active long
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$FNMAS $FNMA https://t.co/KcCWwAHBt9
— Jarndyce Jarndyce (@JarndyceJ) April 16, 2024
The Sen Banking Subcom on Housing, Transportation & Community Development held a hearing on the challenges facing U.S. #housing stock. Chair Tina Smith stated that full Committee Chair Sherrod Brown is very eager to move forward with a set of housing bills.
— ACG Analytics (@ACGAnalytics) April 16, 2024
GSE Conforming Jumbo Business Up in First Quarter
jdohnert@imfpubs.com
Conforming jumbo volume and other noncore activity at the government-sponsored enterprises held up better than GSE business overall in the first quarter of 2024, according to a new analysis by Inside Nonconforming Markets.
In the first quarter, total GSE volume decreased 14.7% from the fourth quarter of 2023. However, the volume of conforming jumbos included in Fannie Mae and Freddie Mac MBS increased by 8.0% to $6.05 billion in the first quarter.
GSE volume involving investment-property loans and cash-out refinances declined in the first quarter, though at a slower rate than GSE business overall. And GSE activity involving mortgages for second homes declined at a slightly faster rate than total GSE business.
The shifts helped to push the core share of GSE business down to 80.3% in the first quarter of 2024 compared with an 82.0% share in the fourth quarter.
GSEs Hold Steady on Home Sale Commissions / Exams by States Increase
bivey@imfpubs.com
The government-sponsored enterprises issued notices Monday confirming their policies on commissions for home sales following a proposed settlement involving the National Association of Realtors.
“Buyer agent fees have historically been fees customarily paid by the property seller or property seller’s real estate agent, and, as such, they are currently excluded from these financing concession limits,” Freddie Mac said in its notice. “If these fees continue to be customarily paid by the property seller according to local convention, they will not be subject to financing concessions limits.” ...
State regulators initiated 2,085 exams of mortgage companies in 2023 through the state examination system within the Nationwide Multistate Licensing System, according to the Conference of State Bank Supervisors. That was up from 1,481 mortgage exams started in 2022...
Whalen & friends: 2 problems with the GSEs -
— Alec Mazo (@Alec_Mazo) April 15, 2024
1. Moody's will be forced to downgrade Fannie/Freddie's credit if they exit conservatorship.
2. The GSEs' work culture is like the U.S. Postal Service. Operationally incompetent.
Howard's (Fannie ex-CFO) reply:
1. No operational…
1) Fannie and Freddie had an implied guarantee for years without impact to ratings 2) today they would exit with a periodic commitment fee that provides a stand-by line behind significant statutory and regulatory capital. It seems Chris is playing for the greedy asset managers…
— joshua rosner (@JoshRosner) April 15, 2024
@rcwhalen
— MIA (@MIA95629998) April 16, 2024
2 problems he states are LIES.
He is corrupt.
He is FAKE NEWS.#fanniegate $fnma
Good Morning Joshua,
— d.l. (@outerspace987) April 16, 2024
A recent quote from the former CFO of Fannie Mae”The companies have over $125bn of capital and growing every quarter..The chances of them tapping into the paid-forTreasury line are minuscule.”Leads to question why an exit strategy hasn’t been implemented?
$Fannie & Freddie 2023 $Combined $Value $7.4 $Trillion
🤣 The Dunning-Kruger effect, instead look into attached pic.twitter.com/I4Mua1ZJ8O
— Ano (@Ano3020100) April 14, 2024
$Fannie & Freddie 2023 $Combined $Value $7.4 $Trillion
🤣 The Dunning-Kruger effect, instead look into attached pic.twitter.com/I4Mua1ZJ8O
— Ano (@Ano3020100) April 14, 2024
Whalen never did when it comes to the GSEs ... and jus like
Trump derangement syndrome he spent his entire article
trying to dispel / explain away GSE Release?? Really??
which means .... its being discussed at circles / levels
WELL ABOVE our paygrade - that alone is a VERY BULLISH
indicator that it's ON THE TABLE - and posting info is
NOT an ENDORSEMENT just POSTING what is out there
Tim Howard commented on Whalen's article - obliterates his nonsense
https://howardonmortgagefinance.com/2024/01/16/the-crt-charade/#comments
DATE: Thursday, April 18, 2024 - TIME: 10:00 AM
LOCATION: Dirksen Senate Office Building 538
THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS will meet
in OPEN SESSION, HYBRID FORMAT to conduct a hearing on
“Oversight of Federal Housing Regulators.” The witnesses will be:
The Honorable Adrianne Todman, Acting Secretary, Dept of HUD; and
The Honorable Sandra Thompson, Director, Federal Housing Finance Agency.
DATE: Thursday, April 18, 2024 - TIME: 10:00 AM
LOCATION: Dirksen Senate Office Building 538
THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS will meet
in OPEN SESSION, HYBRID FORMAT to conduct a hearing on
“Oversight of Federal Housing Regulators.” The witnesses will be:
The Honorable Adrianne Todman, Acting Secretary, Depr of HUD; and
The Honorable Sandra Thompson, Director, Federal Housing Finance Agency.
yer an idiot - Whalen jus talking about
Fannie Freddie means they are being
discussed - I didn't tout or endorse him
so suck eggs JackWagon ...
