availability of financing needed in our mortgage market. Many forms of poultry are quite savory, but I have heard that eating crow has no flavor whatsoever.
Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. Specializing in various facets of real estate finance; he can be reached at howardpr@rosecityrealtyinc.com.
http://rosecityrealtyinc.wordpress.com/2014/07/09/regulatory-backpedaling/
Yes they lost beutifully.
News: MarketWatch
U.S. June budget surplus $70 billion, CBO estimates
Print ReprintsCommentRecommend (0)
Bookmark and Share
7-8-14 5:08 PM EDT | Email Article
WASHINGTON (MarketWatch) -- The federal government had a budget surplus of $70 billion in June, the Congressional Budget Office estimated Tuesday. That is $46 billion less than the surplus in June 2013, when the government got a large onetime payment from Fannie Mae. CBO said receipts in June were $324 billion, $37 billion more than in June 2013. Spending was $253 billion in June, $83 billion more than a year ago. For the fiscal year to date, the deficit is $366 billion, $144 billion less than in the same nine months of fiscal 2013.
http://news.morningstar.com/all/market-watch/TDJNMW20140708341/us-june-budget-surplus-70-billion-cbo-estimates.aspx
uesday, July 8, 2014
The Housing Market is Faltering #2
Below is another recent article about the faltering housing market. This author points out that the interest in home ownership is being usurped by concerns for having enough money for retirement, not to mention all the other things such as lending standards, etc. One thing I have noticed in the younger generation (mostly millennials) is that they do not consider home ownership as an investment. A very different view from earlier generations.
The article is in italics and the bold is my emphasis. From Market Watch:
For Rebecca Diamond, a marketing manager in Randallstown, Md. who’s getting married this month, buying a home with her new husband would seem like the logical next step.
But she’s not even considering it.
“No interest whatsoever. I don’t want the cost and responsibility of one right now,” she says. “Let [the landlord] have all the headaches,” adds Diamond, who rents a three-bedroom condo outside of Baltimore.
She’s hardly alone. Just 74.4 million American households — less than 65% of the country — owned the homes they lived in during the first quarter of this year, according to a U.S. Census Bureau report this week. That was the lowest level since 1995 and a big drop from 2006, when a peak of 76.5 million households, or 68.9%, were owner-occupied.
In fact, the National Endowment for Financial Education released a poll this week that showed only 13% of Americans considered home ownership as their “top long term financial goal,” down from 17% in 2011.
“The American dream has long been associated with the gratification and security of a comfortable home within the picturesque borders of a white-picket fence,” said Ted Beck, president and CEO of the NEFE, which is based in Denver. “However, today the perceived importance of home ownership appears to be waning.”
Instead, according to the poll, a whopping 50% said that their sole long term financial goal was to save enough for retirement, up from 43% three years earlier, even though most financial planners say owning a home is the best way to build wealth that can be tapped once you retire.
Stephen Alberts, a Long & Foster real-estate agent in Williamsburg, Va., who does many of his deals in the coastal retirement community of Virginia Beach, says his business is tougher than ever. “Even I’ve got to pound the ground,” he said. “Buyers just aren’t coming to me anymore.”
For him, it’s all about the economy.
“In most markets they’re worried about the security of their jobs, so they’re reluctant to put roots down and get stability.” Alberts says his market generally bucks the trend since Virginia Beach is a destination for many to spend their golden years. “We are more stable as we have retirees who have already made their money,” echoing NEFE’s poll numbers showing retirement savings is driving consumers.
Still, Albert says first-time home buyers are put off by rising prices and multiple bids. “We also have to do a lot of re-education of our buyers,” he said.
For realtors too, it’s credit scores being too tight.
According to the National Association of Realtors, the average accepted credit score on conventional mortgages was around 720. “A credit score that would have gotten you a mortgage before 2008 is now below the average rejection score,” said Walt Molony of the National Association of Realtors.
“Things are improving, but at a snail’s pace,” he said. The NAR points to its “Housing Affordability Index,” which shows that if a U.S. family was earning the median family income in 2013 of $63,623, it would have 175% of the necessary income to buy a median single family home priced at $197,400.
That equates to about 20 million households able to purchase a home, but choosing not to. And Molony points the finger at the banks more than anything else. “The problem is overly restrictive mortgage lending standards, relying on arbitrarily high credit scores,” he said.
That’s not necessarily true, said Darren Ferlisi, a loan officer with Integrity Home Mortgage Corp. in Frederick, Md., who said FICO scores of 640 and in some cases as low as 620 will qualify for a mortgage today. “If anything, we have more flexibility than we had two years ago,” he said.
