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more Fannie/Freddie GREEN ! ... FMCC 3X's FNMA vol
Agreed
— d.l. (@outerspace987) April 23, 2024
The very last sentence of a 28 page written testimony on the GSEs mentioned getting the GSEs ready for an exit from conservatorship. Judge for yourself what that means.
— Tim Rood (@tim_rood_) April 23, 2024
Fascinating trend in legislating and fiscal spending - find ways for the private sector to pay for or just finance the policy and outcomes the gov wants. CARES Act (servicers and mom and pop investors - “you mind covering those missed payments?” Or the GSEs - (opportunistic…
— Tim Rood (@tim_rood_) April 23, 2024
Agreed
— d.l. (@outerspace987) April 23, 2024
The very last sentence of a 28 page written testimony on the GSEs mentioned getting the GSEs ready for an exit from conservatorship. Judge for yourself what that means.
— Tim Rood (@tim_rood_) April 23, 2024
Fascinating trend in legislating and fiscal spending - find ways for the private sector to pay for or just finance the policy and outcomes the gov wants. CARES Act (servicers and mom and pop investors - “you mind covering those missed payments?” Or the GSEs - (opportunistic…
— Tim Rood (@tim_rood_) April 23, 2024
$Freddie $Mac - $BUY ! ... Bullish Harami ...
FHFA : Incorporating Climate-Related Risks into Governance ...
Published: 4/22/2024
https://www.fhfa.gov//Media/Blog/Pages/Incorporating-Climate-Related-Risks-into-Governance.aspx
Following FHFA’s Conservatorship Scorecard guidance, Fannie Mae and Freddie Mac have made progress on developing foundational climate risk frameworks, integrating climate risk considerations into their strategic planning, incorporating climate risk considerations into their management and board reporting structures, and developing educational resources for their workforce. The Federal Home Loan Banks are continuing to individually develop their decision-making processes and governance structures in consideration of climate change.
Background
In October 2021, the Financial Stability Oversight Council (FSOC) released a report1 identifying climate change as an emerging and increasing threat to financial stability. Several international organizations and standard-setting bodies have recently developed frameworks to understand, assess, and manage climate-related risks to the entities or markets within their statutory jurisdictions. These include frameworks established by the Task Force on Climate-Related Financial Disclosures,2 Bank for International Settlements (BIS),3 and U.S. regulators (Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation),4 as well as guidance5 and hypothetical scenarios6 developed by the Network for Greening the Financial System (NGFS).7
Federal Housing Finance Agency (FHFA)
FHFA, the conservator and regulator of Fannie Mae and Freddie Mac, and regulator of the Federal Home Loan Banks (collectively, the regulated entities), recognizes the emerging and increasing threat to all stakeholders in the housing system due to climate risk and the increased frequency and intensity of major natural disasters. Strong governance is foundational to managing an institution’s risk profile, particularly when the institution must address a constantly evolving landscape of risks. Accordingly, FHFA included the need to identify ways to incorporate climate change into regulated entity governance in its 2022-2026 Strategic Plan.8 Since 2022, FHFA has established goals for Fannie Mae and Freddie Mac (the Enterprises) to develop company-wide frameworks that incorporate climate risk into existing governance and risk management structures and decision-making, and to incorporate both short- and long-term strategies into the Enterprises’ strategic planning processes.
FHFA established an internal Climate Change and ESG9 Governance Working Group (Working Group) to evaluate the integration of climate risk into the corporate governance, risk management, and strategic planning structures of the regulated entities, and incorporation into operational and business decision-making. The Working Group meets regularly with the Enterprises and evaluates their progress through the annual Conservatorship Scorecard process, reviewing the establishment of foundational governance structures, decision-making processes, and risk management practices around climate risk. The Working Group also reviews progress made by the Federal Home Loan Banks in these areas.
Enterprises
Since 2022, the Enterprises have made distinct progress towards these goals and have been focused on: developing foundational climate risk frameworks, integrating climate risk considerations into strategic planning, incorporating climate risk considerations into management and board reporting structures, and establishing training and educational resources for their workforce.
