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FHFA Reports to Congress on G-Fees
By: Jann Swanson • 10 Min, 38 Secs ago
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The two government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac charge guarantee fees or g-fees to lenders when they acquire their single-family loans. These are expected to cover several costs that the GSEs incur in providing their guarantees.
In addition to the expected costs when borrowers fail to make their payments, there are administrative costs and a 10-basis point obligation to the U.S. Treasury as required by the Temporary Payroll Tax Cut Continuation Act of 2011.
The fourth component, the cost of holding capital to protect against the potential of catastrophic losses from loan defaults is by far the most significant. In 2017 the GSEs began using the Federal Housing Finance Agency's (FHFA's) Conservatorship Capital Framework (CCF) which is the amount of capital required multiplied by a GSE's target rate of return, to calculate the cost of holding capital.
Using the CCF and its own proprietary data each GSE determines the estimated cost of guaranteeing a loan. Any gap between the fee charged on a loan and its estimated cost is the measure of estimated profitability of acquiring a loan. At acquisition, each GSE expects to earn a positive return, whether above or below its target amount.
A final factor in determining g-fees is competition between the two GSEs and with other lenders such as the FHA or private label lenders. The GSEs may adjust their fees to retain market share.
The Housing and Economic Recovery Act of 2008 requires the GSEs' regulator and conservator FHFA to conduct an ongoing study of the guarantee fees and submit an annual report to Congress. FHFA released that report on Thursday. It compares year-over-year 2018 to 2017 and provides data over five years back to 2014.
There are two types of g-fees. The first type, upfront fees (which Fannie Mae calls loan level price adjustments and Freddie Mac refers to as delivery fees) are one-time payments made by lenders when they deliver fees to the GSEs. The second, ongoing fees, are collected each month over the life of the loan. Both types are, of course, ultimately passed through by lenders to their borrowers.
Ongoing fees are based primarily on the product type, such as a 30-year fixed rate. Upfront fees are used to price for specific risk attributes, such as the LTV ratio and credit score.
FHFA says that the average single-family guarantee fee for all loan products increased from 2017 to 2018 by 2 basis points (bps) to 55 bps. The increase was accounted for solely by the on-going portion (based on product type and loan term) which rose to 40 bps while the upfront portion based on loan characteristics such as credit scores, was unchanged at 15 bps.
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Within the ongoing fee charges, the average guarantee fee on 30-year fixed-rate loans was unchanged at 56 basis points, while the fee on 15-year fixed-rate loans increased by 1 basis point to 37 basis points. The fee on adjustable-rate mortgage (ARM) loans fell 4 basis points to 54 basis points.
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Higher interest rates accompanied by increasing house prices in 2018 led to a smaller share of both rate-term refinances and 15-year loans acquired by the Enterprises. The larger share of purchase loans and a growing focus on pilot programs for first-time homebuyers and affordable housing led to a slight increase in the share of loans with higher loan-to-value (LTV) ratios and lower credit scores.
http://amp.mortgagenewsdaily.com/article/930309
They are right in with the 100 billion dollars that were stolen prior to Trump admin.
Go FnF!
So who gets paid?
Thirteen big banks and financial services companies agree to pay $337M to resolve claims by investors that they conspired to rig prices of bonds issued by Fannie Mae and Freddie Mac for a decade, according to a preliminary settlements filed late Monday night in Manhattan, Reuters reports.
The settlements require a judge's approval and would conclude private nationwide antitrust litigation against 16 defendants, with settlements totaling $386.5M. The companies deny wrong doing in agreeing to the settlement.
Barclays (BCS -3%), which underwrote the most Fannie and Freddie bonds, will pay $87M.
Twelve other companies — Bank of America (BAC +0.8%), BNP Paribas (OTCQX:BNPQF +1.8%), Cantor Fitzgerald, Citigroup (C +1.2%), Credit Suisse (CS +1.1%), HSBC (HSBC +0.1%), JPMorgan Chase (JPM +0.5%), Morgan Stanley (MS +0.9%), Nomura (NMR +0.6%), Societe Generale (OTCPK:SCGLF), Toronto-Dominion (TD -0.4%), and UBS (UBS +0.8%) — will separately pay a combined $250M.
