Volume 16 - Number 3
February 5, 2016
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Fannie Mae and Freddie Mac issued $56.56 billion of single-family mortgage-backed securities in January, a modest 5.6 percent decline from the previous month, according to a new Inside The GSEs ranking and analysis. December, however, may have been an anomaly. Many mortgage originators reported delays in loan closings in October as the primary market adopted a significant change in mortgage disclosures and closing requirements under the so-called TRID rule. Those delays, ranging from a few days to a week or more, pushed some October closings into November. Given the normal lag between primary market origination and securitization – especially for correspondent originations – the TRID traffic jam may have accounted for the sharp...
The Federal Housing Finance Agency’s long-awaited final piece to the representation-and- warranties framework is complete with the addition of an independent dispute-resolution process that serves as a last resort for disputed loans. A neutral third-party arbitrator will determine whether there was a violation in loan eligibility in the loans sold to Fannie Mae and Freddie Mac. Talks of an alternative to solving the most difficult repurchase demands, outside of the standard procedures, began in 2014. The FHFA reiterated its point that the IDR process only comes into play after the appeal and escalation processes have been exhausted. The GSEs have said most lenders should be able to work with them to resolve buyback requests.
The case of Fairholme Fund v. The United States will continue to linger in the courts as the battle for getting the government to release the bulk of the documents pertaining to the preferred stock purchase agreements between the Federal Housing Finance Agency and the Treasury plays out with a motion filed this week. “We are now in a struggle with the defendants, both the Department of Treasury and FHFA, over claims of the deliberative process privilege they sought to keep from having to produce thousands and thousands of documents, even in redacted form,” Charles Cooper, attorney with Cooper & Kirk, the law firm representing the shareholder plaintiffs, told Inside The GSEs.
There were nationwide protests this week to stop Fannie Mae and Freddie Mac from selling the bulk of its nonperforming loans to private-equity firms and hedge funds. Politicians and community groups continue to argue that the GSEs should level the playing field so more nonprofit groups have a chance to buy the loans. “Struggling mortgages should go to non-profits that fight foreclosures and create affordable housing, not Wall Street speculators ready to evict struggling families. Our neighborhoods are not for sale,” tweeted one of the protest’s organizers, the American Alliance for Californians Empowerment. The protestors argued that Fannie and Freddie continue to announce sales this year where Wall Street firms are the primary benefactors.
Fannie Mae said its new mortgage product that allows borrowers to have higher debt-to-income ratios because it includes income from non-borrowers is not risky. HomeReady was rolled out in August as a revised affordable lending product to replace the MyCommunityMortgage program focused on helping low- and moderate-income borrowers. A key component of HomeReady is that it counts income from relatives or friends who will also live in the home, which helps allow for a DTI ratio of up to 50 percent. Fannie said the reality of today’s market shows that homeowners are sharing homes and in many cases a significant amount of the income is being earned by the co-resident in these “extended-income households.”
Republicans said they are “extremely concerned” about the amount of risk the GSEs pose to taxpayers during this week’s House Financial Services Committee meeting offering up their version of fiscal year 2017 budget views and estimates. While it’s been seven years since the financial crisis, Republicans on the committee said the GSEs’ expanded activities and further consolidation of their dominant market share continue to be a cause for concern, according to the GOP print version of the FY17 BVE. They want to wind down the GSEs as quickly as possible. “Despite recent improvements to their corporate balance sheets, the GSEs’ model is inherently flawed and unsustainable without taxpayer support,” said the majority.
Fannie Mae is planning to release an updated version of Desktop Underwriter in June with more specific details to come by the end of this month. But for now the GSE notified its lenders about some of the changes they can expect in DU Version 10.0. The updates in the latest version will “help lenders underwrite with confidence while expanding access to credit and sustainable homeownership for creditworthy borrowers,” said Fannie in a notice that went out on Jan. 28. The release is targeted to take place the weekend of June 25, 2016, and will include enhanced credit risk assessment using trended credit data provided by Equifax and Transunion. This tool...