Developing ?Climate Risk Frameworks
The Enterprises have developed initial climate risk frameworks that are incorporated in their enterprise risk management frameworks in consideration of the impact that climate change could have on the achievement of their mission, strategy, and business objectives.
The Enterprises continue to make progress and develop their capacity to measure the effects of climate risks and integrate climate-related risks into risk management structures:
Freddie Mac has developed climate scenario methodologies to better quantify the impact of climate events on housing affordability, property values, and credit risk;
Fannie Mae is working on finalizing climate scenario design and methodology for intended reporting in 2024; and
Both Ent?erprises completed exploratory climate scenario analysis exercises on flood risk in 2023.
Strategic Plan Integration
To assess and address climate-related risks and opportunities that could affect their businesses, the Enterprises have been incorporating climate issues into their corporate strategic plans and planning processes.
Each Enterprise has completed ESG materiality assessments that inform their ESG and climate strategic planning processes.
Fannie Mae’s 2023-2025 Strategic Plan includes climate risk management and supporting the housing ecosystem’s adaptation to climate change as priorities.10
Board and Management-level Reporting
Fannie Mae
The board Risk Policy and Capital Committee has primary oversight of climate-related risks.
The board Audit Committee provides oversight of ESG-related reporting, which includes climate risk.
The board Community Responsibility and Sustainability Committee oversees the development and implementation of Fannie Mae’s climate risk strategy.
There is a newly established Climate Risk Committee at the management level, and Fannie Mae has designated senior executive officers to oversee climate and ESG.
Freddie Mac
The board Risk Committee has primary oversight of climate related risks.
The board Audit Committee provides oversight of ESG-related reporting, which includes climate risk.
The board Mission and Housing Sustainability Committee provides oversight responsibilities for the development, planning, implementation, performance, and execution of Freddie Mac’s mission strategies and significant initiatives, including the review of sustainability initiatives with climate change implications or impacts.
Freddie Mac has also established several advisory and steering committees at the management level for ESG and climate risk reporting.
Training and Education
Over the last few years, the Enterprises have begun educating staff on the potential impacts of climate-related risks, taking into consideration the interconnectedness and multi-dimensional nature of climate-related topics that could reach all aspects of the organization.
Federal Home Loan Banks
The Federal Home Loan Banks also continue to develop their decision-making processes and governance structures in consideration of climate change. In June 2023, the Federal Home Loan Banks released an inaugural Corporate Social Responsibility Report11 highlighting governance and risk management as foundational to their ability to meet the needs of their members and districts.
FHLBank Mission and Foundational Principles
?
?Individually, each Federal Home Loan Bank is addressing climate-related risks in accordance with its own governance and management structures. For example, the Federal Home Loan Bank of Dallas’s 2022 ESG Report12?? highlights the formation of an ESG Committee providing oversight of the FHLBank’s ESG activities. The committee assists the executive management team and board with setting ESG strategy and reviewing reports and recommendations from subcommittees, including the Climate Risk Subcommittee. At the Federal Home Loan Bank of New York, “Climate and Natural Disaster” risks have been included into the scope of the board’s Risk Committee charter.
Summary
The work undertaken by the Enterprises and Federal Home Loan Banks in managing climate risks continues to be iterative and ongoing. For 2024, FHFA established priorities for the Enterprises in the Conservatorship Scorecard related to climate risks. For the governance area, this includes strengthening risk management capabilities in identifying, assessing, controlling, monitoring, and reporting on climate risk and incorporating these capabilities into the Enterprises’ overall risk frameworks.
Responsibilities of the FHFA Climate Change and ESG Governance Working Group:
Evaluate the integration of climate risk into the corporate governance, risk management, and strategic planning structures of the regulated entities, and incorporation into operational and business decision-making.
Monitor the development and maturation of the regulated entities’ climate risk frameworks and strategic planning processes.
??
Readers are encouraged to explore the FHFA Climate Change & ESG homepage for additional blogs and information related to climate risk.
1 Financial Stability Oversight Council, Report on Climate-Related Financial Risk, 2021, https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.
2 The Financial Stability Board, established to coordinate at the international level the work of national financial authorities and international standard-setting bodies in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies, created the Task Force on Climate-Related Financial Disclosures in 2015 to improve and increase reporting of climate-related financial information.
