RestoreFannieMae.us
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.
Great DD, updated daily. http://www.restorefanniemae.us/blog
Join us in our effort to Restore Fannie Mae to the taxpaying shareholders! Help restore this great business from government conservatorship, and support progressive ideals. Help us bring justice for the taxpayers, homeowners, communities, and shareholders, which measure progress by more than just profit.
***Please Sign, takes 2 secs***
Termination of dividends. Fannie Mae can Re-Capitalize! This is way better than a Full profit Sweep
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here - https://t.co/Chu3Mz20Et
H.R.2435 Let the GSEs Pay US back
(1) Termination of dividends.--That after such
modification, any Senior Preferred Stock purchased under such
Agreement by the Department of the Treasury shall not accrue
further dividends.
(2) Treatment of enterprise draws on treasury.--That any
amounts received, before or after such modification, during a
single year by the enterprise as a draw on the commitment made
by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the
enterprise that--
(A) was originated on the date of the last such
draw during such year;
(B) has an original principal obligation in an
amount equal to the aggregate amount of such draws;
(C) has a term to maturity of 30 years;
(D) has an annual interest rate of 5 percent for
the entire term of the loan;
(E) has terms that provide for full amortization of
the loan over such term to maturity; and
(F) shall be repaid by the enterprise in accordance
with the amortization schedule established for the loan
pursuant to subparagraph (E) of this paragraph, subject
to paragraph (3).
(3) Treatment of dividends paid.--That any dividends paid
by the enterprise to the Department of the Treasury under the
Senior Preferred Stock Agreement before such modification of
such Agreement shall be treated as payments of principal and
interest due under the loan referred to in paragraph (2), and
shall be credited against payments due under the terms of such
loan (in accordance with the amortization schedule established
for such loan pursuant to paragraph (2)(E)), first to such loan
have the earliest origination date that has not yet been fully
repaid until such loan is repaid, and then to the next such
loan having the next earliest origination date until such loan
is repaid.
CONGRESSIONAL SPONSOR:
MICHAEL CAPUANO
Introduced: 2013.06.19
State Of: Massachusetts
District: 7
No.
"But by 2012, Fannie and Freddie unexpectedly turned back into profitable firms. Seeking a way to keep the common and preferred stock worth nothing, the government changed the way the two paid their dividends in a fashion that meant all dividends went directly to Treasury – that any remaining common and preferred-stock holders would receive nothing.
Perry Capital has accumulated both common and preferred stock in the two entities before this change, and now wants those dividends to be paid to those shareholders once the government’s priority preferred stock has received its 10 percent. It argues that the government failed to justify the change in dividend payments."
http://dealbook.nytimes.com/2013/07/29/hedge-funds-suit-on-fannie-and-freddie-may-spell-trouble-for-u-s/?_r=1&
"There is significant interest in FNMA by institutional investors. The 1.64% of outstanding shares they control represents a greater percentage of ownership than at any other company in the Finance/Rental/Leasing industry. Additionally, during the quarter ended March 2013, these large investors purchased a net $15.7 million shares."
http://money.cnn.com/quote/shareholders/shareholders.html?symb=FNMA&subView=institutional
"Fannie and Freddie are hated by government officials on both sides of the aisle for reasons unrelated to the purchasing of default ready loans. It is important to know that story as well so it becomes clear how politicians have become so eager to reduce, dismantle and eliminate the GSEs seemingly without any substantial fiscal or financial reason."
Please tell or provide supporting links:)
http://www.restorefanniemae.us/survey
Please take the survey: Fannie Mae & Freddie Mac Favorability Survey
Follow us on twitter: @RestoreFannie
http://www.restorefanniemae.us/survey
Please take the survey: Fannie Mae & Freddie Mac Favorability Survey
Follow us on twitter: @RestoreFannie
Wow! Thank You....
Email Template
Here are two different templets from our website, on the Resources page (http://www.restorefanniemae.us/resources). They address shareholder rights.
1.
