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True, Elizabeth Warren (much to the chagrin of a Dr. Mark Calabria, Senator Shelby's right hand man) also fought to keep the twins going in the onslaught of mostly R (with some D's, including Mark Warner) lawmakers calls to drive a stake through the hearts of the twins.
BUT, (1) take a listen to Rep. Foster from Illinois (he's like the ranking minority on the House Financial Services Committee) and his determination to keep the twins necks under the boots of the federal government and any gains to their beleaguered shareholders.
(2). CLEARLY Obama's Treasury pressed Ed Demarco hard on mortgage loan forgiveness to be paid for with funds extracted from the balance sheets of the GSES. To his (and Watt's credit) he refused. The NWS, which keeps them in perpetual CONservatorships was invented by the Obama Administration.
(3). The last time Sandra Thompson testified on the hill, which side of the aisle kept asking her about ending conservatorships? Which side was mostly silent or indifferent?
(4) Look at the Fannie Mae 3Q23 Financial Supplement and witness the 50% rise of loans with FICOS below 680, who do you think was behind that? And their JUST GETTING STARTED!
Fannie Mae and Freddie Mac under the federal government's unclenching grip of the over 15 year CONservatorships are just extensions of the federal government subject to the whims and desires of the Executive Branch of government.
If Sandra remains the FHFA Conservator for the next 5 years, Fannie Mae and Freddie Mac will get more deeply involved with funding initiatives at the expense of the GSES balance sheets to fund benefits for their targeted political voter base.
The 30 year Fixed Rate Mortgage (prepayable at any time) largely entails credit and interest rate risk for the lender.
Luckily for the lenders, Fannie Mae and Freddie Mac (and Ginnie Mae) are there to alleviate both those risks with the MBS program.
Even today the MBA, NAR, and the NAHB would still prefer that Fannie Mae and Freddie Mac have an Explicit Federal Government Guarantee and it seems that they would finally prefer not to have the GSES 100% controlled by the Executive Branch of the government given the 180 degree turns in policy every time a new administration is in power.
Did you know that 4 out of 5 of the largest mortgage lenders are nonbanks, NOT subject to bank regulator scrutiny?
Todays WP:
"The new players
As banks have offered fewer home loans, companies such as Quicken Loans and Guaranteed Rate - "non-bank lenders" that are not subject to the same strict oversight facing banks - have stepped in to fill some of the gaps. In 2014, four of the top five mortgage lenders were banks; in 2022, only Wells Fargo remained in the group, according to the mortgage data analysis firm Recursion.
But this new crop of lenders is at best an imperfect substitute for banks, housing finance experts say.
"A borrower in a high-cost area with limited cash for a down payment would probably still find it difficult to secure credit from a non-bank lender," said Michael Reher, an assistant professor at the University of California at San Diego who has studied the phenomenon. He also experienced it firsthand when he needed to finance 90 percent of his home purchase and could land a mortgage only from a local bank.
The reason, Reher said, is that banks have greater leeway to keep mortgages with smaller down payments on their balance sheets, since they have a generally stable cushion of funding from their deposits. By contrast, the newer mortgage companies aren't banks and don't have deposits, so they need to sell off a greater portion of the loans they make to Fannie Mae and Freddie Mac, the government-backed mortgage giants that help pump liquidity into the housing market. In turn, Fannie and Freddie limit the sorts of loans they will buy to reduce their exposure to risk.
The proposed capital rule would not apply directly to non-bank lenders. That disparate treatment could end up costing the neediest borrowers, some housing finance experts say. Minority home buyers tend to pay more than others in closing costs when buying a home, an expense that can cost up to 1 percent of their loan, recent research has shown. And the fewer lenders available, the more expensive these costs will be on account of the diminished competition, Reher said.
For Caldwell, every additional expense weighs against buying a house, a move she already needs to stretch to afford. So the Cincinnati resident has padded her savings for a down payment to $3,000, paid off credit cards to improve her credit score, expanded her search area - and adjusted her expectations.
Caldwell said she originally told her Realtor she wanted to find a three-bedroom house and could spend $1,500 a month on a mortgage. He countered she had to find a way to pay $1,800, and that number has since climbed.
Then again, if she extends the lease on her two-bedroom apartment - where her 11-year-old son is sharing a bedroom with his 22-year-old brother - her rent will increase by $70 a month, to nearly $1,400.
"To hear costs just keep going up is really disheartening," she said. "Where do they want people to live?"
Affordable housing groups teaming up with the 'evil mortgage banksters' to oppose higher Capital Ratios for the TBTF banks? Sherrod is NOT pleased!