$Booooom ! - $GSE $Servicing $Portfolios Slowly
Shift Toward Higher Interest Rates
Friday - April 12, 2024 - jbancroft@imfpubs.com
The composition of servicing tied to agency mortgage-backed securities continued to shift toward
higher-coupon mortgages during the first quarter of 2024, according to a new ranking and analysis
by Inside Mortgage Finance.
At the end of March, some 11.1% of agency single-family servicing had coupons over 6.0%. That
was up from 9.1% at the end of 2023 and just 3.1% from a year ago.
Original interest rates on single-family loans securitized since early 2023 have averaged over 6.0%.
At the same time, refinance activity has been relatively sluggish, and many homeowners are reluctant
to buy a new house and give up their low-coupon loan.
The share of high-coupon loans is especially high in the Ginnie Mae market, which has shown the most
net growth. At the end of March, some 13.5% of Ginnie servicing had coupons exceeding 6.0%, compared
with 10.2% for the two government-sponsored enterprises.
$Booooom ! - $GSE $Servicing $Portfolios Slowly
Shift Toward Higher Interest Rates
Friday - April 12, 2024 - jbancroft@imfpubs.com
The composition of servicing tied to agency mortgage-backed securities continued to shift toward
higher-coupon mortgages during the first quarter of 2024, according to a new ranking and analysis
by Inside Mortgage Finance.
At the end of March, some 11.1% of agency single-family servicing had coupons over 6.0%. That
was up from 9.1% at the end of 2023 and just 3.1% from a year ago.
Original interest rates on single-family loans securitized since early 2023 have averaged over 6.0%.
At the same time, refinance activity has been relatively sluggish, and many homeowners are reluctant
to buy a new house and give up their low-coupon loan.
The share of high-coupon loans is especially high in the Ginnie Mae market, which has shown the most
net growth. At the end of March, some 13.5% of Ginnie servicing had coupons exceeding 6.0%, compared
with 10.2% for the two government-sponsored enterprises.
if you bothered to listen to the Bloomberg Radio broadcast
his comments were all about preferred shares - NOT COMMON
Listening to these Libtard Bozos on Bloomberg Radio now
Whalen is on the preferred Train ...
https://www.bloomberg.com/audio
GSE Release? Really? - Update: Ally Financial
R. Christopher Whalen - Updated: 1 hour ago
April 11, 2024 | Premium Service | As we approach bank earnings on Friday, we want to see how things are going in the world of residential housing finance. If we look at the top performers in the mortgage sector, the ten best stocks in terms of one-year total returns are led by the two GSEs and several other names that made sense when three or four interest rate cuts in 2024 were likely. Now, not so much.
The Biden Administration is defying the U.S. Supreme Court to forgive government guaranteed student loans, but as we wrote in Zero Hedge, officials of Ginnie Mae and the Federal Housing Finance Agency are sanctioning lenders for refinancing residential mortgage loans for veterans. Really Joe Biden? And interest rates are rising. Can’t make this stuff up.
Mr. Cooper (COOP), United Wholesale Mortgage (UWMC) and PennyMac Financial (PFSI) were once the top of the heap, but now more aspirational names have risen to the surface of the separation tank. The top twelve mortgage issuers are shown below based upon 1 year total return.
Top of the list are Fannie Mae and Freddie Mac, two GSEs which have been in government conservatorship now for 15 years. Remarkable that these illiquid stocks gained over 250% since last August. Several Street firms and a crowd of paid agents again manipulated retail investors into thinking that these firms may be released from government conservatorship. SEC Chairman Gary Gensler says not a word about this very public manipulation of the common and preferred equity of Fannie Mae and Freddie Mac. But the sad fact is, neither GSE is likely to be released from government control. Why not? Let us count the ways.
The first issue is credit. Since 2008, legal and regulatory changes make it impossible to pretend that the GSEs are sovereign credits once they leave government control. If a once and future President Donald Trump were to move to release the GSEs from conservatorship, Moody’s and the other rating agencies would be forced to downgrade both credits. Think “A+” including the Treasury credit line. But that is when the trouble will begin.
We discussed the issue of the GSEs two years ago (“No End to Conservatorship for Fannie Mae and Freddie Mac”), noting that the $7 trillion in MBS guaranteed by the two GSEs is still not included in the federal debt – even though both GSEs are under government control. Members of Congress cannot understand that the secured MBS issued by the GSEs is, in fact, part of the federal debt, albeit secured by a single family dwelling.
The second issue preventing a release of the GSEs is operational, but also goes to value. Both GSEs have deteriorated operationally over the past 15 years, losing any operational efficiency in favor of a culture that is more like the U.S. Postal Service with an angry progressive overlay. Under the Biden Administration, Fannie Mae and Freddie Mac lost most of the key personnel with actual mortgage market experience that enabled them to be competitive.