Letter to Congressman or Senator:
Restore The GSEs
via [Your Name]
[Date]
[Senator/Representative Name]
[Senator/Representative Title]
[Street Address]
[City, Street, Zip]
Dear [Representative/Senator]:
The Restore Fannie Mae movement would like to reach out to your office. We have gathered from across the United States to denounce the unconstitutional (via the 5th Amendment) “takings”, The Administrative Procedure Act, the conservator’s conflict of interest, and the methods employed by the Federal Home Finance Association (FHFA) in its 2008 action and 2012 amendment of the Preferred Stock Purchase Agreement. We invite you and your office to our website to learn more about our cause, and action we are taking to maintain the rule of law. It is vital to remember the long run. This dispute involves lots more than a simple battle over the proceeds of profitable ventures. All capital markets depend on the strong protection of the rule of law so that firms that invest their capital today can be confident that the government will not steal it away by stealth and artifice tomorrow, which is just what is happening now on a multi-billion dollar level.
As a member of Senate, you have a direct impact on the laws that affect us all. The majority of your constituents and the American people do not condone the actions, and unconstitutional activities of the FHFA. Therefore, we request that you take the following action:
1. We ask government officials to direct the FHFA to comply with the original intent of the conservatorships and amend, retroactively, the Agreements with the Treasury to allow the companies to use funds in excess of the 10.0% annual dividend amount for the rebuilding of their capital structures and the repayment of their debt to the Treasury. Additionally, the two firms are to be released from their conservatorships and returned back to the shareholders when each company has achieved certain risk-based capital requirements, as provided by law 12 U.S.C. § 4611(a)(1).
2. Furthermore, Fannie and Freddie are to be relisted on the New York Stock Exchange, with any remaining amounts owing on the Treasury's aggregate liquidation preferences to be satisfied by exercising whatever portions of the warrants are necessary to retire the debts and unpaid interest (dividend). In addition, through a prudent mix of debt and unused Treasury warrants, the two companies could hasten the process of full recapitalization beyond the basic regulatory requirements. Consider, too, that conservative estimates indicate that on a fully diluted basis, the initial values of the common shares for Fannie and Freddie could be approximately $37.00/share and $29.00/share, respectively. And finally, if Congress still wishes to reform the enterprises, the Congressional Research Service has provided several alternatives in their February 2013 report to Congress that are not contrary to the conservatorships, the taxpayers, or the tax-paying shareholders.
HERA stipulates that the FHFA "shall, as conservator or receiver, and by operation of law, immediately succeed to . . . all rights, titles, powers, and privileges . . . of any stockholder" 12 U.S.C. § 4617(b)(2A). This means that the FHFA acts on behalf of the shareholders and, consequently, substitutes itself as the shareholder in all derivative actions against Fannie and Freddie. However, the D.C. Court of Appeals found in Kellmer v. Raines, 674 F.3d 848 (2012) that "the statutory language bars shareholder derivative actions . . . absent a manifest conflict of interest by the conservator." Thus, a conflict of interest does exist, since the proposed action is not against Fannie and Freddie, but against the firms' conservator, the FHFA.
The FHFA's action to amend the Agreements in August of 2012 was not a lawful exercise of its power as conservator, since the amendment intentionally prevented the companies from rebuilding capital and achieving a sound and solvent condition. Additionally, the court found it essential to underscore the FHFA's mandate to Fannie and Freddie by saying that the "FHFA has the 'incidental power' to take 'any action authorized by this section, which the [FHFA] determines is in the best interests of [Fannie and Freddie] or the [FHFA]' 12 U.S.C. § 4617(b)(2J)(ii)." Clearly, keeping the firms undercapitalized is neither in the best interest of the companies nor the FHFA.
HERA makes clear the conservator's purpose of ". . . rehabilitating the affairs of [Fannie and Freddie]" 12 U.S.C. § 4617(2). Furthermore, the purpose of the conservatorships, according to the FHFA, is "to preserve and conserve each [company's] assets and property and restore the [companies] to a sound financial condition." The shareholders in these two companies relied on the promises made by the FHFA and, thus, willingly bore the risk that the economy would either not recover quickly enough or substantially enough to allow Fannie and Freddie to survive.