Todays WP: "Borrowing costs for mortgages have more than doubled over the past two years as the Federal Reserve has battled inflation by hiking interest rates, which hit a 22-year high earlier this year. That has compelled homeowners to hold off from selling and instead stay put until rates cool - choking off supply and locking in prices that rocketed during a pandemic-fueled buying spree.
Out of reach
Higher financing costs already have put homeownership out of reach for most of these borrowers who qualified just two years ago: Before the Fed started raising interest rates, 3.4 million Black Americans were deemed "mortgage ready" based on their credit history and income, according to research by Freddie Mac. Thanks to the higher cost of financing, that number stands at less than 1 million now, the National Fair Housing Alliance found in a follow-up analysis based on traditional underwriting standards.
Meanwhile, Black home loan applicants in the 50 largest U.S. metropolitan markets are 1.6 times more likely to be denied than the overall population, a recent study by LendingTree found.
"That just shows you what happens with this wealth divide," National Fair Housing Alliance CEO Lisa Rice said. "When you don't have family members that you can lean on because they weren't able to build wealth to help with a down payment, these higher interest rates have a devastating impact."
These concerns prompted regulators and industry executives a few years ago to make home-buying easier for underserved borrowers. After George Floyd's murder ignited nationwide protests in the summer of 2020, corporations across the economy committed to projects aimed at battling systemic racism. Mortgage lenders pledged to work with financial regulators to provide credit to more minority borrowers.
Yet only a handful of companies followed through. While a number of mortgage lenders have launched pilot programs over the past year that collectively pledge to initiate tens of thousands of home loans, those efforts will barely make a dent in the racial homeownership gap at their current scale: Closing it would require 4.5 million more Black Americans buying homes, according to the Urban Institute.
More broadly, big financial institutions have retreated from lending to economically disadvantaged mortgage borrowers. Three of the largest banks for mortgage lending - Bank of America, JPMorgan and Wells Fargo - cut the share of home loans they issued to lower-income borrowers by more than half in the six years following the Great Recession, a 2017 Federal Reserve study found.
The new rules put forth by banking regulators could drive banks to accelerate that trend, critics say. The proposal, unveiled in July by the Federal Reserve and two other agencies, would not only harmonize U.S. regulations with international rules on capital requirements but also would go beyond foreign standards regarding extra capital for larger banks. Advocates of the change say it's an attempt to ensure the banking system remains sound in the event of another crisis like the one that shook the industry this spring.
Odd bedfellows
The banking industry has launched an unusually aggressive lobbying blitz against the proposal with help from some unlikely allies: Traditionally progressive groups focused on promoting homeownership are also rallying against it.
The Financial Services Forum, representing eight of the biggest U.S. banks, said it is spending a seven-figure sum on television advertising blasting the proposal as an added fee on Americans already burdened by inflation. Another group, called Center Forward, is airing ads with a similar message on national broadcasts, including during National Football League games. And big bank CEOs raised the issue in testimony before the Senate Banking Committee on Dec. 6.
Meanwhile, the NAACP, the National Urban League and the Urban Institute have lodged their own critiques. An Urban Institute study of the proposal's impact on lower-income minorities concluded it is "particularly perverse in the face of efforts by the bank regulators and other government agencies to encourage banks to increase their lending to precisely these borrowers and communities."
Not all progressive groups oppose the proposed rule. Alexa Philo, a former Federal Reserve Bank examiner who now works as a senior policy analyst at Americans for Financial Reform, said the proposal has sparked heated opposition from the industry because it could dent executives' pay.
"When banks have to raise more equity capital, it can depress the share prices that are linked to banker bonuses," she said in an email. "That's why the bank lobby fights greater capital requirements with everything it has. The rest, particularly about alleged harms to economic growth, is largely nonsense."
Sen. Sherrod Brown (D-Ohio), who chairs the Senate Banking Committee, struck an incredulous tone over the industry's lobbying push as the bank CEOs testified before the panel last week.
"Wall Street banks are actually saying that cracking down on them will, quote, 'hurt working families.' Really?" he asked. "You're going to claim that?"
That's right, and if 8 Jurors can unanimously see what's going on with the Government's unclean hands here, other Juries might also in other filed Complaints, so long as the Shareholders Cause of Action can survive a slew of Governmental Pretrial Motions to deny us our Day in Court.
It's pretty obvious that the Government has misbehaved here, continues to hide the real facts from the American People, and refuses to accept responsibility for their bad actions.
The 30 year Fixed Rate Mortgage's interest rate is set by the yield on the 10 year Treasury plus a spread above that (imbedded in that spread is a Guarantee Fee of about 60 basis points), this is a good quick article from 2 good looking chicks to explain it better than me (ahhh, beauty AND brains, what's not to like?):
https://www.brookings.edu/articles/high-mortgage-rates-are-probably-here-for-a-while/#:~:text=indicate%20recession%20periods.-,The%20spread%20between%2030%2Dyear%20fixed%20mortgage%20rates%20and%2010,2023%2C%20and%20has%20remained%20high.
