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Fannie, Freddie to Merge Some Operations
http://online.wsj.com/article/SB10001424127887323494504578340734170819440.html?ru=yahoo&mod=yahoo_hs
By NICK TIMIRAOS
The regulator of Fannie Mae FNMA -0.68% and Freddie Mac, FMCC +1.37% the government-controlled mortgage companies, announced Monday one of the most concrete efforts to date for building a new infrastructure that could ultimately replace Fannie and Freddie.
Edward DeMarco, the director of the Federal Housing Finance Agency, said the agency would begin forming a new company that would consolidate some of the "back-office" functions currently replicated individually by each firm. The new company will have its own chief executive and board and for now would be jointly owned by Fannie and Freddie, said Mr. DeMarco, in a speech Monday afternoon before the National Association of Business Economics in Washington, D.C.
Fannie and Freddie have operated for decades as independent firms in competition with each other, but last year the FHFA began working with the companies to create a single platform in which home loans could be packaged into securities. The companies were taken over by the U.S. Treasury in 2008 and the FHFA was tasked with conserving the firms' assets until Congress and the White House decided what to do with them.
Up until now, few steps have been taken toward any overhaul. The two firms, together with federal agencies, are responsible today for backing nearly nine in 10 new mortgages, with taxpayers on the hook if those loans default. Fannie and Freddie collapsed as the housing sector deteriorated five years ago and their rescues have cost taxpayers $131 billion so far.
The new company could eventually be privatized or folded into the government—that will be determined by Congress and the White House when they begin the process of any overhaul of the nation's $10 trillion mortgage market. Before those decisions are made, the new company would build a new securitization infrastructure to serve whatever replaces Fannie and Freddie.
"What we are trying to do…is to ease the transition from where we are today to wherever lawmakers decide the country ought to ultimately go," said Mr. DeMarco.
Mr. DeMarco said the new platform for issuing mortgage-backed securities would allow for much needed operational upgrades to the back-office infrastructure at both firms. It would also aim to merge certain functions duplicated by the two firms. "Right now, this investment takes place twice. We're trying to just do this once," he said.
The initiative comes as a stabilizing housing market has boosted the fortunes of the mortgage companies. Freddie Mac last week reported an $11 billion profit for 2012, its largest ever and its first in six years. Fannie Mae has until mid-March to file its annual report.
In recent months, some industry executives have voiced concerns that the new mortgage-bond infrastructure might allow Fannie and Freddie to extend their dominance over the mortgage market. The latest move by the FHFA could tamp down those worries. Mr. DeMarco said the new entity will have a separate physical location from Fannie and Freddie, in addition to its own management and staff. It's unlikely that the entities would actually begin the process of issuing securities through the new company this year, he said.
Creating the new company is one of a series of objectives on an annual corporate scorecard, also released Monday by the FHFA, that is used to evaluate Fannie and Freddie's performance and determine the pay of top officers at both companies.
As part of those annual priorities, the FHFA said it would direct the companies to advance previously announced plans to sell slices of mortgage-backed securities that aren't covered by a government guarantee. It said that each company should attempt to sell at least $30 billion in different mortgage-backed products that would put private investors in a first-loss position on those loans.
The FHFA also directed the firms to reduce their backing of loans for rental apartments by 10% from last year's levels and to sell a portion of the whole loans or other illiquid securities that sit on the firms balance sheets. The companies are already required to shrink those portfolios by 15% annually, but they have largely met those targets simply through the normal maturity of various mortgage investments.
Write to Nick Timiraos at nick.timiraos@wsj.com
Regulator unveils Fannie, Freddie part-merger plan
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http://www.marketwatch.com/story/regulator-unveils-fannie-freddie-part-merger-plan-2013-03-04?siteid=yhoof2
[man...being in the dark over the future is scary....i keep thinking...the 10-K warned you...you may have little value as a shareholder!!...buyer beware...this could be good or bad. I'll keep riding this...]
WASHINGTON (MarketWatch) -- Federal Housing Finance Agency Acting Director Ed DeMarco said Monday that the agency is working on a plan to merge some of the operations of mortgage giants Fannie Mae FNMA -0.68% and Freddie Mac FMCC +1.43% . The plan is that a new venture, separate from the two firms, will operate a secondary mortgage market infrastructure that will be used by Fannie and Freddie. DeMarco said while the new firm would initially be used and funded by Fannie and Freddie, it could either be sold or used "as a foundational element of the mortgage market of the future."
