Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
NAHB: "Over the past 40 years, numerous problems have been uncovered because of Chevron.
First, it clearly is biased toward federal agencies by granting them broad leeway to interpret and implement regulations.
Second, Chevron puts too much power in the hands of the unelected agencies. As part of the executive branch, the federal agencies must enforce the laws. However, because Congress also delegates its authority to write the regulations, the agencies both create and enforce many laws. Chevron adds to that problem by putting a “thumb on the scale” in court. Thus, the power of the legislature, executive and judicial branches are merged in the hands of unelected bureaucrats.
Finally, Chevron gives Congress an incentive to write ambiguous laws. Lawmakers want to get statutes passed. Chevron, however, allows Congress to forgo doing the difficult work of drafting clear laws by letting it pass the work off to the agencies. The agencies can then continuously change the law — and the intent of Congress — by implementing their own interpretation as long as they are “reasonable.”
The Supreme Court is expected to reach a decision in the two cases between April and June."
Nice! I'm loving it, I think this final paragraph from yesterday's WSJ Editorial Board sums up the massive problems associated with the Chevron Doctrine:
"It's not too much to say Chevron has corrupted all three branches of government. It lets Congress abdicate its duty to write clear laws, the bureaucracy to grab more power, and the courts to abandon their normal method of judicial review. Time for the High Court to restore constitutional equilibrium."
Loved the follow comments from Paul Clement:
"Justice Elena Kagan said it's up to Congress to overturn Chevron. But as fisheries' attorney Paul Clement rightly rejoined: "I'm not sure everybody in Congress wants to overrule Chevron. . . It's really convenient for some members of Congress not to have to tackle the hard questions and to rely on their friends in the executive branch to get them everything they want."
He added that even if Congress were to pass a law overturning Chevron, "the President would veto it." In any event, he said, Chevron wrongly "assumes that ambiguity is always a delegation" to the executive branch. More often, ambiguity is "'I don't have enough votes in Congress to make it clear, so I'm going to leave it ambiguous . . . and then we'll give it to my friends in the agency.'"
By allowing Congress to pass off responsibility to regulators, Chevron has contributed to legislative dysfunction and gridlock. Congress has failed to pass a law regulating crypto-currency after the FTX fiasco, Mr. Clement said, "because there's an agency head out there that thinks that he already has the authority to address this uniquely 21st century problem with a couple of statutes passed in the 1930s."
Perhaps he means Securities and Exchange Chairman Gary Gensler. "And he's going to wave his wand, and he's going to say the words 'investment contract' are ambiguous," Mr. Clement said. Or consider that the Federal Communications Commission has rewritten broadband regulation four times in 14 years."
Head of OMB? Franklin Delano Raines (FDR) was head of OMB before becoming CEO of Fannie Mae !
https://en.m.wikipedia.org/wiki/Franklin_Raines
Ouch..."He has been called one of the "25 People to Blame for the Financial Crisis" according to Time magazine.[1]"
https://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877335,00.html
I don't know, what do think, mug shots never make people look good.... !
David Maxwell, the CEO of Fannie Mae, in 1990, looked me straight in the eye and said, "the number one risk for the stock is political risk", and I believe that still holds true today.
He was a stand up guy and personally went around and shook hands with all the employees at the Headquarters. Back then the entire Fannie Mae employee headcount was approximately 2,000 and that included the regional offices. Today, I believe it's closer to 7,000.
I think it's undeniable that you would see a statistically significant bump upwards in price when the previous administration made statements about "getting the federal government out of the GSES."
"...and shares could increase meaningfully in the event Donald Trump wins the election"
" It points out that since Donald Trump's victory in the Iowa Republican caucus on Monday night, shares of Fannie Mae are up 13% and shares of Freddie Mac are up 10.5%."
The quintessential Trump trade?
Well said! And as Brett Kavanaugh said yesterday, "What POTUS would EVER NOT VETO a Congressional Statute to overrule the Chevron Doctrine." and give up all that inherent power in these federal agencies to interpret the law and exercise the Executive Branch power, the way the POTUS sees as appropriate.
Let's see what if anything the Supremes decide to do to reign in these federal agencies, in the 3 cases in front of them this term.