"Mortgage rates reflect the cost of using a mortgage to buy a home or tap home equity and thus affect the price of real estate and housing wealth. To the degree that the Federal Reserve’s tightening of monetary policy pushes up mortgage rates, this channel is an important way in which tighter monetary policy slows the economy and dampens inflation. As shown in figure 1, there has been a long downward trend in mortgage rates (dark green) over the past 40 years in line with the rate of 10-year Treasury bonds (light green). However, the spread between mortgage rates and Treasury bond rates fluctuates for various reasons, including changes in credit conditions and interest rate uncertainty."
I'm all for anything that would end this 15+ year saga in a positive manner for Shareholders.
Given the importance of Fannie Mae and Freddie Mac to the smooth functioning of the US Housing Finance Market and just like the federal government regulators for the TBTF banks, right now, the federal regulations believe "more Capital is better".
With signatures from Sandra Thompson and Janet Yellen, Fannie Mae and Freddie Mac's Capital Ratios could be doubled, removed from conservatorship, and given the green light to build their Portfolios and buy MBS.
The Federal Reserve CAN CONTROL US Short term interest rates, no question about it. Historically and today the Federal Reserve believes that US long term interest rates are controlled by Investor Expectations about the future rate of Inflation, which the Federal Reserve tries to keep within a range, but cannot directly control.
If it is true, that massive purchases/sales of MBS lower/increase the 10 year Treasury and vice versa, if you were the Federal Reserve, would you sign off on a deal that could possibly interfere with your Monetary Policy?
The Court of Federal Claims (OFC) case was related to an Unconstitutional 5th Amendment Takings Clause Case that made it's way up the Appellate court ladder where the Judges ruled that because the Shareholders were missing the right to exclude, an essential element for a Takings Clause Claim, the Shareholders could not continue their case. The US Supreme Court denied Shareholders Petition for a Writ of Certerrori.
So that particular Takings Clause Claim was denied.
In the DC Federal Circuit Court Case with J. Lamberth, a unanimous Jury found that the FHFA, when it stepped into the shoes of Fannie Mae and Freddie Mac as their Conservator, violated the implicit contracts that all corporations have with their Shareholders, to engage in good faith and fair dealing with them.
Pretty sure we're looking at an appeal on that one.
HeeeeHeeee! Just trying to understand his point that's all. Typically our fulcrum security holder's arguments fall in one of 3 themes: (1) instant recap (2) the dilution solution and/or (3) administrative bankruptcy.
Here, he was advocating for a theme from the David Stevens piece in Housing Wire that Fannie Mae and Freddie Mac should increase liquidity to reduce the historically elevated spreads between the 10 year Treasury and the 30 year Fixed Rate Mortgage.
The win/win scenario is Fannie Mae and Freddie Mac would be allowed to build their Portfolios again by buying MBS AND this would help create demand for MBS as the Fed is running off the MBS from its massive book of MBS and no longer buying. This should help lower or neutralize the historically high spread on the 30 yr FRM above 10Y Treasury's.
His idea is that the government is working on this behind the scenes and it will be the catalyst for instant release.
But one potential obstacle could be that the Federal Reserve (an allegedly non political institution) is currently insulated from Executive Branch Control, whereas post Collins, the FHFA is not. The Federal Reserve may or may not green light such an idea, but in theory it could object to it on the basis that a scenario could develop where the POTUS wants to juice the US Economy by having FHFA direct the GSES to put the pedal to the metal and buy tons of MBS 8-12 months prior to the Elections and potentially interfering with US Monetary Policy.
https://www.frbsf.org/education/publications/doctor-econ/2003/september/private-public-corporation/#:~:text=The%20Federal%20Reserve%20(the%20Fed,in%20fulfilling%20its%20varying%20roles.
Allowing Fannie Mae and Freddie Mac to increase their Portfolios would add much needed demand for MBS as the Fed and banks are allowing their massive MBS holdings to run off their books.
It would be a win/win situation, American Families would see reduced mortgage rates and Fannie Mae and Freddie Mac after properly hedging for duration risk would increase their Net Interest Margin Income.
However, the Federal Reserve would have less control when engaging in Quantitative Tightening if Fannie Mae and Freddie Mac match or exceed monthly or quarterly purchases of MBS when the Fed is selling MBS.
"In addition, other factors, such as reduced demand for financial instruments backed by mortgages, have also increased the spread between mortgage rates and Treasury bonds and are likely to remain high."
"But, since early 2022, mortgage rates have risen by a surprisingly large amount relative to the 10-year Treasury rates, putting more restraint on borrowing conditions and the housing market."