Still, as a result of the Great Recession, many people who otherwise had 9-to-5 jobs now are freelancers or self employed, which makes proving two years’ worth of income difficult, especially when those first two years were poor ones as their businesses were just getting off the ground, says Greg McBride, chief financial analyst at Bankrate.com.
“The problem is a lot of those people don’t have $20,000 or $30,000 to make a down payment, and if they’ve got two years of tax returns, in this economy, they might be losses,” McBride said. “A loss for tax purposes is still a loss when it comes to qualifying for a home mortgage.”
McBride says he sees the smaller number of Americans making a home their ultimate financial goal as a good thing. “People compromise their financial goals in pursuit of home ownership and they aren’t putting enough into their retirement or their 401(k) and they end up house rich but cash poor,” he said.
Once more Americans feel financially secure about their retirement, they’ll return to the housing market, he said. “They’ve rightly felt burned by the housing bust, but five to fifteen years from now, they’ll be back.”
http://commonsenseforecaster.blogspot.com/
GSEs Have Prevented Nearly 3.2 Million Foreclosures
in News > Mortgage Servicing
by MortgageOrb.com Tuesday July 08 2014
print the content itemShare on email
Share on facebookShare on linkedin
More Sharing Services0
Fannie Mae and Freddie Mac have completed nearly 3.2 million foreclosure prevention actions since the start of the conservatorships in 2008, with approximately 88,800 actions occurring in the first quarter, the companies reported in June. These measures have helped more than 2.6 million borrowers stay in their homes, including 1.6 million who received permanent loan modifications.
These actions are detailed in the Federal Housing Finance Agency’s quarterly Foreclosure Prevention Report, which includes an online, interactive borrower assistance map for Fannie Mae and Freddie Mac mortgages.
Highlights from the report include the following:
About 42% of all permanent loan modifications helped to reduce homeowners' monthly payments by more than 30% in the first quarter;
About 27% of borrowers who received permanent loan modifications in the first quarter had portions of their mortgage balance forborne;
About 14,900 short sales and deeds-in-lieu were completed in the first quarter, bringing the total to more than 566,800 since the start of the conservatorships; and
Third-party sales and foreclosure sales fell slightly to 47,300 while foreclosure starts decreased 25 percent in the first quarter.
While the total number of troubled borrowers continued to decline, 31% of these borrowers remained deeply delinquent at the end of the first quarter. Florida, New York and New Jersey had the highest number of deeply delinquent loans (365+ days).
http://www.mortgageorb.com/e107_plugins/content/content.php?content.15655
Jul 8, 2014, 1:49pm EDT
Coakley's case against Fannie Mae, Freddie Mac headed to federal court
Matthew L. Brown
Reporter- Boston Business Journal
Email | Twitter
Attorney General Martha Coakley's case against Fannie Mae and Freddie Mac will be heard in federal court rather than the state court where it was filed, as a reuslt of U.S. District Court filing.
In June, Coakley sued the two housing finance agencies, as well as the Federal Housing Finance Agency, which has held them in conservatorship since they were bailed out by the government during the credit crisis. The suit claims agency policies that prevent lenders from selling foreclosed homes for less than their original loan amounts violate the state's 2012 foreclosure prevention law.
Coakley's suit was filed early last month in Suffolk County Superior Court. The federal government has the right to remove cases against it to federal court.
http://www.bizjournals.com/boston/blog/bottom_line/2014/07/coakleys-case-against-fannie-mae-freddie-mac.html
This from yesterday
Salvaging Housing Finance Reform | Commentary
3 Comments
Email email
By Jonathan R. Macey and Logan Beirne
July 7, 2014, 5 a.m.
Housing finance legislation has stalled in the Senate but reform is not dead yet. Secretary Jack Lew recently announced a new initiative to incentivize private capital in the housing market, yet to date, the administration has implemented housing policy that does the complete opposite.
As director of the Federal Housing Finance Agency, Melvin Watt can push forward without Congress, while complementing the administration’s new goal of making sure private capital sustains the housing market.
“The housing market accounts for nearly 20 percent of the American economy, so it is critical that we have a strong and stable housing finance system that is built to last,” declares the Senate Banking Committee Leaders’ Bipartisan Housing Finance Reform Draft. But so far, Congress has been unable to reach a broad enough consensus to make headway towards this laudable goal.
During the financial crisis of 2008, the U.S. mortgage giants Fannie Mae and Freddie Mac (highly successful in the past) joined a long list of distressed financial institutions. Even though these two companies never became insolvent, Congress passed the Housing and Economic Recovery Act of 2008 to take control over Fannie and Freddie, placing them under the FHFA.