John Adams once wrote that we are "a government of laws, and not of men," meaning that no one person (or agency) makes the laws or decides the laws, and no person (or agency) is above the law. The shareholders (both common and preferred) in these companies have legal rights that cannot be ignored or circumvented for political conveniences or objectives. And although the FHFA is owed a debt of gratitude for their sterling leadership during the dark days of the Great Recession, they need to return these entities to their rightful owners – us. You now seem to have some bipartisan support, which is one more sober reminder of how far the nation has drifted from the sound and enduring principles of strong property rights and limited government.
Sincerely,
[Your Name]
Restore The GSEs
www.refm.us
2.
Letter to local politician
Restore Fannie Mae [City]
via [name of individual sending letter]?July [], 2013
[Recipient Name]
[Title]
[Street Address]
[City, Street, ZIP Code]
Dear [Recipient Name]:??
The Restore Fannie Mae [City] movement would like to reach out to your office. In case you have not received the messages or press releases we have sent, we are a local chapter of the national Restore Fannie Mae movement. We have gathered from [City] and across the United States to denounce the unconstitutional (via the 5th Amendment) takings by the FHFA, and the unconstitutional “takings” of the third amended, Treasury imposed, preferred stock purchase agreement.
As an elected official, you represent the people of [City]. It is important to know that our representatives understand the concerns and needs of their constituents. We speak with the rest of America when we say that we do not condone the feudalistic, and unconstitutional activities of the FHFA. Therefore, we would like for you to...
1. [Possible local action he/she can take (e.g. declare position)]
?2. [Possible local action he/she can take (e.g. visit local protest)]?
3. [Possible local action he/she can take (e.g. promote local protest)]
Please show this community your understanding and willingness to hear their concerns. You may contact our political liaison with your response. We look forward to hearing from you soon. Thank you so much for your time [and God bless America].??
Sincerely,???
Restore Fannie Mae [City]
?[Local Contact Info]
?www.restorefanniemae.us
Fannie Mae and Freddie Mac were victims, not culprits
POSTED BY AARON PRESSMAN 0SC ON JULY 26, 2013
There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.
The study identifies five causes of the subprime meltdown:
-Convoluted loan products that consumers didn’t understand.
-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.
You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation.
It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it’s some kind of crazy, politically inspired CYA to blame for the mess we’re in.
(For a more fair and balanced — and detailed — recounting of Fannie and Freddie’s subprime investing forays, see this post from the excellent Calculated Risk blog.)
http://www.restorefanniemae.us/v
Fannie Mae and Freddie Mac were victims, not culprits
POSTED BY AARON PRESSMAN · JULY 26, 2013 1:16 PM
There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.
The study identifies five causes of the subprime meltdown:
-Convoluted loan products that consumers didn’t understand.
-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.
You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation.
It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it’s some kind of crazy, politically inspired CYA to blame for the mess we’re in.
(For a more fair and balanced — and detailed — recounting of Fannie and Freddie’s subprime investing forays, see this post from the excellent Calculated Risk blog.)
http://www.restorefanniemae.us/v
Fannie Mae and Freddie Mac were victims, not culprits
POSTED BY AARON PRESSMAN · JULY 26, 2013 1:16 PM
There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.
The study identifies five causes of the subprime meltdown:
-Convoluted loan products that consumers didn’t understand.
-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.
You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation.
It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it’s some kind of crazy, politically inspired CYA to blame for the mess we’re in.
(For a more fair and balanced — and detailed — recounting of Fannie and Freddie’s subprime investing forays, see this post from the excellent Calculated Risk blog.)
http://www.restorefanniemae.us/v
Do you mind if I post this to our site. Restorefanniemae.us
Agreed!
Great DD, updated daily. http://www.restorefanniemae.us/blog
Join us in our effort to Restore Fannie Mae to the taxpaying shareholders! Help restore this great business from government conservatorship, and support progressive ideals. Help us bring justice for the taxpayers, homeowners, communities, and shareholders, which measure progress by more than just profit.