AIG Is Even More Not Owned By The Government
By Matt Levine
http://dealbreaker.com/
AIG is in the news today for two very small numbers in connection with much larger numbers. First: AIG is no longer bailed out! I know, you thought that happened like six months ago, and then again three months ago, but today AIG got rid of the last little bits of government ownership, really this time:
American International Group, Inc. (NYSE: AIG) announced today that it completed the repurchase of warrants issued to the United States Department of the Treasury (U.S. Treasury) in 2008 and 2009. … AIG and the U.S. Treasury agreed upon a repurchase price of approximately $25 million for the warrants. The U.S. Treasury does not have any residual interest in AIG after AIG’s repurchase of these warrants.
“With AIG repurchasing all outstanding warrants issued to the U.S. Treasury, we are turning the final page on America’s assistance to AIG,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “We appreciate the opportunities this support allowed and are proud to have returned to America every cent plus a profit of $22.7 billion.”
Back in December, I speculated baselessly about why AIG didn’t just buy back these warrants in connection with Treasury’s final sale of stock back in December, since they were just rounding error on the $7.6bn offering. I figured waiting would let the government get a better deal, and it seems to have: I ballparked a value of $18,000,000.393 for those warrants in December, so Treasury made an extra $7mm by waiting three months.1 One possible explanation is that AIG and Treasury enjoyed the dynamic of announcing “AIG HAS PAID OFF ITS BAILOUT” every three months, so they milked it for all it was worth. I’m sure someone from Treasury left a pen or something at AIG’s offices, and its return will be announced with great fanfare in a few months.
But this is a distraction from more amazing, less pleasant AIG news: Read more »
"Washington has been looking for ways to reduce the risk that the government could be on the hook if Freddie runs into trouble again....propose having investors absorb some losses before Freddie’s guarantee kicks in. But specific reforms to unwind Freddie and its sister, Fannie Mae, have not gained real traction. And for better or worse, Freddie’s improved performance certainly doesn’t increase the urgency to arrive at a solution."
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.
[SO, WE ARE TALKING ABOUT FREDDIE MAC IN TROUBLE AGAIN...NOT A NEWCO. SO, WHAT INVESTORS DOTH SHE SPEAKETH OF??? US???? BULLSHIT IF THEY WIPE US OUT AND FIND "NEW" INVESTORS!! LOL...BLOOMBERG THINKING ON THE RIGHT TRACK]
http://www.businessweek.com/articles/2013-03-01/freddie-mac-reports-11-billion-record-profit
Freddie Mac Reports Record $11 Billion Profit
By Karen Weise on March 01, 2013
How quickly things change. In 2011, housing giant Freddie Mac lost $5.3 billion. Yesterday it announced net income of $11 billion for 2012—its first profit since 2006 and its largest ever. Consider that number yet another piece of evidence that the housing market is marching toward recovery.
Freddie had slightly less revenue than in 2011, but its costs are way down—fewer borrowers are behind on their loans, so Freddie was able to reduce how much money it set aside for potential losses. Also, the derivatives bets and investments Freddie made performed very well. (The data are available in this PDF.)
Although Freddie’s profits have surged, it’s not out of the woods yet. First, there’s the little matter of its bailout. Freddie has paid back only about a third of the $71.3 billion it got from the federal government. (It had been receiving new bailouts nearly every quarter until this summer.) The fact that the government still essentially owns Freddie has also put the agency in a difficult position—at once needing to stem losses and stop the bailouts, but also having a public mission to help homeowners. Those two mandates have at times clashed, as news organizations such as ProPublica have documented, with Freddie opting for policies and investments that may have helped its bottom line over aiding borrowers.
Also, Freddie’s role in the housing bubble still raises calls for reforms. Before the credit crisis, Freddie Mac was a private entity with an implicit government guarantee—a quasi-governmental agency that guaranteed mortgages and bundled them together to sell to investors. Freddie’s business largely dealt in safer prime mortgages, with tighter lending standards. But starting around 2002 it began to lose market share to subprime lenders. Freddie did dip it’s toe into subprime, actually buying some securities that bundled together the risky mortgages, but in general it needed the bailout because the subprime bubble took down wide swaths of the housing market.