Fannie Mae won an appeal in which an apartment building that filed for bankruptcy to reduce payments it owed to Fannie did not act in good faith. According to a recent court ruling, the judge reversed the decision and said the bankruptcy court erred in allowing the plan in the first place. After missing one monthly payment of approximately $55,000 in December 2009, four months later the Memphis-based apartment company filed for bankruptcy under Chapter 11. The bankruptcy prevented Fannie from being able to foreclose on the apartment building. The apartment, Village Green, argued against the ruling, but the...
The push for further de-risking Fannie Mae and Freddie Mac, especially by expanded up-front risk sharing by way of private mortgage insurers, is showing no signs of slowing down in 2016. The U.S. Mortgage Insurers said this week that, “The time is right to move forward to expand front-end risk sharing with MI, and USMI members are ready to do more.” The trade group explained that as policymakers are considering proposals to de-risk the GSEs, MIs are strong counterparties and the new capital standards that went into effect in 2015 further enhance reliability. “MI is a first layer of protection against mortgage credit losses and a time-tested method of...
Fannie Mae launched a new version of Fannie Mae Connect on Jan. 29 that includes five seller/servicer reports that were added to the system based on customer feedback. The Loan Delivery Edit Dashboard replaces the Data Quality Dashboard and provides insight into any possible issues at delivery with loan-level detail for fatal, warning and informational edits. About six months worth of data will be provided under this new report. This is the only new report that can be accessed by servicers as well as sellers. The Lender Dashboard gives monthly lender-specific data on things like delivery activity, loan performance and operational activities. It also includes a comparison of profile to peers and to expected loan performance value.
The Federal Housing Finance Agency released guidance in late January on how the Federal Home Loan Banks should classify investment securities. In doing so, it adopted the 2013 Uniform Agreement for FHLBank supervisory purposes. Where FHFA’s rule and guidance and the 2013 Uniform Agreement may conflict, the FHFA said its rules and guidance will apply. The directive states that FHLBanks should use “sound and conservative assumptions” as they pertain to upgrades and it provides classification approach examples and boundaries. For example, when a bank is considering whether to upgrade a classified security to “pass,” it should base its assessment on assumptions that minimize the likelihood that the FHLBank would need to classify the security again in the future.
The former CEO of Fannie Mae is not backing down in his defense that he did nothing wrong in a lawsuit stemming from the Securities and Exchange Commission accusing him of hiding faulty mortgages during the housing crisis. Daniel Mudd is one of three Fannie executives against whom the SEC brought civil fraud charges in 2011. The other two, Thomas Lund, former single family mortgages vice president, and Enrico Dallavechia, a risk officer, settled in September of last year. The court ordered Dallavechia to pay the Treasury $25,000, and Lund was ordered to pay $10,000. But Mudd maintains his innocence and refuses to settle. Last week his lawyer argued in court...
Freddie Default and Work Reporting Changes. Freddie Mac announced last week that servicers are not able to directly change the reporting of a third-party sale to an REO status without submitting a rollback request. Freddie said it also updated its foreclosure sale reporting error codes to more accurately reflect today’s housing market and align it with servicer’s needs. Fannie Ends 2015 with $42.3B in Multifamily Loans. Fannie Mae said that it provided $42.3 billion in financing to the multifamily market in 2015 to support 569,000 units of multifamily housing, of which more than 90 percent of the units financed support affordable or workforce housing. Approximately 99 percent of the multifamily loans Fannie financed last year were securitized...
A lot has been written lately regarding loan closing delays tied to the new TRID rule. Whats been the average delay at your lending shop, if at all? (Report in business days, not calendar.)
- TRID has caused no delays whatsoever because we were prepared.
- 1 to 4 days.
- 5 to 10 days.
- 11 to 15 days. Its been a nightmare.
- Were too embarrassed to tell you.
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