Fannie and Freddie recovered and returned to profitability in 2012 and are currently generating cash — enough cash, in fact, to more than repay the $187.5 billion in emergency funding received from the government during the downturn. But instead of fulfilling its fiduciary obligation as conservator to marshal these assets for the benefit of shareholders, the FHFA worked with the Treasury (without the approval of either Congress or of Fannie and Freddie shareholders) to enact new regulations requiring the companies to turn over 100 percent of profits they earn to the Treasury.
As one analyst recently observed, “in this case the debt that was once $187.5B is now considered infinite. That is to say that with the way things currently are, it is impossible to ever pay back what they have borrowed because the Treasury said so.” By sweeping 100 percent of Fannie and Freddie’s income, the government has left the two private companies undercapitalized despite the large amount of cash they have been generating.
Just as the FHFA worked previously without Congress, it can do so again — but this time, it can help correct its path. Under HERA, Mr. Watt has the statutory authority to develop and set capital standards for Fannie and Freddie. Mr. Watt may use this authority to require the companies to begin rebuilding capital.
http://www.rollcall.com/news/Salvaging-Housing-Finance-Reform-Commentary-234459-1.html
I have bought so many dips that I am out of money!
U.S. House Panel Says It Can Ignore SEC Subpoenas in Insider-Trading Probe – Bloomberg
July 7, 2014, 9:20 am
The U.S. House Ways and Means Committee and a top staff member say the panel and its employees are “absolutely immune” from having to comply with subpoenas from a federal regulator in an insider-trading probe. via U.S. House Panel Says It Can Ignore SEC Subpoenas in Insider-Trading Probe – Bloomberg
http://www.securitiesdocket.com/
Indusrty News for Mortgage Professionals
Hazard Insurers May Face Suit Over Fees to Fannie-Freddie
by admin on Monday, July 7th, 2014 | No Comments
0
The regulator of Fannie Mae (FNMA) and Freddie Mac will consider suing insurers that charged excessive fees for hazard coverage paid by the two government-owned mortgage companies.
Fannie Mae and Freddie Mac (FMCC) could have overpaid about $158 million in 2012 alone for lender-placed insurance, according to the report released today by the Federal Housing Finance Agency’s Office of Inspector General. The coverage is purchased by mortgage servicers and billed to borrowers who allow their policies to lapse.
Fannie Mae and Freddie Mac, which buy loans and package them into guaranteed securities, take over the homeowners’ insurance payments when mortgages they back undergo foreclosure.
The auditors’ analysis of the rates paid by Fannie Mae and Freddie Mac found that the companies, which were placed into U.S. conservatorship as they neared collapse following the collapse of the housing market, “suffered considerable financial harm” in the lender-placed insurance market, the report said.
In a letter responding to the report, FHFA’s general counsel, Alfred Pollard, said that the agency would weigh lawsuits against insurers within the next year.
State insurance regulators have found companies including Assurant Inc. (AIZ) and QBE Insurance Group Ltd. (QBIEY) overcharged borrowers for hazard coverage. In some cases, the regulators found prices may have been increased because of arrangements in which the insurers paid servicers to steer them business.
Borrowers’ Suits
Borrowers who filed class-action lawsuits against insurers for excessive fees have recouped at least $674 million so far, and Fannie Mae and Freddie Mac “may have been harmed in the same manner,” the report said.
Robert Byrd, a spokesman for Assurant, said the company was reviewing the Inspector General’s report.
“Protecting homeowners and investors with lender-placed insurance is a commitment we share with the FHFA and the Inspector General,” Byrd said in an e-mailed statement. “Our role, and consistent practice, has been to make certain insurance is appropriately in place as required by the terms of the mortgage, with approved rates and within applicable regulations.”
Deidra Parrish Williams, a spokeswoman for QBE, did not immediately respond to a telephone call seeking comment.
The FHFA last year ordered the two companies to bar servicers from receiving payments related to lender-placed insurance.
To contact the reporter on this story: Clea Benson in Washington at cbenson20@bloomberg.net
To contact the editors responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net Anthony Gnoffo
Post to Facebook
Post to Twitter
Add to LinkedIn
Post to Google+
Add to Google Bookmarks
Post to Delicious
Post to StumbleUpon
Add to Tumblr
Add to Squidoo
Print with PrintFriendly
http://originatortimes.com/fannie-mae/hazard-insurers-may-face-suit-over-fees-to-fannie-freddie/
Mortgage Insurers Jockey to Stand Out in Contract Overhaul
Print
Reprints
Email
inShare10
New federal requirements for private mortgage insurers aim to standardize coverage across the market. That's left some companies looking for ways to distinguish their products as they vie for lenders' business.
