removed FNMA
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The US housing finance system works just fine
May 19, 2014 12:39 am
From Mr Chris Lafakis.
Sir, Edward Luce (“Hedge funds are testing the quality of US democracy” (Comment, May 12) paints the investors’ lawsuit against the US government on Fannie Mae and Freddie Mac as a righteous struggle between noble American democracy and the evil lords of Wall Street. Should we not question the authority of the US government to confiscate the profits of any company, including one that it bailed out, by fiat decree?
The US government would not have dared to do this to AIG because it knows it would have lost in court. Banks, regulators and Congress were just as indispensable to the financial crisis as the government-sponsored enterprises. So why should the GSEs alone be taken to task?
Mr Luce and virtually every commentator or politician who opines on this issue, including President Barack Obama, wants the US to unilaterally disarm one of its greatest sources of comparative advantage: cheap, 30-year mortgages predicated on the full faith and credit of the US government and the dollar’s role as global reserve currency.
The GSEs have repaid every penny they borrowed. In the teeth of the crisis, no one thought this possible. The system worked. It does not need to be “reformed”.
Chris Lafakis, West Chester, PA, US
http://www.ft.com/intl/cms/s/0/31521a64-d9fd-11e3-920f-00144feabdc0.html
An excellent piece. Must read. Thanks for posting.
****IMF NEWS*****
IN CASE YOU MISSED IT #1: During the Senate Banking Committee markup on the Johnson-Crapo GSE reform bill this week, Sen. Mark Warner, D-VA, warned lawmakers voting against the bill that when Fannie Mae or Freddie Mac start losing money again and costing the government billions, it will be their fault. At least that was one reporter’s take on the situation. Losing money again? Does Warner know something the rest of the industry doesn’t know? How can they not make money? Their cost of funds is next to zero and the assets they slap their guarantee on are close to flawless. And wait a second, isn’t Warner from Virginia where a little ole GSE called Freddie Mac is headquartered and employs thousands? Aren’t those employees considered his constituents? Then again, I guess Fannie and Freddie could start losing money again if they screw up a hedge or the housing market tanks. It’s possible, but so are the chances of the Mets or Marlins winning the World Series this year.
What We’re Hearing: Sale of PHH Mortgage Moves Closer? / More Departures at Nationstar Mortgage / Lawsky and Ocwen: Status Quo / Sen. Warner Issues Warning to Colleagues on GSE Reform
By Paul Muolo
pmuolo@imfpubs.com
Is PHH Corp. moving closer to selling its mortgage banking division? The company isn’t providing much guidance outside its recent earnings call, but something may be afoot. At least one private equity fund has increased its stake in the company: Orange Capital LLC. According to a new filing with the Securities and Exchange Commission, Orange now owns 7.2 percent of PHH. In its last filing in January, the stake was 6.0 percent. Investors in the stock continue to worry about how many of PHH’s private-label lending agreements will be renewed when they eventually expire…
As IMFnews reported earlier in the week, Lisa Rodgers, a top production executive for Nationstar Mortgage, left the company without explanation. Now we’re hearing that three other top executives also have left. At press time, Nationstar’s media department had not returned telephone calls and emails on the matter. One advisor familiar with the fast-growing nonbank had this to say: “They’ve had some strange and unexplained hiccups. Perhaps, they’re overwhelmed with boarding costly, high-touch consumers. Or perhaps they didn’t pay the expected executive level bonuses at year-end”…
Nationstar is publicly traded but its largest single shareholder is Fortress Investments with a whopping 74 percent stake in the company. Jefferies & Co. recently downgraded Nationstar to “hold” from “buy”…
Late Thursday there were market rumors that Ocwen Financial might be moving closer to some type of agreement with New York regulator Ben Lawsky over many concerns. But a quick check with Ocwen management Friday morning revealed that nothing is afoot. Absolutely nothing. The company’s guidance has not changed in the least…
However, it should be pointed out that on Thursday federal judge Rosemary Collyer denied a motion filed by one Chris Wyatt to a legal settlement struck late last year between Ocwen and the Consumer Financial Protection Bureau and other parties. In his motion to oppose, Wyatt argued that the final judgment against Ocwen did not provide “equitable relief and compensation.” Under the original settlement, Ocwen agreed to provide $2 billion in principal reduction to underwater borrowers and refund $125 million to the nearly 185,000 borrowers who have already been foreclosed upon…
IN CASE YOU MISSED IT #1: During the Senate Banking Committee markup on the Johnson-Crapo GSE reform bill this week, Sen. Mark Warner, D-VA, warned lawmakers voting against the bill that when Fannie Mae or Freddie Mac start losing money again and costing the government billions, it will be their fault. At least that was one reporter’s take on the situation. Losing money again? Does Warner know something the rest of the industry doesn’t know? How can they not make money? Their cost of funds is next to zero and the assets they slap their guarantee on are close to flawless. And wait a second, isn’t Warner from Virginia where a little ole GSE called Freddie Mac is headquartered and employs thousands? Aren’t those employees considered his constituents? Then again, I guess Fannie and Freddie could start losing money again if they screw up a hedge or the housing market tanks. It’s possible, but so are the chances of the Mets or Marlins winning the World Series this year.