Here's the orals from Loper, yesterday, why not give it a listen and tell me what you think?
https://www.supremecourt.gov/oral_arguments/audio/2023/22-1219
https://www.supremecourt.gov/oral_arguments/audio/2023/22-451
https://www.costar.com/article/2041487477/fannie-mae-ditches-downtown-dc-headquarters-years-before-lease-expires
"The national mortgage giant known as Fannie Mae has put its 713,500-square-foot space in the city's Midtown Center complex on market more than half a decade before its lease at 1100 15th St. NW was set to expire in June 2029, according to marketing materials and CoStar data.
It's the latest in a string of space reductions, terminations, sublease listings and closings among D.C. employers trying to adapt to the fallout of COVID-19 pandemic-related shifts such as remote and flexible-work policies. The move also reflects the struggles some major cities are having with higher office vacancies.
The listing includes Fannie Mae's entire footprint across Midtown Center, where it occupies about 306,000 square feet in the east tower and roughly 414,000 square feet in the western one. The federal government-sponsored company signed on for the space in 2015 in a $770 million agreement that, at the time, was one of the largest office deals in D.C.'s history."
The lease has multiple 5 year options on it, Fannie Mae decided not to renew one of them and so they will stay in their HQ building until 2029.
I think it's very positive that a group of people are buying BOTH common and JPS, presumably in anticipation of concrete steps forward to release.
We'll see what happens.
The FHFA has 100% control of Fannie Mae and Freddie Mac during the never ending conservatorships.
FHFA attends meetings with executives and the major decision makers at both corporations. The FHFA can overrule virtually ANY business decisions at either corporation.
Quite frankly, it's government overreach and has no end date.
Taking the GSES out of the conservatorships will enhance their responsiveness to the needs of the Primary Mortgage Market and add stability and predictability.
https://www.housingwire.com/articles/mbs-market-imbalance-fueling-higher-rates/
"Fannie Mae and Freddie Mac are in the spotlight again over the role some housing-industry experts say they could play in reducing mortgage rates if they resumed a more active investor role in the mortgage-backed securities (MBS) market.
That’s a role those government-sponsored enterprises (GSEs) have not played since prior to entering into conservatorship in the wake of the global financial crisis of 2007-2008.
The agency overseeing those government-sponsored enterprises (GSEs) — the Federal Housing Finance Agency (FHFA) — is remaining mum on the subject of the GSEs expanding their portfolios of retained MBS via expanded bond purchases, referring to it as speculation only.
Still, some industry observers say if the goal is to make housing more affordable, then the GSEs could achieve that objective by acting as an active investor in helping to absorb existing excess MBS supply in the secondary market.
“If the market got the sense that [the GSEs] were back in that role, even on a limited basis compared to where they once were … and they could step in and stabilize things, that would have an impact [on rates] for sure,” said Richard Koss, chief research officer at mortgage-data-analytics firm Recursion. “How likely that is, though, I don’t even know how to handicap.”
That excess supply, a demand imbalance estimated currently at some $25 billion monthly, has surfaced in the wake of the Federal Reserve launching its tapering program, known as quantitative tightening (QT), an effort to wind down some of its combined multi-trillion dollar portfolio of Treasuries and MBS.
QT was phased in starting in mid-2022 — shortly after the Fed began escalating its benchmark interest rate. As of early January 2024, agency MBS on the Federal Reserve’s balance sheet totaled $2.4 trillion, down from $2.7 trillion in June 2022.
Historically, prior to the global financial crisis and Fannie and Freddie being placed into conservatorship, the GSEs added “a bit of a cushion” in the market, according to Community Home Lenders of America (CHLA) President Taylor Stork, who also is chief operating officer at Developer’s Mortgage Co.
“They bought mortgage-backed securities when demand fell, causing that demand to come back in line, and then they would slow down when demand was high,” Stork said. “That helped to keep spreads pretty consistent over the years and to make sure that this business [the housing industry] isn’t quite so topsy-turvy every time there is an economic change.”
The Fed’s monetary policy moves over the past two years — tapering its purchase of MBS and Treasuries along with increasing its benchmark interest rate from near 0 to 5.25%-5.5% range — have combined to help drive up mortgage rates nearly 4 percentage points since January 2022 and also expanded the supply of MBS relative to demand.
Adding to rate pressure and MBS supply last year was the financial woes afflicting banks — another major source of MBS investment.
“You had the bank failures last year, including Silicon Valley Bank, Signature Bank and First Republic,” said Mortgage Bankers Association (MBA) Senior Vice President and Chief Economist Mike Fratantoni. “As a result of particularly Silicon Valley, the FDIC [Federal Deposit Insurance Corp.] wound up with almost $100 billion in MBS, which they were able to sell very quickly at not much of a discount, so that’s done.”