Goldman Sachs, Deutsche Bank, and units of Tennessee's First Horizon previously settled for a combined $49.5M.
According to the amended complaint 16 defendants underwrote $3.97T, or 77.2% of Fannie and Freddie bonds from Jan. 1, 2009 to Jan. 1, 2016. The two government-sponsored enterprises guarantee more than half of U.S. mortgages.
Now you are dating your self, and me.
Go FnF!
I am patiently waiting. My $2.80 order to add to my shares is all set. I have learned to take advantage of this volatile and news / rumor driven stock.
Go FnF!
The bum rush will be to cover
If govt gives a sweet enough proposal then a deal will happen. That is very vague but it is all about the money. Period! The govt will not have to be humiliated by admission of... well let us just put it all under the umbrella of guilt. Nobody need be held accountable.
We may even ease our discomfort with green PAIN KILLER$$$, wrap our injuries in green BANDAGE$$$ and dry our tears with green handkerchief$$$!
Go FnF!
Fannie and Freddie heading for another near death experience
If yuo are doing the right thing why not make a few million bucks while doing it?
I never used to think of Margaret Sweeney as my kind of woman.
If this is the result of my Costco visits I will camp there
Wow! I went to costco ( no kidding) and just looked at my phone when I got into my truck to leave. Maybe I should go back in and look at the big screen TVs again and buy a giant box of mangos. Then I will check my account again after I get back into my truck again.
Go FnF!
I have read quite often that the duopoly of FnF is unfair. Government logic would be to merge them. There. Fixed. No more duopoly. Then government could whine about the monopoly for 10 + years.
Please, nobody should seriously respond to this unless you are a federal government employee and you see the logic.
Go FnF!
I respectfully request that you read it into a recorder and post tweets in audio format.
TIA LOL
GO FnF!
Ah the good old days when I added to my position at $1.08
Go FnF!
Fannie and Freddie’s joint company replaces CEO with former GMAC Mortgage president
by Candyd Mendoza | Dec 09, 2019
Common Securitization Solutions (CSS), a limited liability company jointly owned by Fannie Mae and Freddie Mac, has replaced former CEO David Applegate with Anthony Renzi to head the joint venture.
Earlier this year, Applegate announced that he would step down from the position by year-end. CSS then launched a nationwide search for qualified candidates to lead the firm, which has played a crucial part in building and running the technology platform that supports the new Uniform Mortgage-Backed Security (UMBS).
"It (CSS) now administers, on behalf of Fannie Mae and Freddie Mac, nearly 1 million securities, backed by loans with $4.8 trillion in unpaid principal balance," said Jerry Weiss, executive vice president of Freddie Mac and chairman of the CSS board of managers. "The appointment of Tony Renzi signals our commitment to a seamless transition in leadership that will pave the way for continued progress at CSS."
Before CSS, Renzi spent over 23 years of his career at GMAC Mortgage and GMAC ResCap as president and chief operating officer. He also held executive roles at Freddie Mac, Citibank Mortgage, Ditech Holding, and Cenlar FSB.
"We are fortunate to have found an individual with deep industry experience in leading large, complex organizations," said David Benson, president of Fannie Mae and CSS board member. "We're delighted to welcome Tony to the CSS organization and look forward to working with him to strengthen and grow the services provided by CSS."
"I'm excited to be with an organization that enabled the launch of the UMBS," commented Mr. Renzi. "We have the opportunity to continue to support Fannie Mae and Freddie Mac and further define the future of CSS and how it will support the housing finance industry."
https://www.mpamag.com/news/fannie-and-freddies-joint-company-replaces-ceo-with-former-gmac-mortgage-president-194178.aspx
Fannie Mae and Freddie Mac Make the 30-Year Mortgage Possible
Why would the federal government try to privatize the companies if they’re doing their job now?