"Recently, the difference between 30-year fixed mortgage rates and 10-year Treasury rates has widened to an unusual degree. Since October 2022, the spread has hovered near the levels last seen during the housing crisis."
"This factor, referred to as the option-adjusted spread (OAS; “other” in figure 3) is likely elevated due to reduced demand in the MBS market. In recent years, the Fed has reduced its holdings of MBS. In addition, private investors in MBS have readjusted portfolios in response to an increase in interest rates. This was particularly true when long-term Treasury rates jumped in the fourth quarter of 2022; demand for MBS has remained cool since then. In addition, holders of MBS may be more pessimistic about prepayment risk than empirical models reflect, which could be the case if investors think that future mortgage rates are more likely to be lower relative to current rates rather than higher."
"stronger demand for MBS could also lower rates"
https://www.brookings.edu/articles/high-mortgage-rates-are-probably-here-for-a-while/#:~:text=indicate%20recession%20periods.-,The%20spread%20between%2030%2Dyear%20fixed%20mortgage%20rates%20and%2010,2023%2C%20and%20has%20remained%20high.
I was listening to Powell's news conference and I see your point about the Federal Reserve bringing the Federal Reserve Balance Sheet back to more reasonable historically lower balances.
And yes having Fannie Mae and Freddie Mac participate more actively into providing liquidity to the US Secondary Mortgage Market is a GOOD thing.
And YES I would love to see these 15+ year conservatorships FINALLY come to an end.
So let's hope that it becomes viable and helps American Families attain their American Dreams of homeownership if they can afford it and can maintain it for the long run.
Contracting, last time I checked I think it dropped $1T.
Yes, Fannie Mae and Freddie Mac would purchase each others MBS as well as Ginnie Mae MBS. They each had huge Mortgage Portfolios on their books as Assets, financed them with Fannie Mae and Freddie Mac issued debt, and made like a 121 basis point spread.
This helped keep MBS Guarantee fees low and around 20bps to 25bps compared to 60bps today.
Todays near tripling of GFees is passed through to each home buyer and home mortgage refinancing.
The banks that own GSE MBS carry interest rate risk on their books (not Credit Risk because Fannie Mae and Freddie Mac guarantees the timely payment of Principal & Interest). Shockingly some banks like SVB didn't hedge that interest rate risk and they no longer exist.
We're talking about the Required Capital needed for Fannie Mae and Freddie Mac, why are we worried about interest rate hedging at the 25 largest banks, they know how to hedge interest rate risk and engage in that activity, right?
I believe the federal regulators are letting the banks not recognize their drop in asset value of their low coupon MBS issued in 2020-22 by allowing the banks to designate them Held To Maturity.
In your opinion how much Capital do you think the GSE'S need to hold to backstop the $7.6T in Fannie Mae and Freddie Mac MBS outstanding?
Well, people keep saying that the way out of this defacto Nationalization by the Federal Government will be driven by the current administration's desire to monetize or cash out the Government from Fannie Mae and Freddie Mac and use the proceeds to fund the American Residential Affordability Deficit.
But you're right, one of big problems of supply is the issue which is governmentally shut down or squeezed at the local zoning boards.
I just don't see this idea of cashing out the Government from their financial position in the GSES to fund affordable housing to be able to be done without Congressional approval and ultimately it could be nixed by locally elected officials on zoning boards.
Yesterday's WSJ: A Housing Project's 17-Year Saga --- In L.A., 49-unit development has faced nearly every hurdle state laws allow
A Los Angeles nonprofit was given government land in January 2007 to build a few dozen units of affordable housing. They're finally hoping to open the building next year.
Lorena Plaza, a 49-unit development rising in the predominantly Latino neighborhood of Boyle Heights in eastern Los Angeles, is taking longer to complete, a city official said, than practically any other residential building this size in the history of Los Angeles.
The 17 years of false starts and delays are an extreme instance of how difficult it has long been to build affordable housing in California -- for both the homeless as well as lower and middle-income workers -- and in other states with complex regulations and high costs.
The development has faced nearly every hurdle that California laws allow opponents to place in the way of affordable housing. Approvals by politicians and commissions took years, often held up by a single determined opponent on the city council. It took the developers more time to win over skeptical neighbors who were particularly opposed to nearby housing for the mentally ill and homeless. Financing hurdles and other costs piled up along the way. Construction finally began about a year ago.
In California, affordable housing developers typically abide by a host of requirements when they take public subsidies, such as tougher energy-efficiency standards and higher wages for construction workers. They often need to build amenities such as offices for social workers and transit-boosting features such as bike storage.