If there is more MBS supply than demand, then MBS yields are enhanced for investors, resulting in lower bond prices, given the inverse relationship between the two. In a market in which supply exceeds demand, investors have the advantage in pricing.
Higher yields commanded by investors in the MBS market, in turn, push mortgage rates higher in the primary market. That’s because most loan originators rely on securitizations for liquidity and are forced to raise mortgage rates as MBS yields for investors increase — if they want to remain marginally profitable.
That pricing dynamic also can fuel wider spreads — as measured, for example, by the difference between rates for 30-year fixed mortgages versus 10-year Treasuries.
“We’re basically saying that getting rates down is the most important thing for homeownership affordability, and so it certainly would seem to be in their [the GSE’s] mission [to buy and retain MBS],” Olson said. “That is the reason for our call for action on this and why it’s important.
“… There’s just so many areas where historically excessive rates are causing an imbalance within the system.”
Rate volatility
One component of the rate spread today that is helping to push it well above the historically normal range of 1.7 to 1.8 points, according to Ben Hunsaker, portfolio manager focused on securitized credit for Beach Point Capital Management, is the risk premium demanded by investors to account for the rate volatility sparked in the main by the Fed.
The spread between mortgage rates and 10-year treasuries rose above 3 points in October of last year and has recently been hovering in the 2.75-point range — in the wake of the Fed’s December meeting in which it signaled it was likely to pivot this year toward rate decreases.
“One of the tricks about mortgages is rate volatility translates directly into prepayment uncertainty,” the MBA’s Fratantoni said. “So, higher [mortgage] prepayment risk directly widens that spread because MBS are sort of uniquely susceptible to that prepayment risk.”
The takeaway: If rate volatility subsides as the Fed makes even clearer in the months ahead where it’s headed on future rate and QT policy, then the risk premium MBS investors require is expected to shrink. That, in turn, should help to contract what has been an abnormally high spread and create some long-overdue persistent downward pressure on mortgage rates.
Hunsaker said a key spread to monitor to better isolate that risk premium is the option-adjusted spread, or OAS. He said the OAS has been hovering in the range of 30 or 40 basis points. A higher OAS implies more return is being demanded by investors for perceived risk.
“I don’t think this [current OAS] range is abnormal,” Hunsaker said. “I think supply and demand is more or less settled out at fair value ranges [in a post-Covid world where the Fed is not the major buyer in the MBS market].
“…As we get through March, April, May, June and we get through the election, you would expect that there’s less uncertainty, or at least a narrower distribution of potential interest rate paths, and if that happens, the option premium [measured by the OAS] that you have to get paid, the incremental yield you have to get paid [for the risk as an investor], should shrink, and so all else equal, that should mean lower borrowing costs….”
Hunsaker added: “How you could get the… option adjusted spread into a different range, then, would require interest rate volatility to come down further [and that’s] independent of supply and demand [factors].”
If the MBS market remains the domain of private-sector investors (i.e., money market funds, overseas buyers, real estate investment trusts, banks and other private players), it is expected to result in a new normal in which rates and spreads settle in a tad higher than in the recent past — when the Fed and/or GSEs also were active investors in MBS.
“Our forecast is for spreads to narrow over the next couple of years, but we’re going to be north of 200 [comparing 10-year Treasuries with 30-year mortgage rates] even once investors adjust, so it’s not going to be the 170 or 180 [basis point spreads] that we always used to think were normal,” Fratantoni said. “That’s just reflecting the new normal [in which neither the Fed nor the GSEs have a finger on the MBS scale as major buyers].”
Fratantoni adds that longer-term, he expects the 10-year Treasury yield to settle at around 3.5%. That implies a new normal for the market where mortgage rates settle in at somewhere around 5.5% longer term, assuming a 200 basis-point spread over 10-year Treasuries.
If the Fed were to end its current round of tapering, however, and reinvest all the proceeds from asset rolloffs into Treasuries, or resume asset purchases, for example, and the GSEs also became more active investors in MBS beyond their existing caps, then spreads and rates could be reduced even further, market experts suggest.
“In terms of the level of mortgage rates, if Treasuries drop [their yields], mortgage rates will drop, too, as long as that spread doesn’t widen,” Fratantoni said.