By Joe Nocera December 9, 2019, 7:30 AM EST
Thirty years is a very long time.
Over three decades, economic conditions will change and change again. And so, in all likelihood, will a person’s circumstances. You might buy a house and then, a decade later, lose your job. Or you might gain a windfall and decide to move to a bigger, better home. Who can know what’s in store over that span of time?
Which is why the 30-year fixed-rate mortgage is such an unusual loan. Banks in other countries 1 don’t offer 30-year fixed mortgages, because they entail too much risk: interest rate risk, prepayment risk and, gravest of all, credit risk — meaning the possibility that the borrower will default. In the U.S., by contrast, the 30-year fixed mortgage is such a staple that nearly 90% of Americans who apply for a home loan want one.
I suspect you already know what makes the 30-year fixed mortgage possible in the U.S.: Those infamous “government sponsored enterprises,” Fannie Mae and Freddie Mac, 2 publicly traded companies created by Congress to help make housing more available to middle-class Americans. Fannie and Freddie accomplish this by doing three things. First, they buy up mortgages from banks, thus freeing up capital so that banks can write yet more mortgages — and help more people gain the American Dream of homeownership.
Second, they bundle mortgages into bonds, and sell them to investors (hence the term “mortgage-backed securities”). Finally, they assume the credit risk for the securitized mortgages they bundle. That is, they guarantee those mortgages against the possibility of a default. Without that guarantee, the 30-year fixed mortgage simply wouldn’t exist. No bank would be willing to assume that risk themselves.
For the past 11 years, Fannie and Freddie have been in “conservatorship” — wards of the U.S. government. They were taken over by the Treasury Department in September 2008, nine days before the bankruptcy of Lehman Brothers Holdings Inc. Having foolishly — and belatedly — jumped into subprime mortgages, Fannie and Freddie were facing big losses. Then-Treasury Secretary Henry Paulson feared that if they collapsed, the entire U.S. housing market would collapse along with them.
Ever since, policy makers in Washington have called for a reduction in the role of the federal government, saying that taxpayers shouldn’t be on the hook if Fannie and Freddie falter again. Indeed, many Republicans believe that Fannie and Freddie should be killed off entirely, and that housing finance should be in private hands. The big banks, irked by the power Fannie and Freddie had for decades over the securitization market, have also agitated for a diminished role for the GSEs.
Sure enough, in 2013, President Barack Obama called for Fannie and Freddie to be wound down, and for the federal role in the mortgage market to be minimized. More recently, the current Treasury Department unveiled a plan that would solve the Fannie-Freddie issue in a different way. It wants to privatize the two companies and eliminate the guarantee, while also imposing a slew of new regulatory controls to prevent another taxpayer bailout like the one that took place in 2008. (The Trump administration plan is still pretty vague.)
https://www.bloomberg.com/amp/opinion/articles/2019-12-09/fannie-mae-and-freddie-mac-make-the-30-year-mortgage-possible
Did U.S. steal $300 billion from investors in ‘coercive’ takeover of Fannie Mae, Freddie Mac?
Updated: December 9, 2019 - 5:00 AM
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Joseph N. DiStefano | @PhillyJoeD | JoeD@inquirer.com
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BILL O'LEARY
Workers clean the glass sides of the Fannie Mae headquarters in Washington. Washington Post photo by Bill O'Leary
The depressed share prices of Fannie Mae and Freddie Mac have perked up a bit this year, while a legal challenge to the way the U.S. Treasury has collected billions of dollars from the home-loan finance giants under Presidents George W. Bush, Barack Obama, and Donald Trump heads toward a decision in the U.S. Court of Federal Claims.
The year-old lawsuit — by Washington Federal Bank (WaFd) of Seattle and the Austin, Texas, police pension-investments fund — alleges that the September 2008 takeover of Fannie Mae and Freddie Mac during the financial crisis was unnecessary, illegal, and marked by “coercive” tactics more appropriate to a dictatorship.