3 The Bank for International Settlements is an international consortium of central banks and monetary authorities whose mission is to support central banks' pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks. See https://www.bis.org/about/index.htm. In 2022, the Basel Committee on Banking Supervision issued principles for the effective management and supervision of climate-related financial risks. See https://www.bis.org/press/p220615.htm.
4 On October 30, 2023, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation jointly issued principles that provide a high-level framework for the safe and sound management of exposures to climate-related financial risks. See https://www.federalregister.gov/documents/2023/10/30/2023-23844/principles-for-climate-related-financial-risk-management-for-large-financial-institutions.
5 See https://www.ngfs.net/en/liste-chronologique/ngfs-publications.
6 See https://www.ngfs.net/ngfs-scenarios-portal/.
7 The NGFS is a voluntary group of central banks and supervisors that work together to contribute to the development of environment and climate risk management guidance and best practices in the financial sector for use both within and outside its membership.
8 See https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA_StrategicPlan_2022-2026_Final.pdf.
9 ESG encompasses considerations of environmental, social, and governance factors. For the Enterprises, ESG covers their work to enhance environmental sustainability within the homes they finance, to advance consumer access to safe, resilient, and affordable housing opportunities in a sustainable manner, and to embed climate considerations within their board and management processes.
10 Fannie Mae’s 2023-2025 Strategic Plan is referenced in its 2022 Annual Report on Form 10-K (pp. 4) at https://www.fanniemae.com/media/46276/display.
11 See https://fhlbanks.com/the-federal-home-loan-banks-inaugural-corporate-social-responsibility-report/.?
12 See https://www.fhlb.com/getmedia/9cd26f43-96eb-4ac0-9dad-e109fd4abdb5/FHLBank-ESG-Report.pdf.
Authored by: Eric Kelley
Senior Strategic Analyst, Division of Conservatorship Oversight and Readiness
Authored by: Anne Marie Pippin
Deputy Director, Division of Conservatorship Oversight and Readiness
Authored by: La’Toya Holt
Senior Risk Analyst, Governance and Management Risk Branch, Office of Risk Analysis, Policy and Guidance and Development, Division of Enterprise Regulation
Editor: Varun Joshi
Economist, Climate Change and ESG Branch
FHFA : Incorporating Climate-Related Risks into Governance ...
Published: 4/22/2024
https://www.fhfa.gov//Media/Blog/Pages/Incorporating-Climate-Related-Risks-into-Governance.aspx
Following FHFA’s Conservatorship Scorecard guidance, Fannie Mae and Freddie Mac have made progress on developing foundational climate risk frameworks, integrating climate risk considerations into their strategic planning, incorporating climate risk considerations into their management and board reporting structures, and developing educational resources for their workforce. The Federal Home Loan Banks are continuing to individually develop their decision-making processes and governance structures in consideration of climate change.
Background
In October 2021, the Financial Stability Oversight Council (FSOC) released a report1 identifying climate change as an emerging and increasing threat to financial stability. Several international organizations and standard-setting bodies have recently developed frameworks to understand, assess, and manage climate-related risks to the entities or markets within their statutory jurisdictions. These include frameworks established by the Task Force on Climate-Related Financial Disclosures,2 Bank for International Settlements (BIS),3 and U.S. regulators (Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation),4 as well as guidance5 and hypothetical scenarios6 developed by the Network for Greening the Financial System (NGFS).7
Federal Housing Finance Agency (FHFA)
FHFA, the conservator and regulator of Fannie Mae and Freddie Mac, and regulator of the Federal Home Loan Banks (collectively, the regulated entities), recognizes the emerging and increasing threat to all stakeholders in the housing system due to climate risk and the increased frequency and intensity of major natural disasters. Strong governance is foundational to managing an institution’s risk profile, particularly when the institution must address a constantly evolving landscape of risks. Accordingly, FHFA included the need to identify ways to incorporate climate change into regulated entity governance in its 2022-2026 Strategic Plan.8 Since 2022, FHFA has established goals for Fannie Mae and Freddie Mac (the Enterprises) to develop company-wide frameworks that incorporate climate risk into existing governance and risk management structures and decision-making, and to incorporate both short- and long-term strategies into the Enterprises’ strategic planning processes.