IN CASE YOU MISSED IT #2: At a recent conference sponsored by Sohn Investment, Pershing Square chief Bill Ackman said the common stock of Fannie and Freddie could be worth between $23 and $47 a share. Sounds like a hot stock tip. But wait, didn’t Pershing Square load up on GSE shares last year at about $2 a pop? How selfless of him to give that piece of investing advice.
QUOTE OF THE WEEK: “I feel the wholesale [broker] channel will not only survive, but will actually grow.” – Paul Rozo, president of PRMG Mortgage.
MORTGAGE PEOPLE: Mortgage industry veteran Randy Lightbody has a new job. RECOVCO, a national mortgage due-diligence firm, named Lightbody as its new CEO. During his career, he has worked for several companies, including Digital Risk, Morgan Stanley, Bank One and others. CoreLogic has hired Bridget Berg as senior director of fraud solutions strategy. Prior to joining the mortgage vendor, Berg worked for Wells Fargo, where she was vice president of fraud risk management. USA Mortgage/DAS Acquisition Co. of St. Louis has hired Bryan Bergjans as director of veteran lending, a newly created position. The company says it has funded at least $1 billion per year for the past five years.
FOLLOW US ON TWITTER: Inside Mortgage Finance and some of our staffers post daily on Twitter, providing updates to readers. Our Twitter crew includes: Guy Cecala, Paul Muolo, and Thomas Ressler. And of course, Inside Mortgage Finance.
Excellent summery of the facts. Thanks for sharing.
Nice observation.
Ackman is smarter than retailers like you and me, politicians who are crafting the bill, and 13 clowns who voted for the bill. Even he is smarter than our president who wanted to get rid of the bed rock of the housing market.
long live FnF
Yes, following news is the final outcome of the dead bill follow-up.
Dead as a Door Nail: Johnson-Crapo Passes Committee. But it’s Dead. Really.
By Charles Wisniowski
cwisniowski@imfpubs.com
The Senate Banking Committee Thursday voted 13 to 9 to report out a revised version of the Johnson-Crapo housing finance reform legislation, but the bill is considered a dead horse and likely will never make it to the Senate floor because of weak support.
Though the measure cleared committee with one more than the minimum 12 votes required, an affirmative vote of at least 16 of the 22 members of the panel had been seen as the benchmark needed to cajole Senate Majority Leader Harry Reid, D-NV, to carve time out of the shrinking legislative calendar for a floor vote.
Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, released their initial draft in March, which built upon the bill submitted last year by Sens. Bob Corker, R-TN, and Mark Warner, D-VA.
The Independent Community Bankers of America released a statement, noting that the banking industry “remains concerned with how the legislation would work in the real-world marketplace and whether it would cause further market concentration of the housing-finance system into a few of the largest financial institutions.”
Industry trade group officials anticipate that no meaningful progress will be made on housing and GSE reform legislation until 2017, after a new president and Congress are elected. For a more detailed analysis on GSE reform, see the Friday edition of Inside The GSEs.
Dead as a Door Nail: Johnson-Crapo Passes Committee. But it’s Dead. Really.
***IMF NEWS***
By Charles Wisniowski
cwisniowski@imfpubs.com
The Senate Banking Committee Thursday voted 13 to 9 to report out a revised version of the Johnson-Crapo housing finance reform legislation, but the bill is considered a dead horse and likely will never make it to the Senate floor because of weak support.
Though the measure cleared committee with one more than the minimum 12 votes required, an affirmative vote of at least 16 of the 22 members of the panel had been seen as the benchmark needed to cajole Senate Majority Leader Harry Reid, D-NV, to carve time out of the shrinking legislative calendar for a floor vote.
Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, released their initial draft in March, which built upon the bill submitted last year by Sens. Bob Corker, R-TN, and Mark Warner, D-VA.