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The allegations are so sensitive that thousands of supporting documents and even part of the lawsuit have been blacked out at the government’s request.
If Judge Margaret Sweeney buys the arguments, “the government would owe these companies $300 billion,” or the amount that the federal government has “swept” from Fannie and Freddie into the U.S. Treasury in the 11 years since the takeover, veteran bank analyst Richard X. Bove of Odeon Capital Group wrote to clients last week.
“The government took over Fannie and Freddie because it needed their cash” to “buy bad mortgages” and keep big banks from collapsing, Bove notes. To be sure, the government said it acted “under severe pressure, to avoid a depression.” But if Sweeney agrees the government went "over the top,” the mortgage takeover could end up in the books not as a timely rescue but as a costly case of government overreach.
Whom did the government wrongly coerce — and so what? It’s still mysterious. In another lawsuit seeking to stop the government from continuing to take cash from Fannie and Freddie, the Obama administration in 2011 “convinced Judge Sweeney to place over 11,000 documents related to the seizures of Fannie and Freddie under a Protective Order, claiming that [public exposure] could affect ‘national security’ and might cause another financial crisis," notes Gary Hindes, a onetime investigative reporter and Delaware Democratic Party chief who now heads the Delaware Bay Co., a New York investment fund.
Hindes is also suing over the Fannie-Freddie seizure; he previously won payouts from government agencies for investor losses in the PSFS and Penn Treaty-American takeovers.
Hindes points to Paragraph 88, an especially provocative passage in the WaFd-Austin cops complaint. Its many blacked-out lines end with "The extortionate nature of this ‘script’ is breathtaking.”
Ex-Fannie Mae chief financial officer Tim Howard has also challenged the basis for the government’s takeover, noting the mortgage giants had assets enough to pay their bills — as proven by the profits the government has confiscated.
Other lawsuits against the government focus more modestly on stopping it from “sweeping” cash from Fannie and Freddie, especially now that the economy seems fully recovered.
The 2008 Housing and Economic Recovery Act, passed in a rush by Congress and signed by Bush, allowed the government to take over Fannie and Freddie with the “acquiescence” of their board members, even if the companies weren’t in trouble.
If the takeover is allowed to stand, the seizure of the two companies will have been “the best deal for the taxpayer since the Louisiana Purchase,” writes Hindes: $115 billion in “dividends” that the government has already collected, and warrants for Fannie and Freddie stock currently worth an estimated $150 billion, plus interest.
https://www.inquirer.com/columnists/fannie-mae-freddie-mac-mortgage-refunds-20191209.html?outputType=amp
Yes. 2015-2016?
Not much volume for the nice move
Go FnF!
Or not speculate. Obi is all about the facts.
I learned that a while back.
Go FnF!
As we all know government loathes to admit when it is wrong or guilty of anything. I think that is a safe statement. The following is my opinion. We will hear more and more rumors as the whole FnF story/saga accelerates due to progress in the courts system. Increased rumors of settlement will be beneficial to share price. I feel it is a shame but nobody will be held responsable for the numerous misdeeds of the government. Government will sweep it all under the rug and every plaintiff in every lawsuit will hold up the rug for the government in exchange for a favorable out of court settlement. This will be great for shareholders but Justice will not be served.
Everyone will know the truths but none of them will be proven in court.
We will still make truckloads of money over time.
As I stated, all my opinion.
Go FnF!
Yes, The Irishman! 3 hours and 30 min. Good flick but they make Hoffa seem kind of dumb. No sense of.... never mind I won't spoil it.
Go FnF!
Happy Thanksgiving!
How the 2020 Presidential Election Will Impact Fannie May, Freddie Mac
BloombergNovember 26, 2019, 3:48 PM CST
Nov.26 -- Bloomberg’s Jesse Westbrook discusses the future of Fannie May and Freddie Mac, and why Senator Elizabeth Warren is urging the Consumer Financial Protection Bureau to investigate allegations that Goldman's Apple Card has a gender-bias issue. He speaks on “Balance of Power.”
https://finance.yahoo.com/video/2020-presidential-election-impact-fannie-214808767.html
We may only be at $2.80 briefly as this transcript is digested.