He added in a webinar this week sponsored by Snapdocs that an end to the Fed’s QT [asset rolloffs] this year is likely.
“It should help to bring spreads in,” Fratantoni said, “but it all depends on exactly how they do it.
“I think at least it’s going to bring rates down,” he added.
Recently released minutes from the Fed’s Federal Open Market Committee’s meeting in December indicate that some participants want to start discussing “the technical factors” that would guide a Fed decision to slow the pace of asset runoff “in order to provide appropriate advance notice to the public.”
In addition, Dallas Federal Reserve Bank President Lorie Logan suggested recently that the Fed should begin to slowly wind down its bond tapering program and ultimately end its QT balance-sheet reduction program.
By slowing or ending asset runoff, industry observers say the Fed essentially decreases the net supply of bonds in the market — which theoretically should help to narrow spreads and also help to put downward pressure on mortgage rates.
“Given the historically high spreads, this is a good time to move in that direction,” CHLA Executive Director Scott Olson said.
GSE role
If the GSEs stepped back in to purchase MBS only up to their current $225 billion caps under the FHFA’s Preferred Stock Purchase Agreements with the U.S. Treasury Department, however, the impact long-term “would be so modest, so incremental, it’s probably not worth muddying the waters with respect to where we’d like the GSE business models to go going forward,” Fratantoni said.
The Fed may well slow or even end its existing tapering program this year, but Fratantoni said he doesn’t see the Fed, or the GSEs for that matter, stepping back into the MBS market as buyers/investors in a major way. Under the Fed’s current QT program, it is allowing up to $60 billion in Treasuries and $35 billion in MBS to roll off its balance sheet monthly.
“…I think listening to what Fed officials say, it’s unlikely that they would start buying MBS again, and listening to what FHFA says, it’s unlikely that that would be a policy choice for them, either.
“But if we we’re to gauge what the relative impact would be, there’d probably be a larger impact from the Fed starting [purchases] again than from the GSEs starting again, although it’s not likely either is going to happen.”
Dave Stevens, CEO at Mountain Lake Consulting and former president and CEO of the MBA, stressed, however, even if the GSEs — Fannie and Freddie — used up the remaining combined $266 billion MBS purchase capacity (estimate as of Nov. 30, 2023) under their separate $225 billion retained-mortgage portfolio caps, “it would suck up [the estimated $25 billion monthly MBS imbalance in the market] for at least six months.” Short-term, he added, that would help to drive down mortgage rates and make housing more affordable — during an election year.
“The Federal Housing Finance Agency (FHFA) will not engage in speculation regarding the referenced ideas and theories,” the FHFA media team stated in response to a HousingWire query about the possibility of the GSEs expanding their MBS investments.
Stevens added that FHFA Director Sandra Thompson “is well aware of this issue.”
“I’ve heard about meetings she’s had with others where she said that [the GSEs returning to the MBS market] has no chance at all being considered, but you know, things change,” added Stevens, who served as a key housing-policy adviser to former President Barack Obama. “She knows that if [President] Joe Biden doesn’t get reelected, her jobs gone. It’s just an interesting time.”
Reporter’s Note: David Stevens, who dedicated his life to the housing industry, serving in both public- and private-sector leadership roles, passed away this week, shortly after HousingWire interviewed him for this story. Stevens, 66, was diagnosed in 2016 with stage 4 prostrate cancer. “The real estate finance community mourns the loss today of one of its great leaders and fiercest advocates,” said MBA President and CEO Bob Broeksmit in a statement issued Wednesday, Jan. 17. You can read more here.
People are buying both Common and JPS, Excellent....
"Fannie’s CAS program has never been economic, but it’s now a charade. The company seems to have set an average initial pool cost it will accept (although the cost of individual CAS issues can vary considerably), and it keeps as much of a mortgage pool’s credit risk as it has to in order to sell CAS at that price, with the percentage of transferred credit losses being the variable. There is not even a pretense of these issues being effective or efficient.
This, of course, is not Fannie’s fault; it is another stupefying consequence of the company’s conservatorship under FHFA. The former director of FHFA, Mark Calabria, has admitted that CAS are a “looting” of Fannie, yet knowing this, the current director, Sandra Thompson, continues to use both carrots (capital credits) and sticks (CRT issuance goals that reduce executive compensation if not met) to encourage CAS and STACR issuance, even as the costs of these deals soar and their benefits dwindle, making the looting even greater.