New Lawsuit: American European Insurance Company vs United States
http://www.restorefanniemae.us/american_european_insurance_company_vs_united_states
New Lawsuit: American European Insurance Company vs United States
http://www.restorefanniemae.us/american_european_insurance_company_vs_united_states
Fannie Mae and Freddie Mac Help More than 2.3 Million Homeowners Keep Their Homes!
http://www.restorefanniemae.us/fannie_mae_and_freddie_mac_help_more_than_2_3_million_homeowners
Fannie Mae and Freddie Mac Help More than 2.3 Million Homeowners Keep Their Homes!
http://www.restorefanniemae.us/fannie_mae_and_freddie_mac_help_more_than_2_3_million_homeowners
...Quote of the day...
Reagan Republican
"The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business. If you want to shutter the GSEs because they lost a ton of money (for which the government will be repaid), remember that they did not lose the money on their core prime business."
Scott Simon
retired in May after 29 years of trading all types of mortgage backed securities, the last 13 years spent as head of mortgage-backed securities at Pacific Investment Management Company.
http://www.americanbanker.com/bankthink/how-i-learned-to-stop-worrying-and-love-the-government-guarantee-1060836-1.html
RestoreFannieMae.us
...Quote of the day...
Reagan Republican
"The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business. If you want to shutter the GSEs because they lost a ton of money (for which the government will be repaid), remember that they did not lose the money on their core prime business."
Scott Simon
retired in May after 29 years of trading all types of mortgage backed securities, the last 13 years spent as head of mortgage-backed securities at Pacific Investment Management Company.
http://www.americanbanker.com/bankthink/how-i-learned-to-stop-worrying-and-love-the-government-guarantee-1060836-1.html
RestoreFannieMae.us
...Quote of the day...
Reagan Republican
"The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business. If you want to shutter the GSEs because they lost a ton of money (for which the government will be repaid), remember that they did not lose the money on their core prime business."
Scott Simon
retired in May after 29 years of trading all types of mortgage backed securities, the last 13 years spent as head of mortgage-backed securities at Pacific Investment Management Company.
http://www.americanbanker.com/bankthink/how-i-learned-to-stop-worrying-and-love-the-government-guarantee-1060836-1.html
RestoreFannieMae.us
http://www.restorefanniemae.us/survey
Please take the survey: Fannie Mae & Freddie Mac Favorability Survey
Follow us on twitter: @RestoreFannie
http://www.restorefanniemae.us/survey
Please take the survey: Fannie Mae & Freddie Mac Favorability Survey
Follow us on twitter: @RestoreFannie
http://www.restorefanniemae.us/survey
Please take the survey: Fannie Mae & Freddie Mac Favorability Survey
Follow us on twitter: @RestoreFannie
Excellent...
New American Banker Article
HOW I LEARNED TO STOP WORRYING AND LOVE THE GOVERNMENT GUARANTEE
JUL 24, 2013 12:00pm ET
SHARE:
Scott Simon
"Let's get the government back out of housing" the cry goes. Back out of housing? Like when? The government has dominated housing policy since World War II and mortgage finance for 40 years. The only time the government didn't dominate mortgage finance was in the mid-2000's and that experiment nearly took down the entire global financial system. Is that what the privatizers want to return to?
"Conventional wisdom" says that housing finance needs to be reformed to bring back private capital, and push out the government and government-sponsored enterprises. I favor pragmatism over conventional wisdom, and therefore believe that government guaranteed mortgage backed securities and a strong GSE are not only "good" but necessary. They are good for the middle and lower classes, housing and the economy. And they don't require a massive taxpayer liability.
Let me come clean: I'm an old-fashioned Reagan Republican. I believe in small government and free markets. I also recognize the importance of initial conditions. Would I design a system from scratch that the government dominated? No. However, voters continuously elected politicians who backed the "American Dream" of homeownership, making it deeply entrenched public policy. The mortgage finance markets not only responded to this, but were explicitly designed for it.