Some insurers are touting faster relief for lenders from the threat of having policies rescinded for underwriting defects. Other carriers are marketing easy-to-read policy summaries. Fundamentally, however, the new master policies contain the same elements—making an already homogeneous market even more so.
"For the most part, mortgage insurance is a commodity," says Jason Stewart, an analyst at Compass Point Research and Trading. "There is very little price differentiation in the market."
Starting on Oct. 1, mortgage insurers will be required to have in place updated master policies—their umbrella contracts with mortgage lenders—as part of a broader industry overhaul by the Federal Housing Finance Agency.
The FHFA is the regulator and conservator for Fannie Mae and Freddie Mac, which require private mortgage insurance on any loans they buy where the borrower has put down less than 20% of the home price.
The agency in December established “aligned requirements” for insurance coverage across the industry, designed to address issues that surfaced during the housing crisis.
As part of the overhaul, insurance companies were required to file updated insurance policies with Fannie and Freddie, and to get approval from state insurance regulators.
In particular, the updates address standards for rescission. When the new guidelines take effect, all insured loans purchased by Fannie Mae and Freddie Mac must have in place a standardized legal framework that spells out when, and under what circumstances, a policy can be revoked.
"It's a huge change," says Meghan Bartholomew, senior vice president for risk management at Radian. Her company’s previous master policy did not include rescission timelines, she says.
Rescission is a concern for lenders because if an insurer yanks a policy, Fannie or Freddie could make the originator buy back the loan (although this is no longer automatic as it was during the downturn). A primary goal of the FHFA overhaul was to make sure all insurance policies contained guidelines for dealing with contested claims.
"We've learned our lessons from the crisis," says Theresa Cameron, associate general counsel at United Guaranty, referring to the gaps in insurers' master policies that led to legal battles during the housing crash. "Taking someone's word for something isn’t going to get you to where you want to be."
Most of the master policies that have been approved by the government-sponsored enterprises, which are posted on the insurers' websites, contain little variation in the area of rescission relief for mortgage lenders.
Six of the seven companies in the market—MGIC, Radian, Genworth, Essent, Arch MI and United Guaranty—have incorporated the GSE-mandated 36-month sunset for policy contestability. That means the insurers promise that coverage can't be revoked after three years, provided that a borrower has made consistent, timely payments.
Additionally, the insurance companies will offer an optional 12-month rescission relief policy. To qualify for the shortened timeframe, loans will be required to undergo an additional underwriting review and submit post-closing documentation.
Radian, for instance, will "do its own independent review of the origination file and closing file, making sure that it was underwritten properly," says Bartholomew.
The new policies provide the housing finance market with an additional layer of credit security, says Stewart.
"What we've seen is that [the mortgage insurers'] underwriting process acts like a quality control check for originators," he says.
Lenders will see little variation in rescission relief options in particular, says Steve Thomson, vice president of risk management at MGIC.
"You can't say [insurance policies] are identical, but the general application is identical," he says. "So really it boils down to the execution underneath the policy."
But one of the newest players in the field, National MI, has seized the industrywide rewrite as an opportunity to set itself apart from the pack.
"A good analogy: BMW and Yugo are the same in that they are both cars, but there is a lot of variation between the two," says Claudia Merkle, executive vice president for insurance operations.
The company will offer 12 months of rescission relief on all loans, which it pitches as "two years sooner than the industry standard of 36 months."
The company touts its shorter rescission window as a source of cost savings to lenders, saying in promotional materials that its policy can "eliminate buyback risk" sooner than competitors' policies.
The company handles the additional insurance risk that comes with a 12-month rescission window by taking a close look at the loans it insures, Merkle says. "When we look at a loan, we provide a guarantee with the underwriting of the file, so we can't push back during the servicing," she says.
National MI's master policy also provides simplicity to aggregators and lenders, says Merkle, since they "won’t have to worry if there’s a mixed bag of coverage."
In a field where uniform pricing and policy coverage are the norm, these differentiators may provide National MI with a slight advantage.
"It's not huge, and it's not going to last forever," says Stewart, the analyst, adding that the market may eventually adopt a standard rescission relief timeframe of 18 months.
In addition to rescission relief, the new FHFA overhaul aimed to reduce ambiguity in the marketplace.
United Guaranty has emphasized clarity in its new master policy as a distinguishing factor. The insurer—a unit of the conglomerate AIG—has introduced what it calls a "policy commitment letter," a regularly updated, signed document which summarizes the key provisions of United Guaranty's contracts with lenders.
"Think of it as a dynamic document," said Kurt Smith, head of insurance risk management at United Guaranty. "Any changes [to the underlying policy] become an amendment to the commitment letter," easily accessible to both parties.