Even home builders who are sympathetic to these priorities say those same objectives undermine the state's ability to produce enough affordable housing. That means California will continue to suffer stubbornly high rates of homelessness that plague the Golden State and are evident on the tent-filled streets of cities like L.A.
"We're really committed to things like climate change and we're very committed to transit-oriented development," said Linda Mandolini, president of Bay Area-based Eden Housing, a nonprofit low-income housing builder. "But those goals don't come for free."
Housing costs and homelessness have become the top political issue in the state, prompting officials to set ambitious goals to build more housing, faster. Los Angeles is aiming to construct more than 450,000 new homes by 2029, a feat that would require five times as much construction as occurred in the previous decade, according to a May report from researchers at the University of California Los Angeles' Ziman Center for Real Estate and California State University Northridge.
Los Angeles Mayor Karen Bass has pointed to the delays with Lorena Plaza as an example of what the city is trying to fix. The mayor is expediting permits for projects in which all of the units are considered affordable and cutting other red tape that has sidelined projects. "How on earth could we expect to house 40,000 [homeless] people if we continue to do business as usual?" the Democrat asked in a speech at the development's construction site last year.
There are still serious impediments to building enough housing in Los Angeles and the state. Existing subsidies that fund affordable housing construction are oversubscribed. And cities keep looking for ways to block new housing, market-rate or affordable. The Bay Area suburb of Woodside, for example, last year tried to declare that its entire city was a mountain lion refuge to prevent apartment development. The town, which later reversed the decision, didn't return a request for comment.
Affordable housing faces hurdles outside of California, too. In New York City, a developer's plan to build low-income apartments at the site of a community garden in lower Manhattan has been held up for a decade by city review processes and lawsuits filed by opponents. In Dallas, a mixed-income apartment complex planned for an empty field in the northern part of the city was delayed for more than three years by deed restrictions that allowed neighboring property owners to dictate land use.
An apartment building takes an average of four years to build in L.A., according to a UCLA and CSU-Northridge analysis of building permits from 2010 to 2022. Two-and-a-half of those four years come after the approvals process. About 36% of projects that received permits in California between 2010 and 2022 had not yet been completed, according to UCLA.
those who had experienced homelessness or mental health issues, and who would rely on services such as social work and healthcare provided by on-site staff.
The Los Angeles County Metropolitan Transportation Authority agreed to provide the land, but was slow to make it available, in large part because it was being used as a staging area during the construction of a train line. A global financial crisis further derailed plans. By the time the economy began rebounding in 2012, the deepest troubles for the 49 could-be apartments were setting in.
The city councilman representing the neighborhood, Jose Huizar, had broad powers to delay projects on his turf. To get a city subsidy, the developers would need a signed letter from Huizar, who sat on the MTA board and remained opposed to the project for years.
particular project."
Much of what stifled construction of Lorena Plaza likely wouldn't have happened now due to recent law changes. Developers no longer need a letter of support from their city council member to receive affordable housing funding. Environmental appeals have to be heard within 75 days. Zoning approvals for affordable projects, which took more than a year at Lorena Plaza, are now happening as quickly as a few months-time under a Mayor Bass executive order.
The new rules mean Lorena Plaza may permanently hold the title for perhaps the city's longest-running development. ACOF plans to start taking applications from prospective tenants in the spring."
So, like $120B in retained earnings plus a $130B Commitment from the US Treasury (I heard that they print money) isn't enough to back the credit risk of $7.6T in US residential mortgages with an average LTV of 50% with FICOS in the mid to high 700's?
There is also the Implicit Federal Government Guarantee as well.
Ok. Are you a fulcrum security holder?
2023 YTD Annualized Gain FNMA: 100%+
Closing Price on 12/31/22: .35
Closing Price on 12/15/23: .71
2023 YTD Annualized Gain FNMAS: 6%
Closing Price on 12/31/22: 2.30
Closing Price on 12/15/23: 2.44
https://finance.yahoo.com/quote/FNMAS/history?p=FNMAS
YTD Annualized Gain S&P 500: 23.37%
Here's a WSJ article that may shed some light...
"WSJ: The poll asks, "What is the one issue you feel so strongly about that you couldn't possibly vote for a candidate who disagrees with you on that issue?" Abortion is at the top of that list. If you go a little deeper, you find that that's because the country has become very much more pro-choice.
BOCIAN: For a long time, the question we've been asking, and we also asked it in this survey, is, "What's the most important issue to you when you're going to vote for president?" When you ask that, you still get economic issues. But we felt like there was something in 2022 that the data wasn't telling us about what was happening in these elections, where abortion was still well below the economy but was dispositive for many voters.
What people are telling us is, it's not that they want to focus on abortion, but when one candidate or one side is violating clear norms in a way that they are fearful of, they will vote on that issue even if it's not their No. 1 issue.