FHFA established an internal Climate Change and ESG9 Governance Working Group (Working Group) to evaluate the integration of climate risk into the corporate governance, risk management, and strategic planning structures of the regulated entities, and incorporation into operational and business decision-making. The Working Group meets regularly with the Enterprises and evaluates their progress through the annual Conservatorship Scorecard process, reviewing the establishment of foundational governance structures, decision-making processes, and risk management practices around climate risk. The Working Group also reviews progress made by the Federal Home Loan Banks in these areas.
Enterprises
Since 2022, the Enterprises have made distinct progress towards these goals and have been focused on: developing foundational climate risk frameworks, integrating climate risk considerations into strategic planning, incorporating climate risk considerations into management and board reporting structures, and establishing training and educational resources for their workforce.
Developing ?Climate Risk Frameworks
The Enterprises have developed initial climate risk frameworks that are incorporated in their enterprise risk management frameworks in consideration of the impact that climate change could have on the achievement of their mission, strategy, and business objectives.
The Enterprises continue to make progress and develop their capacity to measure the effects of climate risks and integrate climate-related risks into risk management structures:
Freddie Mac has developed climate scenario methodologies to better quantify the impact of climate events on housing affordability, property values, and credit risk;
Fannie Mae is working on finalizing climate scenario design and methodology for intended reporting in 2024; and
Both Ent?erprises completed exploratory climate scenario analysis exercises on flood risk in 2023.
Strategic Plan Integration
To assess and address climate-related risks and opportunities that could affect their businesses, the Enterprises have been incorporating climate issues into their corporate strategic plans and planning processes.
Each Enterprise has completed ESG materiality assessments that inform their ESG and climate strategic planning processes.
Fannie Mae’s 2023-2025 Strategic Plan includes climate risk management and supporting the housing ecosystem’s adaptation to climate change as priorities.10
Board and Management-level Reporting
Fannie Mae
The board Risk Policy and Capital Committee has primary oversight of climate-related risks.
The board Audit Committee provides oversight of ESG-related reporting, which includes climate risk.
The board Community Responsibility and Sustainability Committee oversees the development and implementation of Fannie Mae’s climate risk strategy.
There is a newly established Climate Risk Committee at the management level, and Fannie Mae has designated senior executive officers to oversee climate and ESG.
Freddie Mac
The board Risk Committee has primary oversight of climate related risks.
The board Audit Committee provides oversight of ESG-related reporting, which includes climate risk.
The board Mission and Housing Sustainability Committee provides oversight responsibilities for the development, planning, implementation, performance, and execution of Freddie Mac’s mission strategies and significant initiatives, including the review of sustainability initiatives with climate change implications or impacts.
Freddie Mac has also established several advisory and steering committees at the management level for ESG and climate risk reporting.
Training and Education
Over the last few years, the Enterprises have begun educating staff on the potential impacts of climate-related risks, taking into consideration the interconnectedness and multi-dimensional nature of climate-related topics that could reach all aspects of the organization.
Federal Home Loan Banks
The Federal Home Loan Banks also continue to develop their decision-making processes and governance structures in consideration of climate change. In June 2023, the Federal Home Loan Banks released an inaugural Corporate Social Responsibility Report11 highlighting governance and risk management as foundational to their ability to meet the needs of their members and districts.
FHLBank Mission and Foundational Principles
?
?Individually, each Federal Home Loan Bank is addressing climate-related risks in accordance with its own governance and management structures. For example, the Federal Home Loan Bank of Dallas’s 2022 ESG Report12?? highlights the formation of an ESG Committee providing oversight of the FHLBank’s ESG activities. The committee assists the executive management team and board with setting ESG strategy and reviewing reports and recommendations from subcommittees, including the Climate Risk Subcommittee. At the Federal Home Loan Bank of New York, “Climate and Natural Disaster” risks have been included into the scope of the board’s Risk Committee charter.
Summary
The work undertaken by the Enterprises and Federal Home Loan Banks in managing climate risks continues to be iterative and ongoing. For 2024, FHFA established priorities for the Enterprises in the Conservatorship Scorecard related to climate risks. For the governance area, this includes strengthening risk management capabilities in identifying, assessing, controlling, monitoring, and reporting on climate risk and incorporating these capabilities into the Enterprises’ overall risk frameworks.