Washington has been looking for ways to reduce the risk that the government could be on the hook if Freddie runs into trouble again. For example, a bipartisan group of 21 former senators and government officials propose having investors absorb some losses before Freddie’s guarantee kicks in. But specific reforms to unwind Freddie and its sister, Fannie Mae, have not gained real traction. And for better or worse, Freddie’s improved performance certainly doesn’t increase the urgency to arrive at a solution.
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.
well this day sucked...just glad it was up a notch vs. august style bloodbath.
well, here's to another two months! at least it's a shorter wait. wouldn't expect any real news (aside from Fannie results) before then...
have a pint tonight and dream about what it would have been like to order a magnum of champagne. at least you don't need "one bourbon, one scotch, and one beer" to quote John Thoroughgood. a nice relaxing pint is a decent way to end a week that could have gone huge either way, IMHO
net investment is $47.5bn...page 6 of investor financial supplement .pdf on the investor website
CKI HUGE! flood gates not quite open....
thx for post...i hadn't checked...i thought we are in for a quiet day...maybe not??
http://finance.yahoo.com/quotes/FMCC,FNMA,FMCKJ,FMCKI,FMCCM,FMCCK,FMCCT,FMCCI,FMCKK,FMCCG,FMCCH,FMCCL,FMCCN,FMCCO,FMCCP,FMCCJ,FMCKP,FMCCS,FMCKO,FMCKM,FMCKN,FMCKL,FNMAP,FNMAO,FNMAM,FNMAG,FNMAN,FNMAL,FNMAK,FNMAH,FNMAI,FNMAJ,FNMAS,FNMAT,FNMFM,FNMFN/view/v2?info=view_updated
vast majority 18-34 yr. olds want to buy a home
courtesy of @freddiemac tweet
http://www.kcmblog.com/2013/03/01/generation-x-y-and-homeownership-infographic/
all your questions and MUCH more are in the investor supplement...here:
http://www.freddiemac.com/investors/er/pdf/supplement_4q12.pdf
i support you joe...i get the feeling some on the board might be close to getting married to this stock. there is an argument I am co-dependent...I'm all in while acknowledging this could end very bad!
but...man, they are MINTING cash...time is our friend and i really hope that congress is in grid lock and they eventually just release them...but man, this is scary...the fact that the shares aren't on rocket launch is telling. if it were great news as deemed by the interested investors in this stock, we would be looking at the reverse of august 17th today. instead, we trickle up.
CKJ now at $2.27 on another 100,000 shares. pointing to a good day...
bid/ask is 2.26 to 2.35
FNMAS traded over 225,000 shares...close was 2.04 bid/ask is now 2.15/2.19
ok...last post for a while...only have 15 per day :)
FMCCT trades 500 shares...at $4 yesterday close. bid/ask is $4 to $4.50
FMCKJ pre-market up five cents.... good sign... still, i've been bent over so many times...still nervous
It's at $2.25, looks like 240,000 traded already. Bid/Ask is $2.26/$2.35
http://www.otcmarkets.com/stock/FMCKJ/quote
gonna check on the rest of my holdings...will post if anything out of whack developing (up or down)
sorry to be like joe stocks....but I firmly believe in posting all news good or bad. there is some interesting analysis from a former ranking official in a CNBC report that all should figure into their buy/sell decision. my hope this is all baked in, and the stock rockets on great news...but I have been here long enough to now have an abundance of caution and skepticism. it is probably a mistake that I am all in, but so be it:
http://www.cnbc.com/id/100510632
"The big question is what happens now with these profits. It must be very tempting for whoever is in the White House to spend that money," said Phillip Swagel, who served in the Treasury Department under President George W. Bush and is a professor at the University of Maryland's School of Public Policy.
"It is a test for the administration if they are willing to direct these profits towards deficit reduction and not spend them so, eventually, the housing market can be financed with private capital and not just government capital."
Swagel estimates Fannie Mae and Freddie Mac are on track to earn a combined $20 billion a year. He cautioned that policymakers should consider their profitability and dominance and make strides towards comprehensive housing finance reform.
"If that money is spent for other purposes, then it will make it virtually impossible to proceed with reform (of Fannie Mae and Freddie Mac)," he added.
Freddie Mac Posts Its Largest Profit Ever Last Quarter
http://online.wsj.com/article/SB10001424127887323293704578332661121208872.html
[sorry went offline folks, I was reading those slamming me! thx for the laughs...anyway...I'm back after midnight...I had used up my 15 daily posts by Thursday evening]
By NICK TIMIRAOS and ANDREW R. JOHNSON
Freddie Mac, FMCC -1.73% buoyed by the housing market's rebound and an improving economy, reported an $11 billion annual profit for 2012 on Thursday—its largest ever annual gain and first profitable year since 2006.