Moreover, without the pre-2008 situation where we pretended that the GSEs were still sovereign credits, Fannie Mae and Freddie Mac could never survive as private issuers. They are operationally inefficient and could never operate profitably as nonbanks with the cost of funds implied by a “A+” rating from Moody’s. Let's do some math.
If we assume a “A+” unsecured debt rating for the GSEs, neither will be competitive with PFSI, COOP or JPMorgan (JPM), which reports earnings tomorrow.
JPM is a “AA” credit and the largest issuer of prime non-QM residential MBS in the US. JPM is also the largest residential warehouse lender and servicer in the US. If both GSEs are downgraded to “A+” before they leave conservatorship, how will they compete with JPM, PFSI, COOP et al? They won’t.
Ponder this: Can the GSEs charge 60bp a year to insure conventional MBS if JPM is willing to do that same trade for say 30bp? No. JPM’s ST cost of funds is 2% vs average assets. Try 3x that number for the “private” GSEs with an “A+” rating. SOFR is 5.31% this AM. What will the GSEs pay for ST cash? SOFR +1 or over 6%. Funding costs that are 3x large banks make any release of the GSEs impossible.
Indeed, if you actually did push the GSEs out of conservatorship, you would force Fannie and Freddie to formally retain their mortgage servicing rights as collateral for borrowings. Ponder that mortgage peeps. Conventional issuers would no longer be allowed to pretend that they own the MSR and use it as collateral for borrowing. The conventional loan market goes sideways the next day. Hello. Little nuance to fuel nightmares.
Under the Biden Administration, the pricing for conventional MBS has suffered as the progressive zealots who control the Federal Housing Financing Agency have imposed penalties on lenders who are not toeing the progressive line. Many banks have stopped selling loans to the GSEs entirely, preferring the less politically tainted execution at the Federal Home Loan Banks.
Bottom line on the GSEs is that a lot of retail investors have again been misled by various Wall Street firms, who manipulate the common and preferred shares of these two penny stocks with well-time leaks and innuendo spread via social media. The sad part is that some very influential bankers have told the Biden Administration and also people around President Trump that the US Treasury can monetize the government’s preferred equity position in the GSEs at par. Nope.
The preferred stock in the GSEs held by the Treasury only has “value” so long as Fannie Mae and Freddie Mac are under government control. When and if the GSEs are released, we suspect that the common and preferred will trade at a sharp discount to reflect the earnings potential of the GSEs. Again, ask yourself how two large non-bank GSEs with “A+” LT credit ratings, and that are both issuers of conventional MBS and guarantors of these securities, will compete with PennyMac and JPMorgan? They won’t. End of story.
The final reason why the GSEs won’t be released from conservatorship is the ~ $8 trillion in extant and future MBS. Under the ratings criteria of Moody’s, S&P, etc., only a sovereign entity can earn a “AA+” credit rating of the United States. Ginnie Mae and the FHLBs are sovereign credits, but upon release, the GSEs become nonbank mortgage issuers. They will be rated as finance companies under the Moody's criteria. Indeed, the reason that the national Congress pretends that the GSE debt is not part of the national debt is because the debt is tied to the credit of Fannie and Freddie as corporate issuers.
If a future POTUS decides to release Fannie Mae and Freddie Mac from conservatorship, then the US Treasury will first need to negotiate yet another amendment to the agreement with the GSEs. Fannie and Freddie will need to pay the Treasury a guarantee fee to maintain the sovereign credit rating on the extant and future MBS issuance by the GSEs. Looking at the senior tranches of GSE credit risk transfer (CRT) paper, the yields trade wide of “BBB” corporate bond spreads. Yikes.
If we use past GSE credit risk sharing transactions as a guide, the annual fee paid by the GSEs to the Treasury should be about 25-30 bp on say ~ $8 trillion in MBS. That is the mid-point between "A" and "BBB" on the Moody's/S&P ratings scales.
If the nonbank GSEs are forced to cut the guarantee fee they charge conventional issuers in order to compete for conventional loans with JPM and also the FHLBs, and then must pay 30bp annually to purchase a credit wrapper from Uncle Sam, just how exactly do Fannie and Freddie make money? They don’t. You take the GSEs out of conservatorship, the big banks led by JPMorgan and U.S. Bancorp (USB) will own the conventional loan market within a year.
At the end of the day, the preferred equity position held by the US Treasury in the GSEs is impaired. If the GSEs must pay Treasury to wrap $8 trillion in conventional MBS, then the model does not work. Remember, the GSEs have all of the operational and financial responsibilities of PFSI or COOP, must advance cash to their correspondents pay P&I and T&I on delinquent loans, and must also provide credit insurance to holders of MBS. The GSEs are not banks like JPM. Indeed, if you take the GSEs out of conservatorship, then they may need to get credit lines from JPM et al to fund advances and the purchase of delinquent loans.
If we assume that the private GSEs trade wide of the FHLBs in the short term debt markets, then release from conservatorship for Fannie Mae and Freddie Mac will never happen. The ICE “A” spreads for corporates are currently 78bp over Treasury yields, so figure +50bp to the curve for the private GSEs? And under Basel III, the “private” GSEs will be 100% risk weight credits. Figure SOFR +1 for a ST credit line from Jamie Dimon means that both GSEs will be underwater on day one.