The letter "clarifies some of the things we might have gone back and forth about with phone calls and emails," says Cameron, the United Guaranty counsel.
United Guaranty describes the letter on its website as an "innovative addition" that it added above and beyond the GSE requirements.
About 75% of United Guaranty's lender customers have signed a policy commitment letter, Smith says. He expects nearly all lenders to sign it before the Oct. 1 deadline.
http://www.nationalmortgagenews.com/news/origination/mortgage-insurers-jockey-to-stand-out-in-contract-overhaul-1042085-1.html
Americans' Attitudes Toward the Housing Market Reflect Steady but Slow Recovery, "Normal" Housing Levels Still a Ways Off
Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact pressreleases@worldnow.com.
SOURCE Fannie Mae
WASHINGTON, July 7, 2014 /PRNewswire/ -- Consumer confidence in the housing market has trended upward significantly during the recovery but continues to be less than needed to return to "normal" housing levels, according to results from Fannie Mae's June 2014 National Housing Survey. On average, consumers' 12-month home price change expectation remained in positive territory in June at 2.4 percent but dipped slightly from the previous few months, likely in response to a lackluster housing picture in the first half of the year. Additionally, the share of respondents who expect mortgage rates to go up in the next year increased six percentage points to 55 percent in June following a gradual decrease since February. While consumers appear positive overall and are trending in that direction, some survey and market indicators reflect a more subdued housing market, underscoring that the recovery continues but is not yet robust.
"Since we began collecting monthly National Housing Survey data in June 2010, we've seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Still, we do not expect to see 'normal' levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016, our original projection. Such a feat would require a pace of growth in housing starts not seen in decades."
"The uptick this month in the share of consumers expecting mortgage rates to go up and the accompanying decline in home price expectations reflect the pause of activity in the housing market so far this year," said Duncan. "Despite recent improvement, we now expect an annual decline in existing home sales due to weak volume in the first four months of the year associated with the rise in mortgage rates mid-last year and the current dearth of supply of lower-priced homes. On the bright side, the share of employed consumers who expressed concerns about losing their job dropped to an all-time survey low in June, consistent with last week's upbeat jobs report. This may encourage potential homebuyers to enter the purchase market in 2014, helping to offset some of the weakness in sales activity."
SURVEY HIGHLIGHTS
Homeownership and Renting
The average 12-month home price change expectation fell to 2.4 percent.
The share of respondents who say home prices will go up in the next 12 months fell to 46 percent, and the share who say home prices will go down increased to 10 percent.
The share of respondents who say mortgage rates will go up in the next 12 months increased six percentage points to 55 percent.
Those who say it is a good time to buy a house rose to 70 percent, and those who say it is a good time to sell a house fell to 40 percent.
The average 12-month rental price change expectation increased to 4.3 percent.
The percentage of respondents who expect home rental prices to go up increased to 54 percent.
Fifty-two percent of respondents thought it would be easy for them to get a home mortgage today-matching the all-time high.
The share who say they would buy if they were going to move increased slightly to 68 percent.
The Economy and Household Finances
The share of respondents who say the economy is on the wrong track fell by 3 percentage points from last month to 54 percent.
The percentage of respondents who expect their personal financial situation to get better over the next 12 months ticked up to 43 percent.
The share of respondents who say their household income is significantly lower than it was 12 months ago decreased 1 percentage point to 11 percent-a new all-time low.
The share of respondents who say their household expenses are significantly higher than they were 12 months ago rose 4 percentage points to 38 percent.
The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey polled 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts (findings are compared to the same survey conducted monthly beginning June 2010). Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future.
For detailed findings from the June 2014 survey, as well as a podcast providing an audio synopsis of the survey results and technical notes on survey methodology and questions asked of respondents associated with each monthly indicator, please visit the Fannie Mae Monthly National Housing Survey page on fanniemae.com. Also available on the site are in-depth topic analyses, which provide a detailed assessment of combined data results from three monthly studies. The June 2014 Fannie Mae National Housing Survey was conducted between June 1, 2014 and June 21, 2014. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
http://www.wric.com/story/25954199/americans-attitudes-toward-the-housing-market-reflect-steady-but-slow-recovery-normal-housing-levels-still-a-ways-off
Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)
WeidnerLaw Foreclosure Defense and Bankruptcy Blog
Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)
Foreclosure is….The Federal Government Stealing From Private Individuals…(not just homeowners)
July 7, 2014
by Matthew D. Weidner, Esq.
Foreclosure Defense Florida
No Comment
As the State of Florida continues moving headlong through the Great Foreclosure Purge of 2014, no one can explain exactly why Florida’s courts have turned 180 degrees against citizens and tilt now, unquestionably towards granting judgments for banks.