WSJ: Right now, Donald Trump leads Joe Biden. I'm not sure how much that means now, 11 months out from the election. You guys tell me.
FABRIZIO: The good news for Joe Biden is he's got 11 months. The bad news for Joe Biden is he's got to dig himself out of a hole. When you look at the people who say they voted for him in 2020, he's only holding on to 87% of those voters right now. The voters who voted for a third party are breaking for Donald Trump right now.
When you look at the comparisons, Donald Trump wins the comparisons with Joe Biden on the economy, on jobs, on inflation, on the border, on foreign-policy stuff. Biden wins on Social Security and Medicare and abortion and things of that nature. But guess what? The ones Donald Trump is winning on are the ones that are most important to the voters right now.
WSJ: Mike, if I were in your shoes, the good news in this poll would be that the people you've lost your grip on are groups that you should be able to get back if you're Joe Biden.
BOCIAN: Yeah, absolutely. It's not an assurance. Democrats are going to have to get much earlier in their outreach to Black voters, to young voters, to Hispanic voters, Asian voters. These are core parts. But that is where he's lost ground."
So you are thinking that the catalyst for release is an urgent need for Capital and to simultaneously address the affordable housing shortage?
Here's the thing, during the continuance of the CONservatorships, the Capital of the GSES increase about $20-$30B/yr. and the Feds have 100% control over 2 of the lynchpins of the American Secondary Mortgage Market. Added bonus, virtually complete control to add social engineering giveaways for the party in power's targeted political voter base.
Why would the federal government want to give up that power?
"The Brownlow Report applied the principles of an emerging science of public administration to the federal government and recommended a comprehensive restructuring of the American administrative state to enhance its efficiency. It defined administrative management as "the organization for the performance of the duties imposed upon the President in exercising the executive power vested in him by the Constitution of the United States," and thus, having subsumed administration within the executive power and identified the president as manager-in-chief of the federal bureaucracy, it proposed a variety of reforms intended to enhance the ability of the president to play this role. While the report dressed its recommendations in traditional constitutional garb, suggesting that its reforms would restore a proper separation of powers, its vision of presidential government was in fact a striking departure from our constitutional system."
https://go.gale.com/ps/i.do?p=AONE&u=googlescholar&id=GALE|A178359575&v=2.1&it=r&sid=AONE&asid=2fb80466
"James Landis, who had great faith in the capacity of scientific experts to fashion public policies that would serve the public good, fundamentally agrees that politics and administration must be separated. He contrasts an earlier age in which politics and administration were inextricably intertwined because the amateur politician, whose power was rooted in the electoral process, was responsible for administration, with the modern era.
Landis is simply more forthright about drawing out the implications of the separation of politics and administration--the irrelevance of the older separation-of-powers-based constitutionalism for organizing the administrative sphere, and the replacement of constitutional law by administrative law in regulating administration. "In terms of political theory, the administrative process springs from the inadequacy of a simple tripartite form of government to deal with modern problems."
Apparently James Landis never envisioned a Ed Demarco!
I think most nonbanks don't carry a residential real estate portfolio, although I never looked.
The problem with the nonbanks is that real estate downturns take time to resolve and making sure that NONBANKS have the Capital to cover GSE forced buybacks because their GSE delivered mortgages violated the Reps and Warranties Clause could become an issue.
From what I understand, most NONBANKS, like Quicken probably don't have Tier 1 Capital Ratios in the teens, like a lot of Banks.
Most banks, while they unload most to the GSES, they keep some residential real estate in their portfolio, here's JP Morgan's Residential Loan Portfolio, as of the end of 3Q23 (10q):
"At September 30, 2023, $229.3 billion, or 70% of the total
retained residential real estate loan portfolio, was
concentrated in California, New York, Florida, Texas and
Massachusetts, compared with $147.8 billion, or 62% at
December 31, 2022.
Refer to Note 12 for information on the geographic
composition and current estimated LTVs of the Firm’s
residential real estate loans."
Pg. 66 of 3q23 10q:
"Consumer, excluding credit card
Portfolio analysis
Loans increased compared to December 31, 2022 driven
by residential real estate loans associated with First
Republic and higher auto loans.
Residential real estate: The residential real estate
portfolio, including loans held-for-sale and loans at fair
value, predominantly consists of prime mortgage loans and
home equity lines of credit.
Retained loans increased compared to December 31, 2022,
driven by residential real estate loans associated with First
Republic. Retained nonaccrual loans decreased compared
to December 31, 2022. Net recoveries were lower for the
three and nine months ended September 30, 2023
compared to the same periods in the prior year driven by
lower prepayments due to higher interest rates.
Loans at fair value decreased from December 31, 2022,
driven by a decrease in CIB due to sales outpacing
purchases predominantly offset by an increase in Home
Lending as originations outpaced warehouse loan sales.