The only explanation for FHFA’s passivity in the face of the CAS charade is the same as for its passivity in addressing the inconsistency between the results of its recent Dodd-Frank stress tests and its regulatory requirement that Fannie and Freddie hold 3.0 percent capital before they can be released from conservatorship: the current FHFA leadership will not make any significant change to the status quo for the companies—no matter how obvious, urgent or desirable—unless or until it is directed to do so by some other institution or individual, whether Congress, Treasury, or a very senior economic or policy official in the administration. In the meantime, the losses from their CAS and STACR programs will slow the growth of Fannie and Freddie’s retained earnings, while the reduced capital credit given to their much less efficient new CRT issues will be a headwind against filling their capital gaps, by causing their risk-weighted assets to rise at a faster rate than their total assets."
Is the Director of the FHFA and their over 1,172 Employees, pulling in an average $178,000/year in Salary, unaware of this? "...in May of 2021 FHFA itself released a report titled Performance of Fannie Mae’s and Freddie Mac’s Credit Risk Transfer that not only agreed with my observations and conclusions but also offered data in support of them. The report first gave the economics of the companies’ CRT programs to date: “As of February 2021, the Enterprises had paid approximately $15.0 billion in interest and premiums to CRT investors and counterparties and the Enterprises had received approximately $0.05 billion via investor write-downs and counterparty reimbursements.” (That’s $1 of benefits for every $300 in premiums.) But it was the simulations of future CRT performance done by FHFA—using the residential mortgage model of a consulting firm, Milliman—that were the real eye-openers. FHFA ran both a “Baseline” and a “2007 Replay” scenario. In the Baseline scenario, Fannie and Freddie’s lifetime CRT costs were $33.60 billion and their “ultimate benefits” were $1.06 billion ($1 of benefits for every $32 in premiums), while in the 2007 Replay the lifetime CRT costs were $30.72 billion and the ultimate benefits were $10.10 billion ($1 in benefits for every $3 in premiums)."
The CRT program is a $1.5B/yr (Fannie Mae only) give away to the Financial Industry. This $1.5B/yr. should be going to rebuilding Capital.
"Second, Fannie revealed that through September 30, 2023, the annual cost of its CRT programs had reached an all-time high of nearly $1.5 billion, while the lifetime expected value of its “freestanding credit enhancement receivables” had fallen to just $265 million, compared with $565 million at the end of 2022. And finally, despite a $4.7 billion increase in net worth in the third quarter, Fannie only was able to trim its capital deficit by $1.8 billion, because even with its total assets rising just 16 basis points its risk-weighted assets rose by 2.3 percent, likely caused by diminished capital credit given to its CRTs, due to the company’s taking more risk on recent issuances."
I don't think we would know as much as we do today about the internal executive branch dialogues surrounding the Net Worth Sweep and the Conservatorships without the lawsuits.
During the Lamberth trial it was crystal clear to me watching in the audience, JUST HOW MUCH INCRIMINATING EVIDENCE THE FEDERAL GOVERNMENT IS HIDING THROUGH EXECUTIVE PRIVILEGE AND NATIONAL SECURITY EXEMPTIONS TO DISCOVERY.
It's really an uncomfortable position for the federal government to be in, but they practically own the courts and will continue their recalcitrant ways and hiding the ball from the American People and confiscating our property as long as they can.
The Administrative State doesn't "stay up at night worrying about the shareholders."
George Will today: "Chevron is a perpetual thumb on the scale, favoring today's swollen executive. And favoring the most powerful litigant, the federal government, when it is challenged by citizens, whom Chevron deference leaves uncertain about their legal rights and duties.
Eliminating Chevron would not, as excitable progressives claim, cripple the government's power to do progressives' favorite thing: regulate. Congress's regulatory power would be undiminished. Congress would, however, have to be more involved in writing, and therefore accountable for, regulations. By erasing Chevron, the court would force Congress out of its lassitude, whereby it allows agencies vast discretion to interpret vague statutes that are tissues of generalities.
"The interpretation of the laws," wrote Alexander Hamilton in Federalist 78, "is the proper and peculiar province of the courts." Ending Chevron deference, which has transferred power from Article III courts to the Article II executive, would restore a judicial responsibility and would require Congress to exercise its atrophied ability to legislate unambiguously.