The standard refrain from courts is,
“The legislature told us to CLEAR THE FORECLOSURE DOCKET!”
(and so that’s what we’re doing)
Except this is not at all what the legislature told the courts to do. In fact, the one substantive piece of legislation, HB87 told the courts exactly the opposite….in the form of increased pleading and disclosure requirements. But undeniably, the courts have accepted and are executing the mandate to CLEAR THE FORECLOSURE DOCKET! But to what end? Why are courts across this state clearing the cases and far more importantly what becomes of all those homes that are subject to foreclosure sales? No one asks these questions….much less answers them. But here’s a start.
“The Banks” don’t care about foreclosure….”The Banks” and “The Servicers” are merely debt collectors hired by the real owners of the mortgages, propped up and sent into court to do the dirty work of throwing families out into the street. So who really does own the mortgages? In something like 70% of residential cases its Fannie and Freddie, those government enterprises that are given all the protection of government enforcement with all the profit driving incentives of private corporations. Fannie and Freddie are like the Mafia, with the FBI and Justice Department running protection.
Nowhere is the corruption and collusion between government and Wall Street more prominently on display than in the world of foreclosures. Down here at the community level we suffer the end product of government and banks colluding to manipulate markets and eviscerate the due process and legal rights of individuals. Families are foreclosed and the homes are either left vacant or they are sold off to investors? Either way, communities….and individuals…. ultimately suffer.
Case in point…a real specific example…in nearly all foreclosure cases now we can negotiate out a waiver of deficiency…..but this is not the case in Fannie and Freddie loans. Why? I’ve long suspected that the reason lies with accounting fraud and what Fannie and Freddie are reporting to their various stakeholders about their assets. Simply, even though Fannie/Freddie have completed 100,000 foreclosures in Florida and even though we all know they will never collect any deficiencies related to those cases, as long as they do not provide a formal waiver of deficiency, they can continue to tell their stakeholders the full balance of the loans are assets.
THE FEDERAL GOVERNMENT, RUNNING A PROTECTION RACKET FOR FANNIE AND FREDDIE
Litigating a case in which Fannie and Freddie are the real party in interest is in fact much different than litigating any other case. We’ve known that for many years and it’s even worse these days. It’s terribly ironic that a citizen has a much better chance of negotiating out a deficiency waiver when dealing with a private servicer like Bayview or Ocwen than they do when trying to negotiate with Fannie or Freddie….two entities that are assets owned, in part, by that very citizen by virtue of the Fannie/Freddie conservatorship?
But now here’s where the conspiracy gets even more confounding. Fannie and Freddie are not just government run stoodges, these were private corporations into which private individuals invested billions of their own dollars….and now those private investors are being stiffed. A private party or institutional investor that believed in US housing could buy shares of Fannie/Freddie just like they could buy shares of Apple. And just like any other share of stock, they were entitled to returns on those investments….except that Fannie/Freddie became not like any other corporation when the feds came in and put them into conservatorship. When US housing crashed the feds came in, seized Fannie Freddie and rewrote the rules for private investors….the feds just wiped out the rights of these private investors entirely.
PERRY CAPITAL V. FANNIE AND FREDDIE- THE LAWSUIT THAT LAYS IT BARE
One of the most important lawsuits in foreclosure world is Perry v. Fannie/Freddie. It details how the feds have come in and wiped away clean all private property rights….eliminated the ownership and benefits of stock ownership in these trusted institutions. The suit describes how the feds just swooped in and declared,
“No more dividends or returns for you!”
Just like the soup Nazi from Seinfeld. That’s what the entire lawsuit is about….”The Swipe”, as the fed policy has been come to be know now, based on the fact that the feds come in and swipe away any profits or returns that would be due to these private investors. Here’s how it works:
The Third Amendment enriches the federal government through a self-dealing
pact, and destroys tens of billions of value in the Companies’ preferred stock that is, as a result of
the PSPAs, now junior to the Government Preferred Stock (the “Private Sector Preferred
Stock”). The Third Amendment also destroys value in the Companies’ publicly held common
stock. Fannie Mae and Freddie Mac sold the Private Sector Preferred Stock to private investors
such as community banks and insurance companies before it sold the Government Preferred
Stock to Treasury. Community banks, for example, invested large amounts in the Private Sector
Preferred Stock in no small part because their regulators—which considered such investments to
be low-risk—required banks to hold significantly lower reserves to back up investments in the
Private Sector Preferred Stock, as compared to other investments
and here:
At the time of the Third Amendment, the liquidation preference for the
Government Preferred Stock was approximately $189 billion, with approximately $117 billion
attributable to Fannie Mae and $72 billion attributable to Freddie Mac. According to the
Companies’ financial statements, at the time of the Third Amendment, they had each paid
dividends to Treasury equal to approximately 28% of the liquidation preference of their
respective outstanding Government Preferred Stock (more than $25 billion by Fannie Mae and
more than $20 billion by Freddie Mac).