For 40 years, the GSEs financed the rise of middle class homeownership by leveraging their implied government guarantees. The GSE's ran two businesses: guaranteeing "prime" mortgages (most people thought this was their entire business) and managing their portfolios (essentially levered hedge funds). Pressured to achieve earnings growth and maintain market share, the GSEs went off the reservation and bought hundreds of billions of garbage for their portfolios. These toxic loans caused massive losses. The GSEs didn't lose money guaranteeing prime loans. Their prime MBS guarantee business remains very profitable and is why the taxpayers who bailed them out will get their money back.
The GSEs saved the day in 2008 and 2009. Most financing markets shut down but the GSEs allowed $1 trillion of mortgages to be made. Without the GSEs, the housing collapse would have been far worse. Thanks to the government guarantee, the "agency" MBS markets continued to function when most markets seized up.
The markets we have today are set up to make and invest in guaranteed MBS. Large fixed-income investors are constrained by guidelines and ratings. As a result, government-guaranteed MBS trade at much lower yields than non-guaranteed MBS and are infinitely more liquid. This gets the homeowner a much lower mortgage rate and much better credit availability. The government guarantee also ensures a reliable source of funds to the housing market, even during crises.
Some problems with non-government guaranteed MBS: Foreign investors won't buy them; money managers are constrained by guidelines from buying them; and banks are discouraged from buying them by the capital charges under Basel III. I see no current way to restructure the housing finance market that would not require a government guarantee on MBS.
However – and please listen, fellow Republicans – a government guarantee on MBS and risk-sharing on the loans are not mutually exclusive.
While not perfect, the Corker-Warner bill in Congress brilliantly calls for government-guaranteed MBS with risk sharing on the loans. This allows the MBS to trade at very low yields, ensuring a low mortgage rate for the homeowner. It also allows the government to lay off the first-loss credit risk. Who should like this? Homeowners, mortgage investors, politicians who want the middle class to have access to reasonable mortgages and politicians who don't want the government on the hook for massive losses. This concept should garner strong bipartisan support and is a solid basis for honest reform talk.
The competing House GOP plan is disappointing. It would end mortgage availability to the middle class, end the 30-year mortgage and crush home prices. The only winners would be ideologues. To remove the guarantee without crippling damage would take decades.
There are non-debatable, economic facts in housing finance math. All other things held constant, the more the mortgage finance market is funded by private rather than government-guaranteed MBS, the higher mortgages rates, required down payments and credit scores will be; the scarcer credit will be; and the lower the homeownership rate and home prices will be. In a non-government-guaranteed MBS world, everyone from the middle class on down will pray they can get a Federal Housing Administration loan. There will be no other reasonable mortgages available.
The biggest reform hurdles are ideology and economic self-interest. The other big issue is that many involved have zero understanding of how mortgages are made and priced. The reform issues do not have "right" or "wrong" answers. They are public policy questions with foreseeable results. However, many involved seemingly don't know or don't care about those results. Ask yourself this: "beyond your political, ideological or financial self-interest, why do you want to shut down the GSEs and why do you want to end government-guaranteed MBS?"
The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business. If you want to shutter the GSEs because they lost a ton of money (for which the government will be repaid), remember that they did not lose the money on their core prime business. I would fold Freddie Mac into Fannie Mae, leaving one GSE with a single security and securitization platform and no investment portfolio, and run that GSE like a utility. The gas, electric or water companies are too important to be unregulated, as are government-guaranteed mortgages.
I believe the government should keep the GSE, though it could be privatized. I'm a conservative, but as a taxpayer I'd rather see the government make the money than a private equity firm. The MBS should be guaranteed, but the GSE should lay off the risk on the loans. This would maintain the ability to sell MBS at low rates (getting the consumer a low rate) without creating a potential governmental black hole. With a non-guaranteed MBS, the rate to the consumer would be high, and the availability low. Housing finance must serve people other than those in the upper class.
GSE and mortgage reform needs to be done in a way that makes sense, helps the country and helps the people. My conservative philosophy guides my thinking on this, it doesn't blind it. Let's hope politicians from both sides of the aisle adopt this approach.