Go FnF!
Almost down to my $2.80 icing on the top range!
Go FnF!
Ss he says, Happy reading
Happy reading and Happy Thanksgiving! #GSEs #Fairholme https://t.co/iO0oR8mUdd
— David Metzner (@davidametzner) November 26, 2019
Action is right AZ, don't be disrespectful to my future wife.
I do not follow ACG Analytics and I have only read Gabriella's comments etc. That have been posted on IHUB. Does ACG Analytics focus on short term trades?
Go FnF!
Democratic Candidates Debate Plans To Solve The Affordable Housing Crisis
Brenda RichardsonSenior Contributor
I cover residential real estate, including buying, selling and trends.
While the lack of affordable housing continues to plague the country, the question of what Democratic presidential candidates plan to do to help solve the crisis drew significantly different responses Wednesday during the fifth primary debate of the 2020 election cycle in Atlanta.
Here’s what three presidential candidates had to say last night about the persistent crisis in housing affordability.
Sen. Elizabeth Warren: “Our housing problem in America is a problem on the supply side. And that means that the federal government stopped building new housing a long time ago, affordable housing. Also private developers, they’ve gone up to McMansions. They are not building the little two-bedroom, one-bath house that I grew up in. The garage converted to be a bedroom for my three brothers. So I’ve got a plan through 3.2 million new housing units in America. Those are housing units for working families, for the working poor, for the poor poor, for seniors who want to age in place, for people with disabilities, for people who are coming back from being incarcerated.”
Warren added: “It’s about tenants’ rights, but there’s one more piece. Housing is how we build wealth in America. The federal government has subsidized the purchase of housing for decades for white people and has said for black people ‘you’re cut out of the deal.’ That was known as red-lining. When I built a housing plan, it’s not only a housing plan about building new units, it’s a housing plan about addressing what is wrong about government-sponsored discrimination, how we need to address it, and we need to say we are going to reverse it.”
Billionaire Tom Steyer: “When you look at inequality in the United States of America, you have to start with housing. Where you put your head at night determines so many things about your life. It determines where your kids go to school. It determines the air you breathe, where you shop, how long it takes you to get to work. What we’ve seen in California is, as a result of policy, we have millions too few of housing units. And that affects everybody in California. It starts with a homeless crisis that goes all through the state, but it also includes skyrocketing rents that affect every single working person in the state of California.
“I understand exactly what needs to be done here, which is really to change policy, and we need to apply resources here to make sure that we build literally millions of new units. But the other thing that is going to be true about building these units is we’re going to have to build them in a way that’s sustainable. That in fact, how we build units, where people live has a dramatic impact on climate and on sustainability. So we’re going to have to direct dollars. We’re going to have to change policy and make sure that the localities and municipalities who have worked very hard to make sure there are no new housing units built in their towns, that they are going to have to change that. And we’re going to enforce that. And we’re going to have to direct federal dollars to make sure those units are affordable so that working people can live in places and not be spending 50% of their income on rent.”
https://www.forbes.com/sites/brendarichardson/2019/11/21/democratic-candidates-debate-plans-to-solve-the-affordable-housing-crisis/amp/
Even I saw this coming. It is like clock work now after a significant s/p hit. And so I buy more. Just wish I had let it drop a little more but I am very happy!
Go FnF!
KAPOW!
They should group text. It's OTC
I told Gabby to grab all the commons. Our baby needs a college fund.
She is going to have my baby!
I can'afford a subscription. I spent my loose change on more FNMA when it dropped.
Go FnF!
What does IQ mean?
GO FnF!
Not to worry. You will still be able to fill your bath tub with 20 dollar bills.
Go FnF!
YESSS!!!
GO FNF!