Fannie Mae is a federally chartered private stockholder-owned corporation
organized and existing under the Federal National Mortgage Act, created to provide
supplemental liquidity to the mortgage market. Freddie Mac is a federally chartered private
stockholder-owned corporation organized and existing under the Federal Home Loan
Corporation Act, created to stabilize the nation’s residential mortgage market and expand
opportunities for homeownership and affordable rental housing. Both Fannie Mae and Freddie
Mac are Government-Sponsored Enterprises, private corporations created by Congress with the
goal of increasing liquidity in the mortgage market. The Companies endeavor to fulfill their
goals by, among other things, purchasing mortgages originated by private banks, and bundling
the mortgages into mortgage-related securities that can be sold to investors. By creating this
secondary mortgage market, Fannie Mae and Freddie Mac increase liquidity for private banks,
allowing them to make additional loans to individuals to purchase homes.
31. Notwithstanding their government pedigree, as of 2007, Fannie Mae and Freddie
Mac were owned by private shareholders. Before 2007, the Companies were consistently
Case 1:13-cv-01025-RCL Document 1 Filed 07/07/13 Page 13 of 3414
profitable. In fact, Fannie Mae had not reported a full-year loss since 1985, and Freddie Mac had
not reported a loss since 1989.
32. In 2007, however, the nation’s mortgage market began a precipitous decline as a
faltering economy led to an increasing number of delinquent and defaulted mortgages. This
decline had a particularly severe effect on the market’s confidence in the financial health of
Fannie Mae and Freddie Mac.
http://mattweidnerlaw.com/foreclosure-federal-government-stealing-private-individuals-just-homeowners/
Fannie Mae: Housing market recovery on pause
Lackluster recovery hinges on employment
Brena Swanson
July 7, 2014 9:34AM
0 Comments
clouds dark
Consumer confidenceEconomyFannie Maehome buyershousing recoveryMortgagemortgage ratesNational Housing SurveyReal estate
Email Print Reprints
Share on facebookShare on twitterShare on linkedin Share More
AAA
Related Articles
Fannie Mae: “Housing remains worrisome”
Fannie Mae: Improving American outlook bodes well for housing
Fannie Mae: Single point of contact benefits mortgage servicing
Related Products
Digital-Only Subscription
July 2013 Single Issue
Related Events
Zillow's Forum on California's Housing Market
42nd Annual Western Secondary Market Conference
Housing America’s Future: New Directions for National Policy
Related Companies
Global DMS
Global DMS
Lereta Logo
LERETA, LLC
CMG Financial
CMG Financial
Despite lackluster consumer confidence, more employed consumers who expressed concerns about losing their job dropped to an all-time survey low in June, pushing more potential buyers into the purchase market, according to a recent industry survey.
Fannie Mae’s June National Housing Survey said that this could in turn help offset some of the weakness in sales activity.
“Since we began collecting monthly National Housing Survey data in June 2010, we’ve seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
However, the economy still has a long way to travel. “We do not expect to see ‘normal’ levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016, our original projection. Such a feat would require a pace of growth in housing starts not seen in decades,” Duncan said.
The survey, which polled 1,000 Americans, reported mostly flat numbers for the housing market due to a more subdued and slow recovery.
On average, consumers’ 12-month home price change expectation stayed positive in June at 2.4% but fell slightly from the previous few months, largely attributable to an uneventful housing market for the first half of the year.
The share of the percentage of respondents who expect mortgage rates to go up in the next year increased six percentage points to 55% in June following a gradual decrease since February.
“The uptick this month in the share of consumers expecting mortgage rates to go up and the accompanying decline in home price expectations reflect the pause of activity in the housing market so far this year,” said Duncan.
“Despite recent improvement, we now expect an annual decline in existing home sales due to weak volume in the first four months of the year associated with the rise in mortgage rates mid-last year and the current dearth of supply of lower-priced homes,” he added.
http://www.housingwire.com/articles/30554-fannie-mae-housing-market-recovery-on-pause
Has The Federal Reserve Destroyed Market Discipline for Housing and the Stock Market?
Despite Fed Chair Janet Yellen’s denial that The Federal Reserve is causing asset bubbles, it is no coincidence that the housing market and the stock market have both been juiced by the massive expansion of The Fed’s balance sheet and zero interest rate policies (ZIRP).