Scott Simon retired in May after 29 years of trading all types of mortgage backed securities, the last 13 years spent as head of mortgage-backed securities at Pacific Investment Management Company.
http://www.americanbanker.com/bankthink/how-i-learned-to-stop-worrying-and-love-the-government-guarantee-1060836-1.html?zkMobileView=false
Yes, thank you. You'll be fine:)
New American Banker Article
HOW I LEARNED TO STOP WORRYING AND LOVE THE GOVERNMENT GUARANTEE
JUL 24, 2013 12:00pm ET
SHARE:
Scott Simon
"Let's get the government back out of housing" the cry goes. Back out of housing? Like when? The government has dominated housing policy since World War II and mortgage finance for 40 years. The only time the government didn't dominate mortgage finance was in the mid-2000's and that experiment nearly took down the entire global financial system. Is that what the privatizers want to return to?
"Conventional wisdom" says that housing finance needs to be reformed to bring back private capital, and push out the government and government-sponsored enterprises. I favor pragmatism over conventional wisdom, and therefore believe that government guaranteed mortgage backed securities and a strong GSE are not only "good" but necessary. They are good for the middle and lower classes, housing and the economy. And they don't require a massive taxpayer liability.
Let me come clean: I'm an old-fashioned Reagan Republican. I believe in small government and free markets. I also recognize the importance of initial conditions. Would I design a system from scratch that the government dominated? No. However, voters continuously elected politicians who backed the "American Dream" of homeownership, making it deeply entrenched public policy. The mortgage finance markets not only responded to this, but were explicitly designed for it.
For 40 years, the GSEs financed the rise of middle class homeownership by leveraging their implied government guarantees. The GSE's ran two businesses: guaranteeing "prime" mortgages (most people thought this was their entire business) and managing their portfolios (essentially levered hedge funds). Pressured to achieve earnings growth and maintain market share, the GSEs went off the reservation and bought hundreds of billions of garbage for their portfolios. These toxic loans caused massive losses. The GSEs didn't lose money guaranteeing prime loans. Their prime MBS guarantee business remains very profitable and is why the taxpayers who bailed them out will get their money back.
The GSEs saved the day in 2008 and 2009. Most financing markets shut down but the GSEs allowed $1 trillion of mortgages to be made. Without the GSEs, the housing collapse would have been far worse. Thanks to the government guarantee, the "agency" MBS markets continued to function when most markets seized up.
The markets we have today are set up to make and invest in guaranteed MBS. Large fixed-income investors are constrained by guidelines and ratings. As a result, government-guaranteed MBS trade at much lower yields than non-guaranteed MBS and are infinitely more liquid. This gets the homeowner a much lower mortgage rate and much better credit availability. The government guarantee also ensures a reliable source of funds to the housing market, even during crises.
Some problems with non-government guaranteed MBS: Foreign investors won't buy them; money managers are constrained by guidelines from buying them; and banks are discouraged from buying them by the capital charges under Basel III. I see no current way to restructure the housing finance market that would not require a government guarantee on MBS.
However – and please listen, fellow Republicans – a government guarantee on MBS and risk-sharing on the loans are not mutually exclusive.
While not perfect, the Corker-Warner bill in Congress brilliantly calls for government-guaranteed MBS with risk sharing on the loans. This allows the MBS to trade at very low yields, ensuring a low mortgage rate for the homeowner. It also allows the government to lay off the first-loss credit risk. Who should like this? Homeowners, mortgage investors, politicians who want the middle class to have access to reasonable mortgages and politicians who don't want the government on the hook for massive losses. This concept should garner strong bipartisan support and is a solid basis for honest reform talk.
The competing House GOP plan is disappointing. It would end mortgage availability to the middle class, end the 30-year mortgage and crush home prices. The only winners would be ideologues. To remove the guarantee without crippling damage would take decades.
There are non-debatable, economic facts in housing finance math. All other things held constant, the more the mortgage finance market is funded by private rather than government-guaranteed MBS, the higher mortgages rates, required down payments and credit scores will be; the scarcer credit will be; and the lower the homeownership rate and home prices will be. In a non-government-guaranteed MBS world, everyone from the middle class on down will pray they can get a Federal Housing Administration loan. There will be no other reasonable mortgages available.