Freddie's profit compares with a year-earlier loss of $5.3 billion. The fortunes of Freddie and its larger sibling, Fannie Mae, FNMA -1.40% have turned around as home prices have stabilized and mortgage delinquencies slowed. That has allowed the government-controlled companies to set aside less money for loan losses.
Fannie Mae, which has yet to post its annual results, reported $9.6 billion in profit during the first three quarters of 2012.
The numbers show just how closely tied the companies' fortunes are to the housing market and offer a glimpse of their potential profitability with an improving housing market. Both firms reported tens of billions of dollars in losses from 2007 until 2011, as falling home prices and rising mortgage delinquencies blew big holes in their balance sheets. Freddie, for example, lost more than $90 billion between 2008 and 2011.
[image]
After they were taken over by the government in 2008, the companies cinched up lending standards and boosted the fees they charge lenders. They currently are responsible for backing nearly two-thirds of mortgages, as private lenders remain skittish of holding on to loans.
"It's clear from our earnings that the housing market has turned a corner and that our work to minimize legacy losses and build a strong new book of business is paying off," Donald Layton, Freddie's chief executive officer, said in a statement.
Freddie has now reported profits in five consecutive quarters. It reported a fourth-quarter gain of $4.5 billion, compared with a third-quarter profit of $2.9 billion and a year-earlier gain of $619 million. Part of the increase came from a favorable settlement it reached with the Internal Revenue Service over a tax dispute.
The gain reflected "a combination of reasonable improvement in loan performance and the tax benefit," said Jim Vogel, an analyst at FTN Financial. But he said the results don't show the capacity to produce these kinds of profits on a sustained basis, in part because Freddie is required under the terms of its bailout to shrink its mortgage portfolio, which has traditionally been a strong profit generator.
Freddie will make a $5.8 billion dividend payment to the U.S. Treasury in March. All told, the company has received $71.3 billion from the Treasury, and after the latest payment, it will have paid $29.6 billion in dividends, for a total cost to taxpayers of about $41.8 billion. Fannie's rescue has cost taxpayers $87.8 billion.
Beginning this year, the Treasury will take all of the companies' profits as payment, replacing the previous structure that required the firms to pay a 10% dividend on the cash the government injected into the firms.
The new arrangement could lead them to pay back taxpayers faster and will prevent them from building equity. The Congressional Budget Office estimated in February that the companies would return $17 billion to the Treasury this year, compared with an earlier estimate that had them borrowing another $13 billion in 2013.
Rising home prices are boosting Freddie's profit because the company is losing less on homes that go through foreclosure. Freddie lost around 35 cents for every $1 of debt that went through foreclosure during the fourth quarter, compared with nearly 41 cents one year ago.
Home prices last year rose by 7.3%, according to the S&P/Case-Shiller national home-price index, the largest gain since 2005.
Write to Nick Timiraos at nick.timiraos@wsj.com
A version of this article appeared March 1, 2013, on page A2 in the U.S. edition of The Wall Street Journal, with the headline: Freddie Mac Posts $11 Billion Profit, Its Largest Ever.
also from page 55...on the net worth clause:
"Our future profits will effectively be distributed to Treasury.
Under the Purchase Agreement, we are required to pay dividends to the extent that our Net Worth Amount exceeds a permitted capital reserve amount. The amount of this reserve decreases over time. Accordingly, over the long-term, we will not be able to build or retain any net worth surplus, and our future profits will effectively be distributed to Treasury. Therefore, the holders of our common stock and non-senior preferred stock will not receive benefits that would otherwise flow from any such future profits."
freddie is allowed to retain $3bn in net worth per august 17th agreement
from page 55:
"Therefore, it is likely that our shares could further diminish in value, and they are not likely to have any value in the longer-term. The Acting Director of FHFA has stated that “[Freddie Mac and Fannie Mae’s] equity holders retain an economic claim on the companies but that claim is subordinate to taxpayer claims. As a practical matter, taxpayers are not likely to be repaid in full, so [Freddie Mac and Fannie Mae] stock lower in priority is not likely to have any value.”