Responsibilities of the FHFA Climate Change and ESG Governance Working Group:
Evaluate the integration of climate risk into the corporate governance, risk management, and strategic planning structures of the regulated entities, and incorporation into operational and business decision-making.
Monitor the development and maturation of the regulated entities’ climate risk frameworks and strategic planning processes.
??
Readers are encouraged to explore the FHFA Climate Change & ESG homepage for additional blogs and information related to climate risk.
1 Financial Stability Oversight Council, Report on Climate-Related Financial Risk, 2021, https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.
2 The Financial Stability Board, established to coordinate at the international level the work of national financial authorities and international standard-setting bodies in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies, created the Task Force on Climate-Related Financial Disclosures in 2015 to improve and increase reporting of climate-related financial information.
3 The Bank for International Settlements is an international consortium of central banks and monetary authorities whose mission is to support central banks' pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks. See https://www.bis.org/about/index.htm. In 2022, the Basel Committee on Banking Supervision issued principles for the effective management and supervision of climate-related financial risks. See https://www.bis.org/press/p220615.htm.
4 On October 30, 2023, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation jointly issued principles that provide a high-level framework for the safe and sound management of exposures to climate-related financial risks. See https://www.federalregister.gov/documents/2023/10/30/2023-23844/principles-for-climate-related-financial-risk-management-for-large-financial-institutions.
5 See https://www.ngfs.net/en/liste-chronologique/ngfs-publications.
6 See https://www.ngfs.net/ngfs-scenarios-portal/.
7 The NGFS is a voluntary group of central banks and supervisors that work together to contribute to the development of environment and climate risk management guidance and best practices in the financial sector for use both within and outside its membership.
8 See https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA_StrategicPlan_2022-2026_Final.pdf.
9 ESG encompasses considerations of environmental, social, and governance factors. For the Enterprises, ESG covers their work to enhance environmental sustainability within the homes they finance, to advance consumer access to safe, resilient, and affordable housing opportunities in a sustainable manner, and to embed climate considerations within their board and management processes.
10 Fannie Mae’s 2023-2025 Strategic Plan is referenced in its 2022 Annual Report on Form 10-K (pp. 4) at https://www.fanniemae.com/media/46276/display.
11 See https://fhlbanks.com/the-federal-home-loan-banks-inaugural-corporate-social-responsibility-report/.?
12 See https://www.fhlb.com/getmedia/9cd26f43-96eb-4ac0-9dad-e109fd4abdb5/FHLBank-ESG-Report.pdf.
Authored by: Eric Kelley
Senior Strategic Analyst, Division of Conservatorship Oversight and Readiness
Authored by: Anne Marie Pippin
Deputy Director, Division of Conservatorship Oversight and Readiness
Authored by: La’Toya Holt
Senior Risk Analyst, Governance and Management Risk Branch, Office of Risk Analysis, Policy and Guidance and Development, Division of Enterprise Regulation
Editor: Varun Joshi
Economist, Climate Change and ESG Branch
Boooom ! - 
Boooom ! -
FMCC $1.31 -Shorts are headed for the exits ... 13.8% Fri
FMCC Naked Shorts Friday ....
FHFA no-bid contract deal -
In May 2023, I pressed FHFA Director Sandra Thompson on Doma Holdings: pic.twitter.com/NKeDYXNTw2
— Congressman William Timmons (@RepTimmons) April 19, 2024
Yabba Dabba Dooooo !! - this time we BUST THRU $2 !!! ....
-
$Boooom ! - Freddie Mac wants a new role financing
Homeowners sitting on equity. One banking group isn’t happy.
if Banks don't like it - $IT'S a $GENIUS MOVE !!
($Very $Smart $Move - $ALREADY SOLID $PRODUCING $LOANS)
Published: April 17, 2024 at 5:30 p.m. ET - By Joy Wiltermuth
The housing giant could make a $850 billion splash in the market for
second-lien mortgages under a new proposal
A Wall Street lobbying group thinks Freddie Mac’s proposal is mission creep and wants
second-lien mortgages to stay in the domain of private credit. GETTY
-8.97%
Housing giant Freddie Mac wants the green light to expand its already dominant footprint
in the estimated $44.8 trillion U.S. housing market. But not everyone is on board.