The biggest reform hurdles are ideology and economic self-interest. The other big issue is that many involved have zero understanding of how mortgages are made and priced. The reform issues do not have "right" or "wrong" answers. They are public policy questions with foreseeable results. However, many involved seemingly don't know or don't care about those results. Ask yourself this: "beyond your political, ideological or financial self-interest, why do you want to shut down the GSEs and why do you want to end government-guaranteed MBS?"
The GSEs have massive information, skills, systems and efficiencies. They also have an incredibly profitable core business. If you want to shutter the GSEs because they lost a ton of money (for which the government will be repaid), remember that they did not lose the money on their core prime business. I would fold Freddie Mac into Fannie Mae, leaving one GSE with a single security and securitization platform and no investment portfolio, and run that GSE like a utility. The gas, electric or water companies are too important to be unregulated, as are government-guaranteed mortgages.
I believe the government should keep the GSE, though it could be privatized. I'm a conservative, but as a taxpayer I'd rather see the government make the money than a private equity firm. The MBS should be guaranteed, but the GSE should lay off the risk on the loans. This would maintain the ability to sell MBS at low rates (getting the consumer a low rate) without creating a potential governmental black hole. With a non-guaranteed MBS, the rate to the consumer would be high, and the availability low. Housing finance must serve people other than those in the upper class.
GSE and mortgage reform needs to be done in a way that makes sense, helps the country and helps the people. My conservative philosophy guides my thinking on this, it doesn't blind it. Let's hope politicians from both sides of the aisle adopt this approach.
Scott Simon retired in May after 29 years of trading all types of mortgage backed securities, the last 13 years spent as head of mortgage-backed securities at Pacific Investment Management Company.
- See more at: http://www.americanbanker.com/bankthink/how-i-learned-to-stop-worrying-and-love-the-government-guarantee-1060836-1.html#sthash.cbMpf3ph.dpuf
Signed!
Verified by Obiteridctum & Crawford2012
Please Sign, takes 2 secs
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here -https://t.co/Chu3Mz20Et
Termination of dividends. Fannie Mae can Re-Capitalize! This is way better than a Full profit Sweep
H.R.2435 Let the GSEs Pay US back
(1) Termination of dividends.--That after such
modification, any Senior Preferred Stock purchased under such
Agreement by the Department of the Treasury shall not accrue
further dividends.
(2) Treatment of enterprise draws on treasury.--That any
amounts received, before or after such modification, during a
single year by the enterprise as a draw on the commitment made
by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the
enterprise that--
(A) was originated on the date of the last such
draw during such year;
(B) has an original principal obligation in an
amount equal to the aggregate amount of such draws;
(C) has a term to maturity of 30 years;
(D) has an annual interest rate of 5 percent for
the entire term of the loan;
(E) has terms that provide for full amortization of
the loan over such term to maturity; and
(F) shall be repaid by the enterprise in accordance
with the amortization schedule established for the loan
pursuant to subparagraph (E) of this paragraph, subject
to paragraph (3).
(3) Treatment of dividends paid.--That any dividends paid
by the enterprise to the Department of the Treasury under the
Senior Preferred Stock Agreement before such modification of
such Agreement shall be treated as payments of principal and
interest due under the loan referred to in paragraph (2), and
shall be credited against payments due under the terms of such
loan (in accordance with the amortization schedule established
for such loan pursuant to paragraph (2)(E)), first to such loan
have the earliest origination date that has not yet been fully
repaid until such loan is repaid, and then to the next such
loan having the next earliest origination date until such loan
is repaid.
CONGRESSIONAL SPONSOR:
MICHAEL CAPUANO
Introduced: 2013.06.19
State Of: Massachusetts
District: 7
Termination of dividends. Fannie Mae can Re-Capitalize! This is way better than a Full profit Sweep
H.R.2435 Let the GSEs Pay US back
(1) Termination of dividends.--That after such
modification, any Senior Preferred Stock purchased under such
Agreement by the Department of the Treasury shall not accrue
further dividends.