The new quote is the 2012 10-K, where it states that "they are not likely to have ANY value in the longer-term". That has never been said before. That is not a demarco quote.
The demarco quote follows:
"...retain an economic claim subordinate to taxpayer claims...taxpayers are not likely to be repaid in full, so...stock lower in priority is not likely to have any value"
that is interesting as the second quote does seem to imply conditions...that if taxpayers are not paid back, stock has no value.
BUT...if they are paid back...stock has value? Right?
again...our biggest worry is perpetual conservatorship while congress refuses to pass any legislation (as Beta says). They can keep sweeping dividends for years to come and use the funds as another piggy bank. that is worrisome.
for those confusing receivership with conservatorship...this 10K finally lays it out. all should refer newbies to this language on page 54 in the future. it is a common point of confusion:
"Our regulator may, and in some cases must, place us into receivership, which would result in the liquidation of our assets and terminate all rights and claims that our stockholders and creditors may have against our assets or under our charter; if we are liquidated, there may not be sufficient funds to pay the secured and unsecured claims of the company, repay the liquidation preference of any series of our preferred stock, or make any distribution to the holders of our common stock.
We could be put into receivership at the discretion of the Director of FHFA at any time for a number of reasons, including conditions that FHFA has already asserted existed at the time the then Director of FHFA placed us into conservatorship. These include: (a) a substantial dissipation of assets or earnings due to unsafe or unsound practices; (b) the existence of an unsafe or unsound condition to transact business; (c) an inability to meet our obligations in the ordinary course of business; (d) a weakening of our condition due to unsafe or unsound practices or conditions; (e) critical undercapitalization; (f) the likelihood of losses that will deplete substantially all of our capital; or (g) by consent. In addition, FHFA could be required to place us in receivership if Treasury is unable to provide us with funding requested under the Purchase Agreement to address a deficit in our net worth. For more information, see “— If Treasury is unable to provide us with funding requested under the Purchase Agreement to address a deficit in our net worth, FHFA could be required to place us into receivership .”
A receivership would terminate the conservatorship. The appointment of FHFA as our receiver would terminate all rights and claims that our stockholders and creditors may have against our assets or under our charter arising as a result of their status as stockholders or creditors, other than the potential ability to be paid upon our liquidation. Unlike conservatorship, the purpose of which is to conserve our assets and return us to a sound and solvent condition, the purpose of receivership is to liquidate our assets and resolve claims against us.
In the event of a liquidation of our assets, there can be no assurance that there would be sufficient proceeds to pay the secured and unsecured claims of the company, repay the liquidation preference of any series of our preferred stock or make any distribution to the holders of our common stock. To the extent that we are placed into receivership and do not or cannot fulfill our guarantee to the holders of our mortgage-related securities, such holders could become unsecured creditors of ours with respect to claims made under our guarantee. Only after paying the secured and unsecured claims of the company, the administrative expenses of the receiver and the liquidation preference of the senior preferred stock, which ranks senior to our common stock and all other series of preferred stock upon liquidation, would any liquidation proceeds be available to repay the liquidation preference on any other series of preferred stock. Finally, only after the liquidation preference on all series of preferred stock is repaid would any liquidation proceeds be available for distribution to the holders of our common stock. The aggregate liquidation preference on the senior preferred stock owned by Treasury is $72.3 billion as of December 31, 2012. The liquidation preference will increase further if we make additional draws under the Purchase Agreement.
If we are placed into receivership or no longer operate as a going concern, we would no longer be able to assert that we will realize assets and satisfy liabilities in the normal course of business, and, therefore, our basis of accounting would change to liquidation-based accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value and liabilities are stated at their estimated settlement amounts, which could adversely affect our net worth. In addition, the amounts in AOCI would be reclassified to earnings, which could also adversely affect our net worth."
i've seen 10Ks released as late as 8pm Eastern Time...that would be 0200 European Time
the numbers kick ass.
just wish they hadn't snuck that language in the K. the wording has been scary enough for some time!
I say 75% chance rocket up tomorrow. 25% chance August 17th repeat of bloodbath
luckily the news is baked in. not sure how we missed this quote, but it was 2011. still don't like it...tomorrow we rocket up or tank...I bet no middle ground!