For example, American house prices have been rising rapidly since 2012 despite the lower level of real median household income and stalled average hourly earnings growth YoY. It has benefited only the wealthiest Americans. See Logan Mohtashami’s “Housing 2014 Mid-Year Update: The Rich Have Their Cake and Eat It Too.” Notice that the massive Fed balance sheet expansion hasn’t done anything for American wages and income.
csfarbinc
The same applies to the NYSE Composite Index. Cheap money, declining wage growth and diminished real income. And exploding stock prices.
csfedfarbat
In terms of technical analysis, The Fed has essentially defanged any of the trading rules that might have worked.
Like the Ichimoku indicator (the pink dotted lines in each charter is The Fed’s Balance Sheet).
ichi070614
Or the Hindenburg Omen.
hindfed
Or the Fibonacci Retracement.
fibdfed
Or the McGinley Dynamic Indicator.
mcginleydyni
Or …
So take your pick! The Fed has rendered the various charting models as useless. At least until The Fed pulls out of the market.
Market discipline has gone away with The Fed’s hyper-aggressive asset purchases and zero-rate policies.
europ bub
Share this:
Share
Misconceptions About Fannie Mae and Freddie Mac (What They Do and What They Don’t Do)
There continues to be misconceptions about the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. And these misconceptions are partly responsible for why GSE “reform” is stalled in the U.S. Senate.
MISCONCEPTION 1: Fannie Mae and Freddie Mac originate mortgage loans.
False.
Fannie Mae and Freddie Mac PURCHASE mortgage loans originated by mortgage lenders, such as Bank of America, Wells Fargo, Suntrust, etc. They are not permitted to lend directly to borrowers per their charters.
MISCONCEPTION 2: Fannie Mae and Freddie Mac purchased loans that were as risky or riskier that loans found in private label mortgage-backed securities.
False.
Private-label mortgage-backed securities (PLMBS) performed consistently worse for comparable LTV and FICO score buckets, according to FHFA data from Fannie Mae, Freddie Mac and CoreLogic.
As you can see, Fannie Mae and Freddie Mac’s market share started to slump in 2004 and 2005, but began to regain market share relative to private-label MBS in 2006. But note that low FICO Enterprise purchases increased in 2007.
ffvplmbs
For most of the decade, PLMBS suffered higher serious delinquency rates than Enterprise purchased loans. One notable exception is low FICO, high LTV loans in 2007 where both PLMBS and Enterprise loans were crushed for adjustable-rate mortgages (ARMs).
ltvperf
For fixed-rate mortgages, The Enterprise acquired mortgages consistently had lower serious delinquency rates than private label MBS for equivalent LTV/FICO buckets. Even is 2007.
frmffvplmbs
MISCONCEPTION 3: Fannie Mae and Freddie Mac have an implicit government guarantee.
TRUE.
This was not a misconception. They were, in fact, bailed out by the Federal government after experiencing losses leading up to being placed into conservatorship in 2008.
The misconception I am referring to is that the mortgage lenders themselves would like the explicit government guarantee for themselves. It’s all about economic rents and that why the US Senate GSE “reform” efforts stalled. Fannie Mae and Freddie Mac earned economic rents from their implicit government guarantee. Rather than trying to eliminate the government guarantee, Corker-Warner then Johnson-Crapo simply wanted to make the guarantee explicit and shift it to lenders.
In this sense, the government guarantee is similar to a taxi medallion. New York City cab companies can pay over $1 million for a taxi medallion giving a cab the right to cruise New York City and collect fares. Cabs earn positive economic rents since there is a relative lack of competition (particularly around 4-6pm!) Fannie Mae and Freddie Mac held (and continue to hold) a “mortgage medallion”. The price? Fannie Mae and Freddie Mac have affordable housing goals that they must meet.
Just to be clear, Fannie Mae and Freddie Mac do NOT originate mortgage loans. They purchase loan from lenders. And the performance of Enterprise purchased loans was far better than loans in private-label MBS. Except for ARMs in 2007. And mortgage lenders want the “mortgage medallion” (explicit mortgage guarantee) that Fannie Mae and Freddie Mac currently own. Rather than allow lenders to compete on a level playing field by granting lenders their own “mortgage medallion,” the GSE reform legislation proposed to phase-out Fannie Mae and Freddie Mac (their mortgage medallions) and give the mortgage medallions to lenders. The price? Once again, affordable housing quotas.
The Federal government holds the power to grant (sell) the mortgage medallions various parties (lenders, insurers, etc). As long as the Senate, for example, can grant the mortgage medallion, it is doubtful that the government guarantee will even go away. After all, someone will want to earn economic rents and the price is MORE affordable housing goals or quotas.
http://confoundedinterest.wordpress.com/