Ally Financial
We last looked in on Ally Financial (ALLY) in the summer of 2022, when interest rates were rising and the Street narrative had not yet skewed toward aggressive Fed rate cuts. That skew in the Fall of 2023 turned out to be completely bogus, but this is what happens when you let Sell Side firms and their trained economists drive the narrative.
ALLY ran hot in the second half of 2023 as expectations of a “soft landing” were rampant, but have also been disproven as default rates on credit cards and auto loans have gone vertical. At the end of Q1 2024, ALLY ranked 52nd among the top banks in the WGA Bank Top 100 Index based upon total market return. ALLY is scheduled to report Q1 2024 earnings on April 18th.
The 2023 results for ALLY were, as before, mediocre. Net income was in the bottom quintile of Peer Group 1 at 0.51% of average assets vs the peer average of 0.89%. Although Q4 2023 was a bad quarter for the industry, ALLY managed to do far worse than average.
Part of the reason why ALLY has weak income is the pricing of the firm's loans. Even though ALLY is in the consumer finance business, its gross loan spread is barely above larger lenders such as PNC Financial (PNC). More, if you compare ALLY with CapitalOne Financial (COF), the comparison is even less generous.
Source: FFIEC
As you can see, ALLY has pushed up its gross spread compared with 2022, but it is still too low to accommodate the bank's high cost of funds. We have long been concerned that ALLY does not have nearly enough spread on its loans to provide enough dry powder to fund loss mitigation in a severe recession scenario. The fact that equity managers pile into this stock at the first sign of rate cuts is remarkable but not surprising since ALLY does not really have a strong funding position.
Source: FFIEC
As you can see in the chart above, ALLY is the outlier among the group of banks in this report, including COF. ALLY has a cost of funds that is a point higher than monoline credit card issuer COF, but a gross loan spread five points below COF? Keep in mind that ALLY has some of the highest overhead expenses in Peer Group 1 and almost 75bp higher than the peer average. That is not a good place to be when we are talking about elevated interest rates and rising loan delinquency.
The chart below shows net loss rates for ALLY and the group in this report. The fact that COF is over 2.5% net loss is interesting but unremarkable. The $400 billion asset monoline credit card issuer has the gross spread and the funding to handle that level of loss easily. But the fact that ALLY is at 1.5% net loss is troubling because the bank lacks the raw earnings power of a COF or Citigroup (C). Both of these issuers have double-digit gross spreads in their subprime portfolios.
ALLY reported a 69% efficiency ratio at the end of 2023, a full five points above the peer average of 63% and nowhere close to big bank bellwether JPM in the mid-50s. A mid-50s efficiency ratio at the House of Morgan means than half of each dollar that comes in the front door goes down to the bottom line.
In our last note, we showcased Bank OZK (OZK), for our money one of the best managed lenders in the country. George Gleason has an efficiency ratio in the 30s. Gleason know that he is not running JPM, thus he keeps expenses low and pays depositors generously.
In times of economic stress, banks with above average asset returns and below average expenses like OZK survive. IOHO, ALLY needs to push yields up and push that efficiency ratio down 10 points. Just take the example of Jane Fraser at Citi and do it -- if you want to survive the coming storm.
GSE Release? Really? - Update: Ally Financial
R. Christopher Whalen - Updated: 1 hour ago
April 11, 2024 | Premium Service | As we approach bank earnings on Friday, we want to see how things are going in the world of residential housing finance. If we look at the top performers in the mortgage sector, the ten best stocks in terms of one-year total returns are led by the two GSEs and several other names that made sense when three or four interest rate cuts in 2024 were likely. Now, not so much.
The Biden Administration is defying the U.S. Supreme Court to forgive government guaranteed student loans, but as we wrote in Zero Hedge, officials of Ginnie Mae and the Federal Housing Finance Agency are sanctioning lenders for refinancing residential mortgage loans for veterans. Really Joe Biden? And interest rates are rising. Can’t make this stuff up.
Mr. Cooper (COOP), United Wholesale Mortgage (UWMC) and PennyMac Financial (PFSI) were once the top of the heap, but now more aspirational names have risen to the surface of the separation tank. The top twelve mortgage issuers are shown below based upon 1 year total return.
Top of the list are Fannie Mae and Freddie Mac, two GSEs which have been in government conservatorship now for 15 years. Remarkable that these illiquid stocks gained over 250% since last August. Several Street firms and a crowd of paid agents again manipulated retail investors into thinking that these firms may be released from government conservatorship. SEC Chairman Gary Gensler says not a word about this very public manipulation of the common and preferred equity of Fannie Mae and Freddie Mac. But the sad fact is, neither GSE is likely to be released from government control. Why not? Let us count the ways.
The first issue is credit. Since 2008, legal and regulatory changes make it impossible to pretend that the GSEs are sovereign credits once they leave government control. If a once and future President Donald Trump were to move to release the GSEs from conservatorship, Moody’s and the other rating agencies would be forced to downgrade both credits. Think “A+” including the Treasury credit line. But that is when the trouble will begin.