Page 50:
"The Acting Director of FHFA stated on November 15, 2011 that “the long-term outlook is that neither [Freddie Mac nor Fannie Mae] will continue to exist, at least in its current form, in the future.” Future legislation will likely materially affect the role of the company, our business model, our structure, and future results of operations. Some or all of our functions could be transferred to other institutions, and we could cease to exist as a stockholder-owned company or at all. If any of these events were to occur, our shares could further diminish in value, or cease to have any value, and there can be no assurance that our stockholders would receive any compensation for such loss in value."
the language change rubbed me very wrong. i guess we find out in the morning...
sounded like a warning shot to investors.
i'm all in no matter what happens, dammit
correct me if wrong, but I don't believe they have ever explicitly laid out the actual REASON that there will be little value. the quote that europa sent I've never seen before.
another quote on page 38...then I have to get back to my work...please folks, please keep posting highlights for us tied to other things at the moment:
"Effect of Conservatorship and Treasury Agreements on Existing Stockholders
The conservatorship, the Purchase Agreement and the senior preferred stock and warrant issued to Treasury have materially limited the rights of our common and preferred stockholders (other than Treasury as holder of the senior preferred stock) and had a number of adverse effects on our common and preferred stockholders. See “RISK FACTORS — Conservatorship and Related Matters — The conservatorship and investment by Treasury has had, and will continue to have, a material adverse effect on our common and preferred stockholders .”
As described above, the conservatorship and Treasury Agreements also impact our business in ways that indirectly affect our common and preferred stockholders. By their terms, the Purchase Agreement, senior preferred stock and warrant will continue to exist even if we are released from the conservatorship. For a description of the risks to our business relating to the conservatorship and Treasury Agreements, see “RISK FACTORS.”"
We are not aware of any current plans of our Conservator to significantly change our business model or capital structure in the near-term. Our future structure and role will be determined by the Administration and Congress, and there are likely to be significant changes beyond the near-term. We have no ability to predict the outcome of these deliberations.
tomorrow my be bloodletting, beyond August 17th
that 10k quote is very very very bad
oh crap. that is very bad. tomorrow may be very, very bad
tracking to $20 billion in dividends this year...keep that up and the net investment will be zero very fast....
as well as a higher income tax benefit
primarily driven by the favorable resolution of tax matters with the Internal Revenue Service (IRS).
Freddie Mac today reported its fourth quarter and full-year 2012 financial results. The company also filed its Annual Report on Form 10-K with the Securities and Exchange Commission. Please click on the link below for additional information.
http://www.freddiemac.com/investors/index.html?cmpid=IREBI022813
what a beautiful green day! http://finance.yahoo.com/quotes/FMCC,FNMA,FMCKJ,FMCKI,FMCCM,FMCCK,FMCCT,FMCCI,FMCKK,FMCCG,FMCCH,FMCCL,FMCCN,FMCCO,FMCCP,FMCCJ,FMCKP,FMCCS,FMCKO,FMCKM,FMCKN,FMCKL,FNMAP,FNMAO,FNMAM,FNMAG,FNMAN,FNMAL,FNMAK,FNMAH,FNMAI,FNMAJ,FNMAS,FNMAT,FNMFM,FNMFN/view/v2?info=view_updated
there is only white outside my office window...the green in this link pasted above is a welcome harbinger to spring...
he deactivated his blog? any hit gator capital still running? might explain why he hasn't shared his investor newsletter with me in a long while (i was on his distribution list...not as a client...)
4cent: FMCKJ getting real close to 10cent!
fannie 10K this week I bet...maybe today...if I were to place a bet...i'd say friday morning. i know fannie has released before the bell in the past.
text from the new CFO 8-K disclosure filing:
"Ms. McFarland will be resigning as Executive Vice President and Chief Financial Officer effective as of the first day following the filing of the company's 2012 Form 10-K. She will remain employed by the company as a senior adviser for a transition period that will end no later than June 30, 2013."
http://biz.yahoo.com/e/130227/fnma8-k.html
Six Questions on the Latest Fannie, Freddie Overhaul Proposal
By Nick Timiraos
[a great summary of the plan http://blogs.wsj.com/developments/2013/02/27/six-questions-on-the-latest-fannie-freddie-overhaul-proposal/?mod=yahoo_hs ]
A bipartisan group of former senators and housing secretaries unveiled on Monday a comprehensive proposal in a bid to jump-start the stalled debate over what to do with Fannie Mae FNMA -0.71% and Freddie Mac FMCC +0.35%.