The Independent Community Bankers of America released a statement, noting that the banking industry “remains concerned with how the legislation would work in the real-world marketplace and whether it would cause further market concentration of the housing-finance system into a few of the largest financial institutions.”
Industry trade group officials anticipate that no meaningful progress will be made on housing and GSE reform legislation until 2017, after a new president and Congress are elected. For a more detailed analysis on GSE reform, see the Friday edition of Inside The GSEs.
Kick those 13 national criminals' @$$.
Long live FnF
IMO, We will have a green day tomorrow.
FHFA Director Mel Watt Rules Out GSE Loan Limit Increase
By Paul Muolo
pmuolo@imfpubs.com
Federal Housing Finance Agency Director Mel Watt Tuesday morning promised the residential finance industry that he will not use his power as GSE regulator and conservator to lower loan limits on mortgages guaranteed by Fannie Mae and Freddie Mac, effectively freezing current limits where they are today.
“This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market,” he said.
In a wide-ranging speech before an overflowing audience at the Brookings Institution – and in supporting documents – Watt also vowed that the GSEs will continue to permit “compensating factors” when weighing a decision to guarantee mortgages where the debt-to-income ratio is north of 43 percent. “FHFA will continue to permit these compensating factors in each company’s underwriting standards,” he said in prepared remarks.
The speech is significant for other reasons: Watt effectively encouraged lenders to loosen GSE credit standards and offered buyback relief to primary market originators. Among the coming changes, the FHFA will create what Watt called an “independent dispute resolution program” giving lenders a forum to argue their case if they believe a repurchase is unwarranted. For a deeper analysis on the many topics Watt touched on, see the upcoming editions of Inside Mortgage Finance and Inside The GSEs.
FHFA’s Watt: It’s Not the Agency’s Role to Shrink the GSEs; Principal Reduction on the Table?
By Charles Wisniowski, Paul Muolo
cwisniowski@imfpubs.com, pmuolo@imfpubs.com
Federal Housing Finance Agency Director Mel Watt laid down his marker on the mortgage industry Tuesday morning, declaring at the Brookings Institution that it’s not the agency’s role to “contract the footprint” of Fannie Mae and Freddie Mac.
Moreover, it’s clear that the new FHFA director wants to loosen credit to consumers, a huge victory for trade groups such as the Mortgage Bankers Association and National Association of Realtors, which have been clamoring for such a move.
To some listening to his speech – his second to the industry – it marks somewhat of a reversal from his predecessor Edward DeMarco and likely will anger GOP officials who would like nothing more than to see Fannie and Freddie disappear.
In a question-and-answer session with reporters following his speech, Watt stressed that the agency’s role is to “maintain an efficient credit market.” The regulator believes that as “private capital demonstrates that it will come into the market, I think it will be clear that Fannie and Freddie will step back.”
Meanwhile, in his comments to reporters, Watt did not rule out Fannie and Freddie engaging in principal reductions on troubled GSE loans. For additional coverage, see related stories on IMFnews and the upcoming edition of Inside Mortgage Finance.
I can see $5 by next week. Confirmation of the no vote to that Crapp bill should take the pps at $6+ level.
All IMO.
very useful post. thanks.
After long period finished at HOD today....Next run is imminent IMO. I am expecting to cross $8 mark in this push.
FNMA
JC bill is dead as expected.
Billion $ profit.
No one can hold us down.
Any one can tell me what happened to that Corker Warner bill?
REFORM, RELEASE, RELIST, and REGULATE
Bill Ackman Presentation ...
( I am sure it was posted earlier. Reposting for interested people who missed it like me)
http://www.valuewalk.com/2014/05/bill-ackman-2014-ira-sohn/
No viable alternative to Fannie and Freddie
http://www.bloomberg.com/video/ackman-no-viable-alternative-to-fannie-freddie-fSM_~2lOTIS10bZ8ErdOwQ.html
90% of what you said is a rigid lie.
Yes, it has already begun.
Yes, the statement is not true. And treasury does not have the authority to do so. FHFA has the authority to release it from conservatorship. The most probable scenario is, the court will ask them to release, since the objective of conservatorship has already been served. The company is in a very sound state, actually they are in the best possible position in the last 70 years.
Yes, we will be out of conservatorship. This is an IMF news. You are right. Probably the first headline.
KBW: Fannie and Freddie Emerging From Conservatorship ‘Increasingly Plausible’
By Paul Muolo
pmuolo@imfpubs.com
The battle over the future of Fannie Mae and Freddie Mac likely will rage on for the rest of the decade, but it’s “increasingly plausible” that the two government-controlled mortgage giants will emerge from conservatorship, according to a new report from Keefe, Bruyette & Woods.