We discussed the issue of the GSEs two years ago (“No End to Conservatorship for Fannie Mae and Freddie Mac”), noting that the $7 trillion in MBS guaranteed by the two GSEs is still not included in the federal debt – even though both GSEs are under government control. Members of Congress cannot understand that the secured MBS issued by the GSEs is, in fact, part of the federal debt, albeit secured by a single family dwelling.
The second issue preventing a release of the GSEs is operational, but also goes to value. Both GSEs have deteriorated operationally over the past 15 years, losing any operational efficiency in favor of a culture that is more like the U.S. Postal Service with an angry progressive overlay. Under the Biden Administration, Fannie Mae and Freddie Mac lost most of the key personnel with actual mortgage market experience that enabled them to be competitive.
Moreover, without the pre-2008 situation where we pretended that the GSEs were still sovereign credits, Fannie Mae and Freddie Mac could never survive as private issuers. They are operationally inefficient and could never operate profitably as nonbanks with the cost of funds implied by a “A+” rating from Moody’s. Let's do some math.
If we assume a “A+” unsecured debt rating for the GSEs, neither will be competitive with PFSI, COOP or JPMorgan (JPM), which reports earnings tomorrow.
JPM is a “AA” credit and the largest issuer of prime non-QM residential MBS in the US. JPM is also the largest residential warehouse lender and servicer in the US. If both GSEs are downgraded to “A+” before they leave conservatorship, how will they compete with JPM, PFSI, COOP et al? They won’t.
Ponder this: Can the GSEs charge 60bp a year to insure conventional MBS if JPM is willing to do that same trade for say 30bp? No. JPM’s ST cost of funds is 2% vs average assets. Try 3x that number for the “private” GSEs with an “A+” rating. SOFR is 5.31% this AM. What will the GSEs pay for ST cash? SOFR +1 or over 6%. Funding costs that are 3x large banks make any release of the GSEs impossible.
Indeed, if you actually did push the GSEs out of conservatorship, you would force Fannie and Freddie to formally retain their mortgage servicing rights as collateral for borrowings. Ponder that mortgage peeps. Conventional issuers would no longer be allowed to pretend that they own the MSR and use it as collateral for borrowing. The conventional loan market goes sideways the next day. Hello. Little nuance to fuel nightmares.
Under the Biden Administration, the pricing for conventional MBS has suffered as the progressive zealots who control the Federal Housing Financing Agency have imposed penalties on lenders who are not toeing the progressive line. Many banks have stopped selling loans to the GSEs entirely, preferring the less politically tainted execution at the Federal Home Loan Banks.
Bottom line on the GSEs is that a lot of retail investors have again been misled by various Wall Street firms, who manipulate the common and preferred shares of these two penny stocks with well-time leaks and innuendo spread via social media. The sad part is that some very influential bankers have told the Biden Administration and also people around President Trump that the US Treasury can monetize the government’s preferred equity position in the GSEs at par. Nope.
The preferred stock in the GSEs held by the Treasury only has “value” so long as Fannie Mae and Freddie Mac are under government control. When and if the GSEs are released, we suspect that the common and preferred will trade at a sharp discount to reflect the earnings potential of the GSEs. Again, ask yourself how two large non-bank GSEs with “A+” LT credit ratings, and that are both issuers of conventional MBS and guarantors of these securities, will compete with PennyMac and JPMorgan? They won’t. End of story.
The final reason why the GSEs won’t be released from conservatorship is the ~ $8 trillion in extant and future MBS. Under the ratings criteria of Moody’s, S&P, etc., only a sovereign entity can earn a “AA+” credit rating of the United States. Ginnie Mae and the FHLBs are sovereign credits, but upon release, the GSEs become nonbank mortgage issuers. They will be rated as finance companies under the Moody's criteria. Indeed, the reason that the national Congress pretends that the GSE debt is not part of the national debt is because the debt is tied to the credit of Fannie and Freddie as corporate issuers.
If a future POTUS decides to release Fannie Mae and Freddie Mac from conservatorship, then the US Treasury will first need to negotiate yet another amendment to the agreement with the GSEs. Fannie and Freddie will need to pay the Treasury a guarantee fee to maintain the sovereign credit rating on the extant and future MBS issuance by the GSEs. Looking at the senior tranches of GSE credit risk transfer (CRT) paper, the yields trade wide of “BBB” corporate bond spreads. Yikes.
If we use past GSE credit risk sharing transactions as a guide, the annual fee paid by the GSEs to the Treasury should be about 25-30 bp on say ~ $8 trillion in MBS. That is the mid-point between "A" and "BBB" on the Moody's/S&P ratings scales.
If the nonbank GSEs are forced to cut the guarantee fee they charge conventional issuers in order to compete for conventional loans with JPM and also the FHLBs, and then must pay 30bp annually to purchase a credit wrapper from Uncle Sam, just how exactly do Fannie and Freddie make money? They don’t. You take the GSEs out of conservatorship, the big banks led by JPMorgan and U.S. Bancorp (USB) will own the conventional loan market within a year.