Nonaccrual loans at fair value decreased compared to
December 31, 2022, predominantly driven by CIB.
At September 30, 2023 and December 31, 2022, the
carrying value of interest-only residential mortgage loans
was $90.9 billion and $36.3 billion, respectively. The
increase was driven by First Republic. These loans have an
interest-only payment period generally followed by an
adjustable-rate or fixed-rate fully amortizing payment
period to maturity and are typically originated as higher-
balance loans to higher-income borrowers. The credit
performance of this portfolio is comparable with the
performance of the broader prime mortgage portfolio and
there were no charge-offs associated with First Republic for
the three and nine months ended September 30, 2023.
The carrying value of home equity lines of credit
outstanding was $16.4 billion at September 30, 2023,
which included $2.6 billion associated with First Republic.
The carrying value of home equity lines of credit
outstanding included $4.5 billion of HELOCs that have
recast from interest-only to fully amortizing payments or
have been modified and $4.5 billion of interest-only balloon
HELOCs, which primarily mature after 2030. The Firm
manages the risk of HELOCs during their revolving period by
closing or reducing the undrawn line to the extent
permitted by law when borrowers are exhibiting a material
deterioration in their credit risk profile."
Considered for the next Conference at the SCOTUS:
335-7 LLC v. City of New York, New York
(1) Whether New York’s Rent-Stabilization Laws and accompanying regulations effect a per se physical taking by expropriating petitioners’ right to exclude; (2) whether the laws effect a confiscatory taking by depriving petitioners of a just and reasonable return; and (3) whether the laws effect a regulatory taking as an unconstitutional use restriction of petitioners’ property.
We'll see, should be interesting next year.....
With nonbanks constituting larger and larger shares of the GSES book of biz (think Quicken and Loan Depot, et. al) I wonder if that will be a problem with the next inevitable US Housing Market downturn?
Some believe, the 'wealth effect' increases Consumer Spending by up to 1% of the increase in family wealth.
https://www.investopedia.com/terms/w/wealtheffect.asp#:~:text=What%20is%20The%20Wealth%20Effect,investment%20portfolios%20increase%20in%20value.
FNMAS is 2.42/25 = 9.6% of PAR. FNMAO is priced at 7% of PAR.
The liquidity discount for owning the extraordinarily low volume traded FNMAO is 27% versus the higher traded FNMAS.
$100,000 PAR? 93% discount to par.
Yeah, but the drop in the 10 year Treasury will be "yuge" for the typical American Family, as the 30 year Fixed Rate Mortgage is priced on it.
Also, car loans may come down too.
Businesses issuing debt will also be impacted favorably.
Avoiding the much advertised Recession, will likely be beneficial for an incumbent.
"Over the past 12 months, the index is up 0.3%, though only five of the tracked markets experienced growth.
“After last quarter’s rebound, the third quarter decline in AIMI is primarily attributable to the significant increase in interest rates,” said Sara Hoffmann, director of Multifamily Research at Freddie Mac. “The slight annual increase is notable, and largely the result of a substantial contraction in property prices, which offset the effect of markedly higher mortgage rates.”
https://finance.yahoo.com/news/freddie-mac-multifamily-apartment-investment-192100099.html
Check out Warren's McDonald's Gold Card ...
https://finance.yahoo.com/news/billionaire-warren-buffett-mcdonalds-gold-200922573.html
The polls are pretty close and whoever is elected next November will have a significant outcome on our Shares.
Some suggest that the 20% of "Independents" will decide the outcome and if the Economy is doing well I'm thinking advantage incumbent because if it's not doing well, the incumbent typically gets trashed at the polls.
We'll see what happens.
https://en.m.wikipedia.org/wiki/It%27s_the_economy,_stupid
Moody's and Standard & Poors slapping "AAA" Ratings on the Garbage Toxic Private Label MBS didn't help either...
It will be interesting for sure. If the Economy picks up, doesn't that advantage typically go to the incumbent?
5 more years of her Majesty Sandra?