Federal regulators want feedback on Freddie’s new proposal to allow it to start buying up
second-lien mortgages, a popular product among cash-strapped U.S. homeowners looking
to tap the equity in their properties, especially after mortgage rates shot up in the wake
of the pandemic.
Read: Homeowners scrambling for cash breathe new life into second-lien mortgage market
The aim is for Freddie to start buying fixed-rate second liens potentially by this summer, giving
borrowers a way to tap an estimated $32 trillion of equity built up in U.S. homes in recent years.
If approved, it would open the door for more borrowers to extract cash from their homes, without
having to refinance at current 30-year fixed mortgage rates of about 7.2%.
But a major financial-industry lobbying group said Wednesday that the second-lien market should
remain in the hands of private credit, not a partially government-backed entity.
“In the current market, closed-end second mortgages have been, and continue to be, successfully
originated and funded by private capital,” said Michael Bright, chief executive of the Structured
Finance Association, in a statement. “It is quite unclear what role the government-sponsored
enterprises have in funding these mortgage products, or how that fits into Freddie Mac’s overall
government-chartered mission objective.”
Freddie Mac FMCC, -5.38%, Fannie Mae FNMA, -8.97% and other government-sponsored
housing agencies already have a roughly $9.1 trillion stake in the estimated $13 trillion
U.S. residential-mortgage market.
While they don’t make loans, they buy up 30-year fixed-rate mortgages that conform to higher
lending standards put in place after the late-2000s subprime-mortgage crisis.
These lower-risk loans often end up bundled into bond deals with government guarantees that
primarily are owned by the Federal Reserve and banks, among other investors. Because of
these guarantees, investors consider the bonds to be a Treasury surrogate.
A hitch to Freddie’s proposal would be that it only buys second liens on homes where it already
financed the first mortgage.
Importantly, the proposal aims to limit how much homeowners can borrow in total against their
homes. Freddie said it plans to keep a borrower’s loan-to-value ratio at less than 80% when
looking at both first and second-lien mortgages on a home, keeping an equity cushion in place
in times of stress.
Servicing of the loans also would be overseen by Freddie, which means homeowners could
have access to payment pauses implemented by the government — such as the ones rolled
out during the COVID-19 pandemic, or in cases where homes are hit by hurricanes or other
natural disasters.
The SFA — which represents bond investors, issuers and Wall Street banks — called the
proposal “an unnecessary government encroachment into a sector that has been operating
successfully without government involvement.”
But Freddie’s charter, in place for decades, already indicates that it is authorized to purchase,
service, sell and deal in subordinate second liens.
BofA Global researchers estimated Wednesday that Freddie could end up owning around
$850 billion in second liens, given the huge swath of first-lien mortgages it already financed
at rates below 4%, and based on a combined loan-to-value ratio of 75%.
Fannie Mae, which hasn’t announced a similar program, could see volume of $1 trillion in
second liens when looking at the same parameters.
For context, the BofA Global researchers expect Wall Street to package up to a total of
about $11 billion in home-equity lines of credit and second liens into bond deals this year,
up from only $4.5 billion in 2023.
The U.S. housing market has been largely frozen since the Federal Reserve began
raising interest rates in 2022 to fight high inflation, a battle it continues to wage to this day.
$Boooom ! - Freddie Mac wants a new role financing
Homeowners sitting on equity. One banking group isn’t happy.
if Banks don't like it - $IT'S a $GENIUS MOVE !!
($Very $Smart $Move - $ALREADY SOLID $PRODUCING $LOANS)
Published: April 17, 2024 at 5:30 p.m. ET - By Joy Wiltermuth
The housing giant could make a $850 billion splash in the market for
second-lien mortgages under a new proposal
A Wall Street lobbying group thinks Freddie Mac’s proposal is mission creep and wants
second-lien mortgages to stay in the domain of private credit. GETTY
-8.97%
Housing giant Freddie Mac wants the green light to expand its already dominant footprint
in the estimated $44.8 trillion U.S. housing market. But not everyone is on board.