At the end of the day, the preferred equity position held by the US Treasury in the GSEs is impaired. If the GSEs must pay Treasury to wrap $8 trillion in conventional MBS, then the model does not work. Remember, the GSEs have all of the operational and financial responsibilities of PFSI or COOP, must advance cash to their correspondents pay P&I and T&I on delinquent loans, and must also provide credit insurance to holders of MBS. The GSEs are not banks like JPM. Indeed, if you take the GSEs out of conservatorship, then they may need to get credit lines from JPM et al to fund advances and the purchase of delinquent loans.
If we assume that the private GSEs trade wide of the FHLBs in the short term debt markets, then release from conservatorship for Fannie Mae and Freddie Mac will never happen. The ICE “A” spreads for corporates are currently 78bp over Treasury yields, so figure +50bp to the curve for the private GSEs? And under Basel III, the “private” GSEs will be 100% risk weight credits. Figure SOFR +1 for a ST credit line from Jamie Dimon means that both GSEs will be underwater on day one.
Ally Financial
We last looked in on Ally Financial (ALLY) in the summer of 2022, when interest rates were rising and the Street narrative had not yet skewed toward aggressive Fed rate cuts. That skew in the Fall of 2023 turned out to be completely bogus, but this is what happens when you let Sell Side firms and their trained economists drive the narrative.
ALLY ran hot in the second half of 2023 as expectations of a “soft landing” were rampant, but have also been disproven as default rates on credit cards and auto loans have gone vertical. At the end of Q1 2024, ALLY ranked 52nd among the top banks in the WGA Bank Top 100 Index based upon total market return. ALLY is scheduled to report Q1 2024 earnings on April 18th.
The 2023 results for ALLY were, as before, mediocre. Net income was in the bottom quintile of Peer Group 1 at 0.51% of average assets vs the peer average of 0.89%. Although Q4 2023 was a bad quarter for the industry, ALLY managed to do far worse than average.
Part of the reason why ALLY has weak income is the pricing of the firm's loans. Even though ALLY is in the consumer finance business, its gross loan spread is barely above larger lenders such as PNC Financial (PNC). More, if you compare ALLY with CapitalOne Financial (COF), the comparison is even less generous.
Source: FFIEC
As you can see, ALLY has pushed up its gross spread compared with 2022, but it is still too low to accommodate the bank's high cost of funds. We have long been concerned that ALLY does not have nearly enough spread on its loans to provide enough dry powder to fund loss mitigation in a severe recession scenario. The fact that equity managers pile into this stock at the first sign of rate cuts is remarkable but not surprising since ALLY does not really have a strong funding position.
Source: FFIEC
As you can see in the chart above, ALLY is the outlier among the group of banks in this report, including COF. ALLY has a cost of funds that is a point higher than monoline credit card issuer COF, but a gross loan spread five points below COF? Keep in mind that ALLY has some of the highest overhead expenses in Peer Group 1 and almost 75bp higher than the peer average. That is not a good place to be when we are talking about elevated interest rates and rising loan delinquency.
The chart below shows net loss rates for ALLY and the group in this report. The fact that COF is over 2.5% net loss is interesting but unremarkable. The $400 billion asset monoline credit card issuer has the gross spread and the funding to handle that level of loss easily. But the fact that ALLY is at 1.5% net loss is troubling because the bank lacks the raw earnings power of a COF or Citigroup (C). Both of these issuers have double-digit gross spreads in their subprime portfolios.
ALLY reported a 69% efficiency ratio at the end of 2023, a full five points above the peer average of 63% and nowhere close to big bank bellwether JPM in the mid-50s. A mid-50s efficiency ratio at the House of Morgan means than half of each dollar that comes in the front door goes down to the bottom line.
In our last note, we showcased Bank OZK (OZK), for our money one of the best managed lenders in the country. George Gleason has an efficiency ratio in the 30s. Gleason know that he is not running JPM, thus he keeps expenses low and pays depositors generously.
In times of economic stress, banks with above average asset returns and below average expenses like OZK survive. IOHO, ALLY needs to push yields up and push that efficiency ratio down 10 points. Just take the example of Jane Fraser at Citi and do it -- if you want to survive the coming storm.
Whalen has always been very anti-GSE
so if he is putting in print GSE Release ?
despite his scoffing at it - then it seems
that it's probably being discussed by
people in circles well above our paygrade
we'll see what the mkt does tomorrow
GSE Release ? Really ?
Update: Ally Financial
R. Christopher Whalen - 4 hours ago
April 11, 2024 | Premium Service |
https://www.theinstitutionalriskanalyst.com/post/gse-release-really-update-ally-financial
The 250% run in GSE shares since August '23 is the story everyone missed. $ALLY not so much. | https://t.co/kwcrbRwc1C
— Richard Christopher Whalen (@rcwhalen) April 11, 2024
GSE Release ? Really ?