Here’s a look at some of the most frequently asked questions on the report from the Bipartisan Policy Center, a Washington think tank:
What does the report propose? The BPC’s housing commission calls for the government to wind down Fannie and Freddie within five to 10 years and replace them with a new infrastructure that would provide explicit government insurance on mortgage-backed securities, but only if private insurance providers are wiped out first. Fannie and Freddie issued mortgage-backed securities and investors bought them on the assumption that there was a fuzzy “implied” guarantee that would lead the government to rescue the firms if they got into trouble, which is exactly what happened in 2008.
Why does the BPC think that the government needs to guarantee mortgage-backed securities? At the heart of the commission’s report is the conclusion that the U.S. mortgage market should continue to offer access to low-cost, 30-year fixed-rate mortgages and that the government will need to play some market backstop in order to attract the capital needed to fund those loans. (Only one other country, Denmark, offers the product widely).
Banks don’t hold onto many of those mortgages and haven’t for decades. Instead, over the last 30 years, Fannie and Freddie, along with private banks, bundled those loans together and sold them off to investors as securities. Fannie and Freddie developed deep, liquid markets for buying and selling mortgage-backed securities, attracting capital from pension and mutual funds and foreign investors that wouldn’t otherwise invest in U.S. mortgages.
It’s been 4½ years since Fannie and Freddie were rescued by the Treasury Department. Why hasn’t the White House or Congress dealt with them? The Obama administration issued three broad options for what might happen to Fannie and Freddie two years ago, but has said little since. Conservative Republicans have argued strongly against continued government guarantees, though they have made equally little headway in producing a detailed plan. One reason for the reluctance on both sides: almost any proposal to overhaul the nation’s $10 trillion mortgage market includes unpopular steps—either limiting access to credit, raising costs, or putting some risk on taxpayers, and often a mix of all three.
There have been other housing-finance reform proposals before that have made similar recommendations. What’s different about this one? One reason the BPC report is garnering more attention is, in part, because the debate over what to do has stalled out. The commission’s co-chairs said Monday that one hope is that their recommendations force the issue back onto the agenda in Washington and encourage a more thoughtful discussion about how to move forward.
One sign that may be happening: Sen. Bob Corker (R., Tenn.) put out a statement on Monday saying the report “appears to be headed in the right direction.” Mr. Corker could be a key Republican dealmaker whenever the Senate takes up any housing-finance overhaul.
Who supports the proposal’s recommendations? The real-estate industry, including mortgage bankers and Realtors, generally gave the report a warm reception because it commits to maintaining some type of federal safety net for mortgage markets.
What objections are being raised? The report doesn’t spell out where the capital would come from to build the new mortgage market. It doesn’t say how the existing infrastructure of Fannie and Freddie might be used to create the new market, and how or if the U.S. is to recover the nearly $190 billion investment it has in the two companies (after counting dividends that have been paid to the Treasury, the total cost of the rescues are closer to $137 billion). Those concerns, of course, could be addressed later.
But there are bigger reservations that any plan structured similar to the BPC proposal will have to contend with: Can a government regulator appropriately determine how to price the cost of the new insurance that the government would provide? The report estimates that mortgage rates might need to rise by another 0.25 percentage points to ensure that the government would be protected against losses.
Another worry: private lenders will be incentivized to sell off the riskiest loans that they’re able to fit within the guidelines for any federal backing. “That’s what they did with the ratings agencies during the bubble: ‘How much can we get away with and still get a triple-A [rating]?’” said Thomas Lawler, a former economist at Fannie Mae.
Follow Nick @NickTimiraos
i'm snowed in at home. brought computer home from work last night. not easy to work and deal with a four year old at the same time...and there are many, many posts to skim through today! too many to read. i like the activity :)
well...got some work done...need to go play another half hour of mario kart...
i love how tarred Ebano is...anytime anyone gets suspicious...or half the time there is a new face...it must be the GREAT EBANO!!!!
LOL
WSJ now spews reality:
"Heard on the Street" column:
http://online.wsj.com/article/SB10001424127887323699704578326413920672092.html?ru=yahoo&mod=yahoo_hs
Fix Isn't In for Housing Finance
By DAVID REILLY
Housing markets can't have their cake and eat it, too. But that is what people on all sides of the debate over how to overhaul the housing-finance system, along with what to do about Fannie Mae FNMA -0.71% and Freddie Mac, FMCC 0.00% seem to want.