However, KBW analyst Brian Gardner readily admits that the firm is unsure “how or when” the Treasury Department or Federal Housing Finance Agency can legally take the two out of conservatorship.
Industry officials who have studied the issue contend that Treasury does not have the legal right to give the companies back to their junior and common shareholders and that it would take an act of Congress. Hedge funds that speculated in GSE stock are suing the government, claiming – among other things – that a GSE earnings sweep initiated by Treasury almost two years ago was illegal.
KBW, though, does not see GSE shareholders eventually prevailing in court. Regarding GSE legislation, the firm notes “many in Congress are wary of changing the current mortgage finance system and are reluctant to trust the private sector to step into the role that would be vacated by Fannie and Freddie” should pending GSE reform legislation prevail.
Other areas of interest: Originations, Servicing, Secondary/MBS, Regulatory, Fannie, Freddie
My message to these senators:
"You clowns have already damaged the economy, don't ruin the nation by eliminating the GSEs. At least act like a human being, not like a goat."
Possible.
Yes Zargis, you were right. As you can see, SA is only highlighting the negative part of the research outcome.
http://seekingalpha.com/news/1709183-gses-would-need-further-bailout-under-feds-severely-adverse-scenario?isDirectRoadblock=false&uprof=15
But the main article has equally positive findings, which is favorable to keep GSEs for another 100 years.
Long live FnF
Very good post, Crawford2012.
I want to add some thing with what you said.
The government wasted $800 billion in Iraq war. What was the return on investment?...The death of 4500 American soldiers. And 30% of the returned soldiers are living with PTSD (Post traumatic stress disorder). Some of them are going to live their entire life with it. I suffered a nervous break down once. I know how it feels............Atleast 500,000 Iraq people killed in that war.
Now come to the 2008 GSE bailout. They invested $188 billions. In five years the return of investment was $201 billions already. And plenty more to come. This is a remarkable investment by anyone in history because it has already proven profitable.
Now you plan to kill the companies that gave you billion$ profit, served you for 70 long years, helped you to afford homes, helped you to build wealth, and so on...These criminals in Washington can send money to Ukraine, fabricate a war in Iraq and lose Trillion$, but shout at spending only $188 billion necessary investment, which is crucial for the entire nation and humanity.
If the GSEs are to kill for that bailout money, then clowns in Washington should also be killed asap for that destruction of trillion$ tax payer money.
Hensarling, then Corker and now Crapo bills are nothing but broad mockeries. Let us get rid of those clowns other than getting rid of our beloved Fannie and Freddie.
Good luck to all longs.
Thank you.
Long and strong since last year. Wont sell below $60.
Good luck to all longs.
FNMA
Please add me with Bronze member.
Thanks in advance.
GreenWizard
LOL...agreed..only a republican can write it
Forbes: Obama Administration's Lawlessness Finally Hits Home With Investors
.
(Old article but very good read)
Virtually from its beginning the Obama administration has been marked by a disregard for the law. Yet the administration’s supporters have been mostly unmoved by this aspect of the government’s action. This seeming indifference to the continual flouting of laws, constitutional principles, and precedent has also extended to Wall Street. Yet now, thanks to a revelation about the fraud being perpetrated by the Obama administration upon investors in Fannie Mae and Freddie Mac , investors have finally seen the cost of this lawlessness.
A list of all the actions taken by the Obama administration that break or stretch the law is long. There are so many they can be grouped into categories: Obamacare actions, recess appointments, non-enforcement of existing laws, and participation in actions that break laws.
Most famously President Obama has now made over twenty executive changes to Obamacare that are not allowed under a plain reading the law. In the majority of these changes the administration simply announced that it will not enforce a law duly passed by Congress and signed by the President. Legalization of the “Dreamers” and letting states legalize marijuana are two more major examples of selective non-enforcement of various laws. Such acts likely break the law and certainly stretch it greatly. Under our system of government, the legislative branch (Congress) is supposed to make laws and the executive branch is supposed to enforce them, not ignore them.
Added to this list are recess appointments (such as to the National Labor Relations Board) made when the Senate was not in recess, and actions by the EPA, the National Labor Relations Board, and other federal agencies that go beyond the authority they have been given by Congress.
