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Volume 16 - Number 24

November 25, 2016

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GSE 1-Family Business Slump in October, Credit Box Unchanged

Fannie Mae and Freddie Mac saw a largely seasonal decline in single-family business in October, according to a new Inside The GSEs analysis of mortgage-backed securities data. The two GSEs guaranteed $99.33 billion of single-family MBS during October, an 8.3 percent decline from the previous month. Most of the slippage was in purchase-money mortgages, which fell 14.5 percent from September, following typical seasonal patterns. The refi market held up a lot better. October volume was down 1.6 percent from September, while still ranking as the second-highest monthly total so far this year. That pushed the refi business to 60.2 percent of GSE volume, excluding modified loans.

FHFA Raises Maximum Conforming Loan Limit to $424,100

The Federal Housing Finance Agency raised the maximum conforming loan limit for GSE mortgages by $7,100 for 2017, amid rising home values. The new loan limit, announced Nov. 23, is $424,100 and represents the first time in a decade, since the housing downturn, that the conforming loan limit climbed above $417,000. The baseline loan limit was established by the Housing and Economic Recovery Act and is recalibrated each year to reflect the changes in a national home price index. Until now, the index has not risen above levels set in the third quarter of 2007.

GAO Report Says FHFA’s Goals for Fannie, Freddie are Inconsistent

The U.S. Government Accountability Office found that the Federal Housing Finance Agency’s strategic plan for the GSEs reflects a shift in priorities that has created more uncertainty. The GAO said the regulator revised the wording of the goals in the 2014 plan to align it more closely with FHFA’s statutory responsibilities. In the absence of an official post-conservatorship plan for Fannie Mae and Freddie Mac, the GAO was asked to examine the FHFA’s actions as conservator in a report highlighting the objectives needed for the future of the two companies after the conservatorship. The report noted that the FHFA increased its emphasis on maintaining credit availability and foreclosure prevention options, shifted away from...

Hensarling Calls for Greater Fannie, Freddie Accountability

House Financial Services Committee Chairman Rep. Jeb Hensarling, R-TX, called for greater accountability of the GSEs and discussed reintroducing his Dodd-Frank Act reform bill in the next Congress, during remarks in Washington last week. He said the GOP’s PATH (Protecting American Taxpayers and Homeowners) Act would help end the Fannie Mae and Freddie Mac bailout. The PATH Act, first introduced in 2013, proposes to phase out the GSEs within five years. In addition to ending the “costly” bailout, Hensarling said the bill would protect and restore the FHA to its defined mission, increase mortgage competition, enhance transparency, maximize consumer choice, and break down barriers to private investment capital.

Second Nonperforming Loan Report Shows Growth in Fannie NPL Sales

The GSEs have sold more than 59,629 nonperforming loans through August 2016, according to the Federal Housing Finance Agency’s second report this year highlighting the activity of nonperforming loan sales and borrower outcomes. That number is up from the 41,649 NPLs that were sold through May 2016. The report, released last week, is part of the FHFA’s plans to make NPL sales data more transparent. The agency released its inaugural report in July and plans on publishing two each year. The latest report shows that the NPLs had a total unpaid principal balance of $11.9 billion, were delinquent 3.4 years on average and had an average current loan-to-value ratio of 97 percent.

GSE Shareholder Case Attorney Details Pending Litigation

Fairholme Funds, the plaintiff in an ongoing GSE shareholder lawsuit, hosted a conference call late last week and dished on recent developments in the case. “Fannie Mae and Freddie Mac are obligated to protect the capital of all preferred shareholders, not just one of those shareholders, the Obama Treasury,” said Bruce Berkowitz, Fairholme’s CEO. Plaintiffs in Fairholme Funds Inc. v. United States, et al, argue that the U.S. Treasury’s net worth sweep of GSE profits is against the law. “And, really, only those who oppose the dream of American homeownership would attempt to dismantle two publicly traded, shareholder-owned companies that have single-handedly provided $7 trillion in liquidity to support America’s mortgage market since 2009,” he said.

FHFA 2016 Performance Report Shows Improved Loan Quality

The quality of the GSEs’ portfolios continues to improve as the credit quality of new single-family business remains strong and delinquencies are down, according to the Federal Housing Finance Agency’s performance and accountability report for fiscal year 2016. But the agency said potential for a Treasury draw still looms. The report, released last week covers from October 2015 to September 2016 and highlights performance goals from the year. The average new single-family loan holds a weighted average credit score in the high 740s. There’s been a big improvement in delinquencies as loans that were seriously delinquent dropped considerably, down to 321,000. That’s a 25 percent decrease from a year earlier, when there were 426,000 seriously delinquent loans.

Investors Unite Panel Weighs in on GSE Risk-Sharing Cons

The GSEs’ credit-risk sharing program has expanded over the years but not everyone has been fond of the transactions designed to transfer risk away from Fannie Mae and Freddie Mac Tim Howard, a former Fannie CFO, has become one of the program’s biggest critics. He said today’s credit-risk transfer program, mandated by the Federal Housing Finance Agency, removes the “normal economic discipline” of a company making its own decisions about which risks to keep and which ones to share, and on what terms. He said that the CRT transactions being done today are nothing like those done during his time at Fannie, before the start of the conservatorship.

Freddie Introduces MH Curriculum, Expects Increase in Loans

With potential increases in loan production on the horizon, Freddie Mac introduced a pilot program aimed at getting more mortgage lenders prepared to originate manufactured housing loans and buyers prepared to purchase them. The GSE will partner with Next Step Network, a nonprofit specializing in manufactured home purchases, and eHome America, an online home counseling company, to implement the curriculum. One of the goals of the initiative is to foster new relationships with active participants in the manufactured housing industry. This includes national and local mortgage lenders. Next Step is based in Kentucky, a state heavy in manufactured housing. Freddie said the partnership with Next Step will educate prospective buyers of...

GSE Roundup

FHFA 2017 Multifamily Lending Caps Unchanged: The Federal Housing Finance Agency announced that the 2017 multifamily lending caps for Fannie Mae and Freddie Mac will remain at the same level they were for 2016. Each will be subject to a cap of $36.5 billion of multifamily purchase volume. The FHFA expects the multifamily finance market to be roughly the same as it was in 2016. Fannie Bans Plywood in Foreclosures. Fannie Mae recently banned the use of plywood to secure vacant homes. Beginning early this month Fannie property foreclosures must be secured by a plywood alternative, such as clear boarding.

Poll

In 2016, what have you been paying your retail residential loan officers, on average, as a commission?

25 to 50 basis points per loan
51 to 75 bps
76 to 100 bps
101 to 150 bps
More than 150 bps
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