Furthermore, erasing Chevron would be congruent with the court's recent, and excellent, formulation of the "major questions" doctrine, which is: If an administrative agency makes a decision with substantial economic and/or social impacts, and the decision is not based on explicit statutory authority, then the agency bears the burden of proving that its action reflects Congress's intent."
What do you think about his point in his latest book about the Progressives love of the Administrative State, true?
"Modern administrative law has been the subject of intense and protracted intellectual debate, from legal theorists to such high-profile judicial confirmations as those conducted for Supreme Court justices Neil Gorsuch and Brett Kavanaugh. On one side, defenders of limited government argue that the growth of the administrative state threatens traditional ideas of private property, freedom of contract, and limited government. On the other, modern progressives champion a large administrative state that delegates to key agencies in the executive branch, rather than to Congress, broad discretion to implement major social and institutional reforms. In this book, Richard A. Epstein, one of America’s most prominent legal scholars, provides a withering critique of how the administrative state has gone astray since the New Deal.
https://rowman.com/ISBN/9781538141496/The-Dubious-Morality-of-Modern-Administrative-Law
First examining how federal administrative powers worked well in an earlier age of limited government, dealing with such issues as land grants, patents, tariffs and government employment contracts, Epstein then explains how modern broad mandates for delegated authority are inconsistent with the rule of law and lead to systematic abuse in a wide range of subject matter areas: environmental law; labor law; food and drug law; communications laws, securities law and more. He offers detailed critiques of major administrative laws that are now under reconsideration in the Supreme Court and provides recommendations as to how the Supreme Court can roll back the administrative state in a coherent way."
Clarence, you may enjoy this if you are planning on keeping up with Loper (orals this Wednesday at 10am).
How many D's asked Sandra the last time she was testifying in the Senate Banking Committee and then the House Financial Services Committee about her plans to exit the conservatorships?
I'm writing a number on a piece of paper.....0
What do you think several members of the other side asked her about her plans to end the conservatorships? It was a couple.
What did Sandra L Thompson say in response? "We're waiting for Congress to decide the future of the GSES."
In Collins, the court stated that HERA under its grant of broad authority from Congress (limited to FHFA's determination of what is “in the best interests of the regulated entity or the Agency.” §4617(b)(2)(J)(ii) (emphasis added).") allowed the agency to implement the August 17, 2012, Net Worth Sweep.
As I recall the NWS was challenged as violating the APA because it was arbitrary and capricious.
The gravamen of the Collins case was the rewriting of the law (here HERA) by the SCOTUS to replace an INDEPENDENT FHFA Director with one under the direct control of the POTUS by writing in 'fireable at will by the POTUS'.
But SCOTUS is NOT going to explore other legal reasons to give the Plaintiff's the relief they ask for. If you don't bring up a reason in your Pleadings (like the NWS violates the MQD), the Justices won't even consider the issue.
Here, the Justice's said that under the APA Challenge the NWS was NOT arbitrary and capricious under HERA.
Whether or not the NWS violates the MQD would have to be another hearing for another day.
https://www.talksonlaw.com/briefs/major-questions-doctrine
"Hidden Force Helps Home Buyers --- Spread between 30-year mortgage and Treasury benchmark keeps rate in check
A key factor that pushed up mortgage rates over the past two years is now starting to pull them down.
Average 30-year fixed mortgage rates have been higher than usual relative to the benchmark Treasury yields they typically track. But that extra differential, or spread, has been shrinking for eight straight weeks. It is now at its lowest since March.
The 30-year mortgage rate has fallen by more than a percentage point recently to 6.62%, according to data released Thursday by mortgage giant Freddie Mac. The shrinking spread between that and the 10-year Treasury yield amounts to roughly one-sixth of the decline. (Treasury yields have also fallen sharply.)
The spread is still far larger than its historical average. But its downward trend is giving mortgage rates an extra push lower. It is a boon to would-be home buyers who have been sidelined by high borrowing costs, as well as to hard-up mortgage lenders and real-estate agents.
"Rates have come down since October and everyone in the industry is excited about that," said Adam Haller, a mortgage-loan officer based in Raleigh, N.C.
The reason the spread exists in the first place has to do with the machinery behind the home-lending industry."
-WSJ 01/05/24
Think about the bipolar nature of the Conservatorships and the 180° turns of Public Policy:
2008: "The Conservatorships will be temporary and it's designed to right the ship."
2012: "We're going to "wind down" the GSES and replace them with something different, bringing their Capital levels close to zero so Congress fixes this "
2019: "We're going to overly rebuild Capital to 4.0%-4.5%, and someday they will likely be released from Government Control."