Federal regulators want feedback on Freddie’s new proposal to allow it to start buying up
second-lien mortgages, a popular product among cash-strapped U.S. homeowners looking
to tap the equity in their properties, especially after mortgage rates shot up in the wake
of the pandemic.
Read: Homeowners scrambling for cash breathe new life into second-lien mortgage market
The aim is for Freddie to start buying fixed-rate second liens potentially by this summer, giving
borrowers a way to tap an estimated $32 trillion of equity built up in U.S. homes in recent years.
If approved, it would open the door for more borrowers to extract cash from their homes, without
having to refinance at current 30-year fixed mortgage rates of about 7.2%.
But a major financial-industry lobbying group said Wednesday that the second-lien market should
remain in the hands of private credit, not a partially government-backed entity.
“In the current market, closed-end second mortgages have been, and continue to be, successfully
originated and funded by private capital,” said Michael Bright, chief executive of the Structured
Finance Association, in a statement. “It is quite unclear what role the government-sponsored
enterprises have in funding these mortgage products, or how that fits into Freddie Mac’s overall
government-chartered mission objective.”
Freddie Mac FMCC, -5.38%, Fannie Mae FNMA, -8.97% and other government-sponsored
housing agencies already have a roughly $9.1 trillion stake in the estimated $13 trillion
U.S. residential-mortgage market.
While they don’t make loans, they buy up 30-year fixed-rate mortgages that conform to higher
lending standards put in place after the late-2000s subprime-mortgage crisis.
These lower-risk loans often end up bundled into bond deals with government guarantees that
primarily are owned by the Federal Reserve and banks, among other investors. Because of
these guarantees, investors consider the bonds to be a Treasury surrogate.
A hitch to Freddie’s proposal would be that it only buys second liens on homes where it already
financed the first mortgage.
Importantly, the proposal aims to limit how much homeowners can borrow in total against their
homes. Freddie said it plans to keep a borrower’s loan-to-value ratio at less than 80% when
looking at both first and second-lien mortgages on a home, keeping an equity cushion in place
in times of stress.
Servicing of the loans also would be overseen by Freddie, which means homeowners could
have access to payment pauses implemented by the government — such as the ones rolled
out during the COVID-19 pandemic, or in cases where homes are hit by hurricanes or other
natural disasters.
The SFA — which represents bond investors, issuers and Wall Street banks — called the
proposal “an unnecessary government encroachment into a sector that has been operating
successfully without government involvement.”
But Freddie’s charter, in place for decades, already indicates that it is authorized to purchase,
service, sell and deal in subordinate second liens.
BofA Global researchers estimated Wednesday that Freddie could end up owning around
$850 billion in second liens, given the huge swath of first-lien mortgages it already financed
at rates below 4%, and based on a combined loan-to-value ratio of 75%.
Fannie Mae, which hasn’t announced a similar program, could see volume of $1 trillion in
second liens when looking at the same parameters.
For context, the BofA Global researchers expect Wall Street to package up to a total of
about $11 billion in home-equity lines of credit and second liens into bond deals this year,
up from only $4.5 billion in 2023.
The U.S. housing market has been largely frozen since the Federal Reserve began
raising interest rates in 2022 to fight high inflation, a battle it continues to wage to this day.
GOVT filed to have 8-0 Jury verdict THROWN OUT
Freddie Green _ +.02 .... back on the Train .....
Govt goons have filed for Lamberth to THROW OUT the
UNANIMOUS 8-0 JURY JUDGEMENT and the DAMAGES
that "THEY" HAVE AGREED TO .. ! 67 pages worth :
https://www.glenbradford.com/wp-content/uploads/2024/04/13-mc-01288-423.pdf
Govt goons have filed for Lamberth to THROW OUT the
UNANIMOUS 8-0 JURY JUDGEMENT and the DAMAGES
that "THEY" HAVE AGREED TO .. ! 67 pages worth :
https://www.glenbradford.com/wp-content/uploads/2024/04/13-mc-01288-423.pdf
163,405 Block BUY - Shorts probably started the rumor -
they've done similar stunts many times - Whales are scooping
up the cheapies at least - STRONGER HANDS -