Update: Ally Financial
R. Christopher Whalen - 4 hours ago
April 11, 2024 | Premium Service |
The 250% run in GSE shares since August '23 is the story everyone missed. $ALLY not so much. | https://t.co/kwcrbRwc1C
— Richard Christopher Whalen (@rcwhalen) April 11, 2024
Waters presses Biden to drop plans to replace housing regulator
KATY O'DONNELL
https://www.aol.com/waters-presses-biden-drop-plans-083657019.html
House Financial Services Chair Maxine Waters is urging President Joe Biden to keep the current regulator of mortgage giants Fannie Mae and Freddie Mac, creating a potential clash with the White House as it considers naming a replacement.
The California Democrat made the rare public intervention into executive branch personnel late Thursday with a statement endorsing acting Federal Housing Finance Agency Director Sandra Thompson, who took on the role in June after Biden fired a Trump appointee.
“We will not find a more qualified, more dedicated, or more deserving public servant than Ms. Thompson to lead the FHFA at this moment in our nation’s history,” Waters said. “Appointing Ms. Thompson as director of FHFA is an opportunity that should not be missed.”
Fannie and Freddie — the government-controlled companies the FHFA oversees — buy mortgages from banks and resell them as securities to investors, making the firms and the agency critical to the functioning of the U.S. housing market.
Waters, one of the most influential Washington voices when it comes to housing policy, threw her weight behind Thompson as the White House considered nominating Center for Responsible Lending President Michael Calhoun for the job, according to sources familiar with the matter.
Thompson's initial actions in her first months leading the FHFA have tracked closely with the Biden administration's priorities to expand affordable housing and address racial homeownership gaps. Thompson is the first Black woman to head FHFA — a point that Waters tried to elevate in her plea to Biden. Calhoun is a white man.
“It is in part due to the past and ongoing lack of representation of people of color in the senior ranks of our financial services regulators that we see stark racial and economic inequities throughout our country today,” Waters said.
The White House did not respond to a request for comment.
Pagliara is out 'n about ...
$FNMA #FANNIEGATE how to solve the affordable housing crisis https://t.co/DHx2LN5dfr
— Fanniegate Hero (@DoNotLose) April 10, 2024
Pagliara is out 'n about ...
$FNMA #FANNIEGATE how to solve the affordable housing crisis https://t.co/DHx2LN5dfr
— Fanniegate Hero (@DoNotLose) April 10, 2024
added more Freddie on today's dip....
only buy on RED days - expect return of
recent climb up as well ...
State Financial Regulators and FHFA Enter Into
Mortgage Market Information Sharing Agreement
FOR IMMEDIATE RELEASE - 4/10/2024 - Joint Release
Federal Housing Finance Agency - Conference of State Bank Supervisors
Washington, D.C. – The Conference of State Bank Supervisors (CSBS) and the Federal Housing Finance Agency (FHFA) today entered into a formal agreement designed to facilitate information sharing with respect to nonbank mortgage companies.
The memorandum of understanding establishes substantive information sharing protocols between state financial regulators and FHFA, improving the ability to coordinate on market developments, identify and mitigate risks, and ultimately, further protect consumers, taxpayers, and the nation’s housing finance system.
“Information sharing between state regulators and federal supervisors is common sense given our shared interest in a vibrant, stable mortgage marketplace,” said CSBS Board Chair Lise Kruse, North Dakota Commissioner of Financial Institutions. “Establishing information sharing opens the door to a more collaborative oversight process that is beneficial to all involved.”
State financial regulators are the primary regulators of nonbank mortgage companies. FHFA is the regulator and conservator of two of the nonbank mortgage industry’s largest and most important counterparties, Fannie Mae and Freddie Mac. While each supervisory agency maintains specific authorities related to the mortgage industry, only state financial regulators have complete prudential authority over nonbank mortgage companies.
“The development of an information sharing framework is an important milestone that will better equip both FHFA and state regulators to oversee our respective regulated entities,” said FHFA Director Sandra L. Thompson. “Improved communication leads to better coordination, which in turn leads to better outcomes for consumers, market participants, and taxpayers.”?
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The Conference of State Bank Supervisors (CSBS) is the national organization of bank regulators from all 50 states, American Samoa, District of Columbia, Guam, Puerto Rico and U.S. Virgin Islands. State regulators supervise roughly three-quarters of all U.S. banks and a variety of non-depository financial services. CSBS, on behalf of state regulators, also operates the Nationwide Multistate Licensing System to license and register non-depository financial service providers in the mortgage, money services businesses, consumer finance and debt industries.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $8.4 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter @FHFA, YouTube, Facebook, and LinkedIn.
Contacts:
FHFA: MediaInquiries@fhfa.gov
CSBS: Susanna Barnett, (202) 680-3143; Twitter: @CSBSNews
pre-mkt 5,000 shares X 2 - 10,000 shares $FMCC @ $1.47 ...
"might" ? - Jan 2020 ?
SeaShell phone Skateboard now is touting "Consent Decree" ....