https://www.google.com/amp/s/www.cnbc.com/amp/2023/12/12/inflation-fears-down-consumer-optimism-up-economy-may-start-to-help-biden-with-voters.html
https://www.etsy.com/listing/801367710/queen-elizabeth-crown-replica-state?gpla=1&gao=1&&utm_source=google&utm_medium=cpc&utm_campaign=shopping_us_a-accessories-costume_accessories-costume_hats_and_headpieces&utm_custom1=_k_Cj0KCQiAyeWrBhDDARIsAGP1mWT86uWfJLWSrXvT-Uab9whtipO0X6RIiJYzT9bqdK-q-fvDt1-TtKAaAgtLEALw_wcB_k_&utm_content=go_12561588600_118992629466_506896987635_aud-2007167693269:pla-353009141439_m__801367710_566085602&utm_custom2=12561588600&gad_source=1&gclid=Cj0KCQiAyeWrBhDDARIsAGP1mWT86uWfJLWSrXvT-Uab9whtipO0X6RIiJYzT9bqdK-q-fvDt1-TtKAaAgtLEALw_wcB
https://finance.yahoo.com/news/turned-american-dream-home-ownership-214934632.html
"First-time buyers are particularly feeling the pain: They comprise 31 percent of the current market, down from 38 percent in 1981; but the average age of repeat buyers now stands at 58, up significantly from 36 in 1981, according to the National Association of Realtors."
"Sam Chandan, director of the NYU Stern School of Real Estate Finance, testified before Congress last year that institutional investors account for only 2.5 percent of all home sales nationally, citing data from Freddie Mac.
“It’s an incorrect assessment, in my view, that the institutional investors are driving prices nationally,” Chandan told CO. “It is simply not supported by the data.”
“For the overwhelming majority of U.S. households, homeownership is the route to wealth creation and intergenerational wealth transfer. Period.”
"When the Great Depression hit in the 1930s, the government looked for ways to prop up both a debilitated housing market and a severely wounded banking sector. President Franklin Roosevelt’s administration and Congress created the Federal Housing Administration (1934), which provides insurance for mortgages originated by private lenders, and the Federal National Mortgage Association (1938), known colloquially as “Fannie Mae,” which expands the secondary mortgage market by securitizing loans and selling them to investors.
Out of FHA and Fannie Mae, the 30-year mortgage was born. The innovation allowed homeowners to put down 10 to 20 percent of the home’s overall value and pay the rest off in monthly installments over a 30-year period."
"Things shifted dramatically within a generation: Homeownership rates have never dropped below 63 percent since 1965.
“That system worked perfectly from the 1930s to the mid-1990s,” said Hockett. “But we allowed these public agencies, Fannie Mae and FHA, to fall increasingly under the sway of private sector institutions, and those systems of home mortgage finance began to get into trouble once we privatized them and allowed Wall Street banks to bid up prices.”
Mortgage securitization — packaging different mortgages into a security, slicing them up according to risk, and selling the bond to investors — is universally viewed as the principal cause of the 2008 Global Financial Crisis (GFC). While poor underwriting standards and misguided federal legislation helped inflate the early-2000s housing bubble, a three-decade buildup of mortgage securitization laid the foundation for a once-in-a-century financial panic that exploded across Wall Street and nearly took the entire system down with it.
“There’s just so much money to be gained that it makes sense for these systems and elaborate secondary markets to have been created to support homeownership,” said Perry. “Government provides incentives for homeownership, and in the private sector there are these overlapping entities — homebuilders, mortgage brokers, real estate agents, insurers, investors — that it’s very much a cornerstone of the U.S. economy.”
“[The affordability] issue is largely the result of not building enough housing, but it’s been compounded tremendously by the distortions the Fed created by its zero-interest-rate policy [ZIRP] and quantitative easing [QE],” said Pinto. “They drove interest rates below 3 percent, needlessly, and that created a refinancing boom which has locked people into 2 percent and 3 percent rates, so people don’t want to move, and in the meantime rates have doubled.”
"Several senators and representatives in Washington are attempting to forge a legislative compromise. Rep. Khanna’s “Stop Wall Street Landlords Act” would prohibit Fannie Mae, Freddie Mac and Ginnie Mae from purchasing and securitizing mortgages purchased by private firms that use debt to buy and rent them out for profit. The bill has several Democratic co-sponsors in the GOP-controlled House.
“This is a real issue,” Khanna said. “Ordinary people are talking about this, how they can’t buy a home because Wall Street is buying up their neighborhoods.”
"Utah Republican Sen. Mike Lee’s “HOUSES Act” would allow state or local governments to purchase millions of acres from the federal Bureau of Land Management and open those tracts to residential real estate development as they see fit. The bill has several GOP co-sponsors.
Professor Ghent is wary of Sen. Lee’s plan, mainly because so much federal land is in undesirable pockets and away from employment centers. Rather, she points toward state-level housing reforms as being the best hope to make local governments approve more single-family and multifamily housing through zoning measures.
“The low-hanging fruit is state-level reform,” she said. “Cities are kind of hopeless. They don’t have expertise, and they’re so beholden to local interests.”
Regardless of where the solutions come from, it’s clear some elected officials are now awake to an American Dream that is starting to feel like a nightmare.
“Americans aren’t serfs,” said Khanna. “We didn’t fight a revolution in this country just so we have to pay rent to Wall Street because they own all the homes.”