This was underscored by a report Monday from a Washington think tank, the Bipartisan Policy Center. Some hope it will spur moribund discussions on housing finance and possibly pave the way for proposals from the Obama administration.
The report called for winding down Fannie and Freddie and replacing them with an agency that would offer a form of government reinsurance to mortgage-backed debt, which firms would have to pay for. But, while this is meant to minimize government backing of the mortgage market, the plan doesn't eliminate the risk to taxpayers from another housing downturn. That in many ways is because the report also endorses the continuation of 30-year, fixed-rate financing with no prepayment penalties.
That gets to the dilemma at the heart of the debate over housing finance. It is possible to have either a housing market without government backstops, or a 30-year, fixed-rate mortgage with no prepayment penalty. It probably isn't possible to have both.
As the Policy Center notes, such long-term financing is relatively rare in other countries where shorter-term and variable-rate mortgages are the norm. That is why firms like Fannie and Freddie are virtually nonexistent elsewhere.
The report adds that long-term mortgages have been "a tremendous boon to consumers." But they are essentially subsidized by taxpayers. The problem is that investors in mortgage-backed debt aren't eager to take on both long-term interest-rate and credit risk.
While long-term, fixed-rate mortgages are incredibly popular, any effort to address the broken housing-finance system must also acknowledge that they come at a big cost.
Write to David Reilly at david.reilly@wsj.com
Eliminate Fannie and Freddie, bipartisan report says
February 25, 2013, 11:48 AM
[market watch spin even worse than WSJ! http://blogs.marketwatch.com/election/2013/02/25/eliminate-fannie-and-freddie-bipartisan-report-says/ ]
The nation’s housing-finance system should be overhauled, increasing the private sector’s role and eventually eliminating government-sponsored mortgage buyers Fannie Mae FNMA and Freddie Mac FMCC , a bipartisan group recommended Monday.
Specifically, the Bipartisan Policy Center, a Washington-based think tank, said a government corporation should replace Fannie and Freddie, but its role would be limited to providing a “catastrophic” guarantee on certain mortgage-backed securities. That is, the government guarantee would come into play only after private entities exhausted their capital.
“The commission’s proposed model includes a continued, but limited, role for the federal government to guarantee MBS to ensure mortgage market liquidity and stability, with a large role for private capital to assume credit risk and shield taxpayers from exposure to credit losses,” according to the report. “Our new model…establishes a clear expectation that private firms suffer the consequences of poor business decisions by losing their capital, with no bailout for private shareholders or bondholders.”
In addition to eliminating Fannie and Freddie within several years, the report recommended narrowing the role of the Federal Housing Administration, a mortgage insurer, by reducing loan limits. With its relatively low down-payment requirements, the FHA helps first-time homeowners and lower- and moderate-income borrowers obtain credit. The agency also plays an important countercyclical role, continuing to provide financial support to the housing market during times of economic stress.
While the report acknowledged the government’s role in recovering from the crisis, there’s concern about the ongoing involvement. The government touches the lion’s share of mortgages through various programs — more than 90% are supported through Fannie Mae, Freddie Mac, Ginnie Mae, and the FHA, according to BPC.
“Greater federal intervention was necessary when the market collapsed, but the dominant position currently held by the government is unsustainable…Reducing the government footprint and encouraging greater participation by risk-bearing private capital will protect taxpayers while providing for a greater diversity of funding sources,” according to the BPC report. Read the report.
The report also said overly strict lending standards and uncertainty on new mortgage rules are hurting the housing market’s recovery, among other factors, and suggested that federal officials should develop a plan to ease credit.
The bipartisan group’s report follows a federal watchdog alarm earlier this month about the U.S. government’s role in housing finance. The U.S. Government Accountability Office included the government’s role in housing finance to its biennial list of “high risk” areas, citing FHA’s growth during the financial crisis, as well unfinished work on Fannie Mae and Freddie Mac. Read more about GAO report.
Despite the concern over the government’s role in housing finance, an overhaul in the next couple of years may be unlikely, wrote Jaret Seiberg, a policy analyst with financial services firm Guggenheim Securities, in a research note.
“There is not a consensus in Congress on how to proceed,” Seiberg wrote. “We do not expect efforts to reduce the government’s role in housing finance to gain traction as we are unsure if conservatives can even get such bills through the full House. Even if they could, the Democratically controlled Senate is a major roadblock to action.”
–Ruth Mantell
Follow Ruth on Twitter @ruthmantell