I've been posting that for so many YEARS ...
only shareholder relief will come from Retained Earnings & Courts
*****************************************************************************************
bradford86 -Re: Augie Boukalis post# 791341
Monday, April 08, 2024 10:12:00 PM - Post# 791365 of 791398
Yes biden admin is just getting closer to the big event. Consent decree
Freddie Mac Sells $104 Million in Non-Performing Loans
April 9, 2024 8:00 AM EDT - Awards SPO Pool to One Winner
MCLEAN, Va., April 09, 2024 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) today announced it sold via auction 679 deeply delinquent non-performing residential first lien loans (NPLs) from its mortgage-related investments portfolio.
The loans, with a balance of approximately $104 million, are currently serviced by Specialized Loan Servicing LLC and New Rez LLC, d/b/a Shellpoint Mortgage Servicing.
The transaction is expected to settle in June 2024. The sale is part of Freddie Mac’s Standard Pool Offerings (SPO®). Freddie Mac, through its advisors, began marketing the transaction on March 6, 2024, to potential bidders, including non-profits and Minority, Women, Disabled, LGBTQ+, Veteran or Service-Disabled Veteran-Owned Businesses (MWDOBs), neighborhood advocacy organizations and private investors active in the NPL market. Bids for the upcoming
Extended Timeline Pool Offering (EXPO), which is a smaller sized pool of loans, are due from qualified bidders by April 25, 2024.
i'ts time to Release the GSEs !!!
Cup and handle bullish patterns. $FNMA $FMCC https://t.co/GNdjXMNWiM pic.twitter.com/E4s3t64rSY
— José E Burgos Lugo, PA (@TheBurgosGrp) April 8, 2024
FHFA Announces New Staffing Update
FOR IMMEDIATE RELEASE
Washington, D.C. – Today, the Federal Housing Finance Agency (FHFA) announced that Tracy Stephan has been named Chief Artificial Intelligence Officer (CAIO) and will continue in her role leading the FHFA Office of Financial Technology.
FHFA’s CAIO will manage AI risk, promote AI innovation, and lead effective AI governance in accordance with the Executive Order 14110 on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence and the related Office of Management and Budget Memo on Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence.
“Establishing a Chief AI Officer underscores FHFA’s commitment to understanding new developments in technology and the marketplace and incorporating those insights into our day-to-day work,” said FHFA Director Sandra Thompson. “Through her role leading the Office of Financial Technology, Tracy has been a leader in FHFA’s work on AI and she is well prepared to lead this into the future.”
About Tracy Stephan: Stephan, a 25-year veteran in mortgage technology, leads FHFA’s Office of Financial Technology. In this role, she leads a team responsible for supporting the Agency’s efforts to identify technology-driven developments in housing finance, understand the associated risks, and facilitate the development of responsible innovation in FHFA’s regulated entities. Stephan came to FHFA from Fannie Mae where she served in a variety of positions overseeing Enterprise Innovation, Data, Software Engineering, and Product Management. In these roles she led complex digital transformation initiatives, oversaw mission-critical technology operations, and drove innovation at scale. Stephan holds a bachelor’s degree in Decision Science and Information Systems from George Mason University.?
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $8.4 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter @FHFA, YouTube, Facebook, and LinkedIn.
Contacts:
MediaInquiries@FHFA.gov
The Fairholme-GSE Case: Not Quite Over (Probably)
Monday April 8, 2024 - dhollier@imfpubs.com
Last August, Hamish Hume, an attorney at the Washington, DC-based law firm B
oies Schiller Flexner, became the first lawyer to win a jury trial related to the
net worth sweep. Even so, he said the case isn’t over yet.
Although the jury in Fairholme v. Federal Housing Finance Agency awarded Fannie Mae
and Freddie Mac shareholders a combined $612 million in damages — onto which U.S.
District Court Judge Royce Lamberth tacked an additional $200 million in pre-judgement
interest for Fannie preferred shareholders — Hume feels certain the government will appeal.
Speaking at a recent SitusAMC webinar, he said, “One would hope that this would be the
end of the road, because it’s been a really long road for a lawsuit that was originally filed
in 2013. But unfortunately, I don’t think it will be.”
Hume said the defendants are likely to file post-judgment motions, which allow the judge
to rule, as a matter of law, that the verdict should have gone the other way.
Fannie and Freddie Loosen the Purse Strings on Loan Credit
Monday April 8, 2024 - nbhatia@imfpubs.com
Mortgage lenders that sell loans to Fannie Mae and Freddie Mac took baby steps
toward loosening their credit standards for borrowers in the new year, according
to a new Inside Mortgage Trends analysis of mortgage-backed securities data.
In the first quarter of 2024, 4.03% of the government-sponsored enterprises’
business was derived from mortgages with credit scores ranging from
620 to 699 and loan-to-value ratios above 80%. In 4Q23, 3.96% of Fannie/Freddie
business came from that category.
The analysis excludes modified loans and mortgages with LTV ratios exceeding
97% or credit scores lower than 620.
Meanwhile, the share of the safest mortgages — those with credit scores of
740 or more and LTV ratios of 60% or less — slipped to 11.26% in 1Q24 from
11.32% in the fourth quarter. During the pandemic years, loans from this category
accounted for a much larger share of GSE business, hitting a high of 25.60% in
the first quarter of 2021.