2024: "We're waiting for Congress to decide the future of the GSES."
The "public interest" is whatever a bunch of UNELECTED bureaucrats in DC decides it is and if it takes away the retirement savings of hard working American Families these bureaucrats are unaccountable and could care less.
HeeeeHeeee! Actually I would like that IF the government actually paid their federal government employees salaries and administrative costs at the FHFA, instead of forcing the capital depleted GSES to do it.
As an 'evil capitalist', my businesses like it when their customers have plenty of discretionary income. !
Both
You need to watch a recent Senate Banking Committee hearing or House Services Financial Committee meeting where Sandra is present and you will see the 'yuge' difference in which way each side of the aisle views the CONservatorships.
Don't you think that the federal government should pay for employees they hire to run their federal government agencies?
Do you think or speculate that a minor or major motivation for the August 17, 2012, Net Worth Sweep was the anticipation that it would bring in $120B+ to the US Treasury coffers and that Mitch McConnell and the R's were dead set on not funding it?
When the Obama Presidential Library opens, at the ObamaCare Exhibit, ask the Curator if you can see the intra governmental communications between FHFA and UST and the White House from December 2011-December 2012.
Didn't SM state this in his interview with Maria at the outset of the DJT term?
The whole Nationalization/Net Worth Sweep is unbelievable, did HERA envision the FHFA in conjunction with the UST to do a defacto Nationalization of the GSES during Conservatorship? Collins said it was okay, but Lamberth's trial showed it was a breach of contract between the Shareholders and their companies.
I wonder if it violates the US Constitution under the MQD, as major questions of national economic significance shouldn't be decided by federal agency clowns like Jim Parrot, Mary Miller and Stegman, but by our elected representatives in the US Congress.
Under an MQD Cause of Action in the federal courts, has the Statute of Limitations tolled on the August 17, 2012, Net Worth Swipe or does it survive quarterly with the Sweeps of profits and/or Liquidation Preference?
Jim Parrot, Mary J Miller, and Michael Stegman were employed by the Urban Institute (GREAT JOB ON THAT AUGUST 17, 2012, NET WORTH SWEEP/NATIONALIZATION IDEA!):
"The Urban Institute has been referred to as "nonpartisan",[3][4] "liberal",[5] and "left-leaning".[6] A 2005 study of media bias in The Quarterly Journal of Economics ranked UI as the 11th most liberal of the 50 most-cited think tanks and policy groups, placing it between the NAACP and the People for Ethical Treatment of Animals.[21] According to a study by U.S. News & World Report most political campaign donations by Urban Institute employees go to Democratic politicians. Between 2003 and 2010, Urban Institute employees' made $79,529 in political contributions, none of which went to the Republican Party.[22]"
https://en.m.wikipedia.org/wiki/Urban_Institute#:~:text=The%20Urban%20Institute%20has%20been%20referred%20to%20as%20%22nonpartisan%22%2C,for%20Ethical%20Treatment%20of%20Animals.
Sorry JP, Wells, and BofA, but Fannie and Freddie had Net Income of $120B in 2013:
"JPMorgan, Bank of America, Wells Fargo and Citigroup together earned $104 billion in 2023, up 11% from the year earlier."
-WSJ
HERA has no Caps on the amount of FHFA employees nor their annual budget, so long as it's 'reasonable', they tell their regulated entities how much to fund them every year and it decreases the amount of Capital available to stand behind the $7.6T in MBS and American Family Home Mortgages outstanding.
I'm pretty sure that the FHFA Director decides what is 'reasonable'.
The CFPB has a similar arrangement under Dodd Frank, but it's capped at 12% of the Federal Reserve budget.
"The $124 million spent to date for the 303,000 square foot office building is $409 per square foot, more than Trump World Tower, which cost $334 per square foot or Las Vegas’ Bellagio Hotel and Casino, priced at $330 per square foot."
https://dailycaller.com/2018/02/07/cfpb-headquarters-tour/
When I worked at Fannie there were a lot of employees I worked with who were relatives or related to politicians. Hey, it's not their fault their family member went into politics !
It was an enjoyable place to work in and there were some very intelligent interesting people.
Good times, good times!
FHFA employees are VESTED in the Status Quo. Don't you think it's in their 'best interests' to continue the CONservatorships so the FHFA is in TOTAL CONTROL of their destiny?