(2) Treatment of enterprise draws on treasury.--That any
amounts received, before or after such modification, during a
single year by the enterprise as a draw on the commitment made
by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the
enterprise that--
(A) was originated on the date of the last such
draw during such year;
(B) has an original principal obligation in an
amount equal to the aggregate amount of such draws;
(C) has a term to maturity of 30 years;
(D) has an annual interest rate of 5 percent for
the entire term of the loan;
(E) has terms that provide for full amortization of
the loan over such term to maturity; and
(F) shall be repaid by the enterprise in accordance
with the amortization schedule established for the loan
pursuant to subparagraph (E) of this paragraph, subject
to paragraph (3).
(3) Treatment of dividends paid.--That any dividends paid
by the enterprise to the Department of the Treasury under the
Senior Preferred Stock Agreement before such modification of
such Agreement shall be treated as payments of principal and
interest due under the loan referred to in paragraph (2), and
shall be credited against payments due under the terms of such
loan (in accordance with the amortization schedule established
for such loan pursuant to paragraph (2)(E)), first to such loan
have the earliest origination date that has not yet been fully
repaid until such loan is repaid, and then to the next such
loan having the next earliest origination date until such loan
is repaid.
CONGRESSIONAL SPONSOR:
MICHAEL CAPUANO
Introduced: 2013.06.19
State Of: Massachusetts
District: 7
Termination of dividends. Fannie Mae can Re-Capitalize! This is way better than a Full profit Sweep
H.R.2435 Let the GSEs Pay US back
(1) Termination of dividends.--That after such
modification, any Senior Preferred Stock purchased under such
Agreement by the Department of the Treasury shall not accrue
further dividends.
(2) Treatment of enterprise draws on treasury.--That any
amounts received, before or after such modification, during a
single year by the enterprise as a draw on the commitment made
by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the
enterprise that--
(A) was originated on the date of the last such
draw during such year;
(B) has an original principal obligation in an
amount equal to the aggregate amount of such draws;
(C) has a term to maturity of 30 years;
(D) has an annual interest rate of 5 percent for
the entire term of the loan;
(E) has terms that provide for full amortization of
the loan over such term to maturity; and
(F) shall be repaid by the enterprise in accordance
with the amortization schedule established for the loan
pursuant to subparagraph (E) of this paragraph, subject
to paragraph (3).
(3) Treatment of dividends paid.--That any dividends paid
by the enterprise to the Department of the Treasury under the
Senior Preferred Stock Agreement before such modification of
such Agreement shall be treated as payments of principal and
interest due under the loan referred to in paragraph (2), and
shall be credited against payments due under the terms of such
loan (in accordance with the amortization schedule established
for such loan pursuant to paragraph (2)(E)), first to such loan
have the earliest origination date that has not yet been fully
repaid until such loan is repaid, and then to the next such
loan having the next earliest origination date until such loan
is repaid.
CONGRESSIONAL SPONSOR:
MICHAEL CAPUANO
Introduced: 2013.06.19
State Of: Massachusetts
District: 7
Become a Cosponsor Here:
https://www.cosponsor.gov/details/hr2435-113
Please Sign, takes 2 secs
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here -https://t.co/Chu3Mz20Et
Please Sign, takes 2 secs
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here -https://t.co/Chu3Mz20Et
Please Sign, takes 2 secs
LET GSEs PAY US BACK ACT OF 2013 H.R 2435: Become a Cosponsor Here -https://t.co/Chu3Mz20Et
Wednesday, July 24, 9:11 AM ET Seeking Alpha Update
Freddie Mac (FMCC.OB) takes a step back from the housing market, selling $500M of derivatives backed by mortgage loans. Unlike other securities issued by the GSEs (FNMA.OB as well), these "Structured Agency Credit Risk" notes offer no guarantee of payment should the underlying loans default. "It's the beginning of an experiment," says Deutsche mortgage analyst Steven Abrahams. "If (it's) not an end to their existence, then (it's) a serious change in their role."
http://seekingalpha.com/currents/post/1157512