Much closer to home for investors, the Obama administration signaled its attitude toward the laws that govern investments almost immediately upon assuming office. Investors should have paid attention when President Obama arranged for the bankruptcies of GM and Chrysler to occur in such a manner that the UAW healthcare trust funds received preferred treatment to legally superior creditors such as bondholders. This subversion of centuries of bankruptcy law precedent on the order in which creditors are paid should have warned investors that this was not an administration to be trusted. Yet, other than a few affected bondholders, most investors looked past this theft of bondholder money.
Instead, Wall Street’s top dogs have mostly given the administration a pass on its many legal violations, placated by their bailout and the fiscal and monetary policies that were boosting the stock market and making the rich even richer. While their campaign donations in the 2012 election did favor Mitt Romney over President Obama by about a 3:1 margin, the finance/insurance/real estate sector still donated over $20 million to President Obama’s reelection campaign.
Now, we have discovered that investors have been fraudulently mistreated by the Obama administration. This case deals with the two government sponsored enterprises lubricating our mortgage markets: Fannie Mae and Freddie Mac. During the depths of the recession the Obama administration did not nationalize Fannie Mae and Freddie Mac, instead placing them under conservatorship and taking an ownership stake in the companies. Since that time, the government has sold large blocks of stock in Fannie and Freddie three times through the FDIC. While doing so, the government neglected to inform investors that it planned to keep all of Fannie and Freddie’s profits forever, even after it has been paid back in full with interest.
When normal companies sell stock they must provide investors and the Securities and Exchange Commission with considerable details about their plan as well as enough financial and risk disclosure for investors to make informed decisions. The details disclosed must be truthful and complete or the company risks civil and criminal prosecution.
The federal government sold stock in a company with no future earning potential and handily kept that fact to itself. While prospective investors may not have expected much in the way of future earnings in 2010 or 2011, they knew there was at least a chance that Fannie and Freddie would be able to pay back the government one day and those investors could begin to collect a share of earnings from that point forward. This probability, slight though it may have been, caused investors to bid the price of Fannie Mae shares up from $0.34 to $3 per share.
In 2012 the federal government revealed an amendment to its 2008 document explaining its relationship with Fannie and Freddie. This 2012 plan, known as the Third Amendment, makes clear that the government plans to keep all of Fannie and Freddie’s earnings forever, long after the two GSEs have fully paid back the government from the housing bust’s fallout. Yet a memo, dated in 2010, details that the government plans were in place well before they were disclosed to the public.
This fraud allowed the government to find buyers for some of the shares in Freddie and Fannie that it acquired as part of its bailout, helping it to recoup the taxpayer’s money. However, this recovery of taxpayer money was accomplished at the expense of investors who trusted in the disclosures that they received from Fannie and Freddie, disclosures that the government knew to be untrue.
People can debate the wisdom and benefits of the government essentially nationalizing Fannie and Freddie. However, there is no debate about the ethics of fraud. The best way out of this dilemma is for the government to reverse the Third Amendment and begin allowing Freddie and Fannie’s shareholders to receive some or all of the future earnings. If the government did this, the fraud’s economic damages would disappear since the government just recently reached the point where it was fully paid back.
Our government is supposed to be policing securities fraud, not committing it. There is no excuse for defrauding investors just to enrich the Treasury. The government needs to admit its wrongdoing, make reparations if needed, and take steps to make sure it does not repeat this type of behavior. As for investors, they should learn that at least for the rest of the Obama administration you cannot trust the government.
Fannie Mae, Freddie Mac Will Be Set Free
http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-crapo/
$100 in a year. Period.
I am replying with your own words, you posted it many times before
"No one can wind down a 5.2 trillion $ company"
Especially when it is most profitable in its 70 year history.
Period.
FNMA
Opinion: Fannie Mae will never die.
http://on.wsj.com/1qwwZZX
New Congressional Supporter of Fannie/Freddie
(Posted by aroadrock in Yahoo msg board)
.
Brad Sherman
United States Representatives
Bradley James "Brad" Sherman is an American politician. He has been a Democratic member of the United States House of Representatives since 1997, representing California's 30th, 27th, and 24th congressional districts
Mr. Sherman today made a public announcement on KNX Radio (Los Angeles) that keeping Fannie and Freddie in their old form is VERY IMPORTANT to his constitutents (in the San Fernando Valley, CA)
i could hardly believe my ears when i heard it...i heard it TWICE...and am listening to KNX now, too, to see what else he says about it, but he's a SUPPORTER...if any of you are in his district, you might want to call
his office and i'm sure they'd give you a recap of his position....HE'S ON OUR SIDE...happy day