IMFnews....Wednesday, Apr 30, 2014
Sen. Corker: The Committee Will Resolve Johnson-Crapo Morass, As for Passage
By Thomas Ressler
tressler@imfpubs.com
Senate Banking Committee member Bob Corker, R-TN, told an industry group Wednesday that an agreement has been reached among his colleagues to resolve their differences over housing finance reform legislation.
?We know that there are two or three issues that need to be resolved to make it work well for everybody. We?re going to resolve those issues. As a matter of fact, we?ve already agreed privately to resolve those issues, Corker told attendees at the Independent Community Bankers Association of America's 2014 Washington policy summit. And over the next few days, we?re going to have a markup on the bill that I think takes our country vastly forward, reduces taxpayer risk, takes us from a place where we have no capital at two institutions that are a duopoly and have no competition, to a situation where you have lots of capital and lots of competition.
Fellow committee member Heidi Heitkamp, D-ND, a co-sponsor of Johnson-Crapo, also said the bill is moving forward. This train is leaving the station, she said. But whether it makes it to the floor of the Senate is another matter.
One hang-up for the committee is the provision of Johnson/Crapo that provides for an explicit federal guarantee, as opposed to the previous regime in which federal support was implicit and presumed. That's a big leap for a lot of conservatives on the committee, Heitkamp said.
But as confident as the senators may have sounded in predicting the bill would move forward, both were uncertain as to the exact timetable. I hope it will happen this year, Corker said. Heitkamp said, I have no idea. We want to get this done in May. For more coverage on different facets of the GSE bill, see the upcoming editions of Inside Mortgage Finance and Inside The GSEs.
A Trade-Off Looming: Higher G-Fees for a Break on LLPAs
By Paul Muolo
pmuolo@imfpubs.com
Although new Federal Housing Finance Agency Director Mel Watt delayed an increase in guaranty fees earlier this year, executives at Fannie Mae and Freddie Mac have told some mortgage executives in private conversations that raising g-fees may not be a bad idea, according to industry officials briefed on the matter.
They're actively saying that want an increase in g-fees, said one source, speaking about the GSEs.
But others suggest that the situation needs to be placed into context. The FHFA and the GSEs may be working on a deal to reduce charges tied to loan-level price adjustments. One lobbyist noted that something is afoot about lowering LLPAs and compensating via a higher overall g-fee.
As far as pricing goes, if g-fees are raised, Fannie and Freddie could earn more money, cash that ultimately would wind up at the U.S. Treasury Department, which sweeps most of their earnings each quarter. A spokesman for Fannie declined to comment. Freddie Mac's media department had not responded as IMFnews went to press Wednesday.
FHFA Stress Test Results: $190 Billion in Future Assistance Might be Needed for Fannie and Freddie
By Paul Muolo
pmuolo@imfpubs.com
New GSE stress test results released by the Federal Housing Finance Agency Wednesday reveal what many in the industry have been talking about for the past year: Because Fannie Mae and Freddie Mac are not allowed to build capital, they would be forced to tap Uncle Sam once again for cash assistance should a financial calamity strike the nation.
If a severe recession hits, Fannie and Freddie would need Treasury draws ranging from $84.4 billion to $190 billion depending on the treatment of deferred tax assets, according to new calculations made by the GSEs and the FHFA. Adjustments to DTAs have allowed the two to book huge earnings the past year, but those accounting adjustments are now running out.
Changes that the Treasury Department made to the senior preferred stock purchase agreement nearly two years ago allow the government to "sweep" virtually all of their earnings. Under the conservatorship agreement, the two are allowed to maintain a small capital buffer, but within three years that buffer will be reduced to zero.
In a statement reacting to FHFA's stress test results, Fannie Senior Vice President Kelli Parsons noted: "These results of the severely adverse scenario are not surprising given the company's limited capital." She adds: "Under the terms of the senior preferred stock purchase agreement, Fannie Mae is not permitted to retain capital to withstand a sudden, unexpected economic shock of the magnitude required by the stress test."
The stress test exercise is required of the GSEs under the Dodd-Frank Act. The stress test reflects three hypothetical economic scenarios: base, adverse and severely adverse. Under the severely adverse scenario, the assumption is that home prices fall 25 percent over nine quarters.
Short Takes: New Coalition Group Forms to Preserve Fannie and Freddie / Former Senator Kerrey Front and Center at Pro-GSE Group
By Paul Muolo, Brandon Ivey, Thomas Ressler
pmuolo@imfpubs.com, bivey@imfpubs.com, tressler@imfpubs.com
A new coalition group launched this week that has a stated goal to preserve Fannie Mae and Freddie Mac, the two government-controlled mortgage giants which are now wildly profitable. Unlike most factions of the mortgage industry, this new group United for American Homeownership is unabashed in its support of the GSEs. In short, UAH loves Fannie and Freddie. It should be pointed out that UAH not only wants to preserve the two, it wants to "strengthen" them. Strengthen, That's not a typo!
So, who's behind UAH? Answer: The National Black Chamber of Commerce, RetireSafe, National Organization of Women, and the Tea Party, among many others. Okay, the Tea Party insertion is a joke on our part. UAH's board includes former Nebraska senator Bob Kerrey, Josh Angel, an attorney with Herrick Feinstein and Harry Alford, president of the National Black Chamber of Commerce.
