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Volume 15 - Number 13

June 19, 2015

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Fannie and Freddie Buybacks Down Sharply in 1Q15

Fannie Mae and Freddie Mac both reported sharp declines in mortgage repurchases during the first quarter of 2015, according to a new Inside The GSEs analysis of public disclosures by the two. There was, however, a sharp increase in the volume of unresolved buyback demands. The GSEs reported a combined $491.3 million in mortgage repurchases during the first three months of 2015, a 30.8 percent decline from the fourth quarter of last year. It was also the lowest quarterly buyback figure since Fannie and Freddie began filing repurchase activity reports with the Securities and Exchange Commission back in early 2012. Fannie’s repurchase volume fell 45.8 percent from the previous quarter while Freddie’s was...

FHFA Report Highlights GSE Challenges and Risks

Fannie Mae and Freddie Mac have made progress in improving their corporate governance structure and managing credit risk, but they still face significant headwinds, according to the FHFA’s annual report to Congress. The report noted that the prospect of negative net worth in future quarters for Fannie might be more likely than in recent periods thanks to a reduction in income from Fannie’s shrinking investment portfolio. Also income from loss reserves and legal settlements is diminishing. While the report noted that Fannie has significant initiatives underway to improve its governance, risk management and systems infrastructure, it said the magnitude of the projects would expose the enterprise’s operations to heightened risk.

Freddie Mac's STACR Program Evolves, Gains Momentum

Freddie Mac announced its fifth Structured Agency Credit Risk debt note offering in 2015 this week. This $950 million offering comes on the heels of last week’s STACR offering of $425.6 million, which was the first transaction under a new structure that shares a reference pool of loans with a previous transaction. Last week’s STACR Series 2015-HQ2 has a reference pool of single-family mortgages with an unpaid principal balance of more than $30.3 billion. Freddie said the reference pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie in the first through third quarters of 2013 with loan-to-value ratios from 80 to 95 percent. Analysts from Moody’s Investors Service said Freddie used part of its 58 percent....

One-on-One with MBA's David Stevens on Rep and Warrants, IDR

The most recent rep-and-warrant policy updates and clarifications by the GSEs are a positive step in the right direction, according to David Stevens, president of the Mortgage Bankers Association, but he said the goal now is to focus on remedies. “It helped provide some definite greater clarity around what constitutes the kind of defects that get covered in that first 36 months,” he said in an interview with Inside The GSEs. “It was the first step of a few more steps that need to take place, however.” While the GSEs have worked to ensure that their customers know what the potential defects are in a file and how best to address them, Stevens said the next evolution is working on things like remedies.

FHLB Member Advances Increase for Third Consecutive Year

The Federal Home Loan Banks increased their advances to members for the third consecutive year and substantially grew them by $72.1 billion in 2014 to $570.7 billion. In fact, at the end of the year, advances reached their highest quarter-end level since the first quarter of 2010 and the increase was the largest since 2007, according to the Federal Housing Finance Agency’s annual report to Congress released this week. Ten of the 12 FHLBanks reported increased advances last year. The report noted in recent years, some members may have increased their use of advances to meet higher liquidity requirements. Despite this growth, the demand is below levels witnessed during the height of the financial crisis.

Senators Seek More Clarity on GSE Credit-Risk Transfers

A letter sent to the Federal Housing Finance Agency last week from a bipartisan group of senators asking for more transparency and clarity on GSE risk transfers included the request of a five-year goal timeline. Although FHFA officials have talked about risk transfers by Fannie Mae and Freddie Mac, most of the description of the program is sparsely outlined in the agency’s strategic plan and the 2015 scorecard. The Senate Banking, Housing and Urban Affairs Committee members said that the FHFA needs to be more forthright about its plans to expand the credit-risk transfer activities of the GSEs. However, one analyst believes while more clarity would be helpful, outlining risk sharing in a five-year context would be challenging.

Freddie Completes First NPL Auction for Smaller Investors

Freddie Mac announced its first non-performing loan auction that primarily caters to smaller investors was sold last week to Corona Asset Management XII, LLC. Freddie marketed the Extended Timeline Pool Offering of 157 deeply delinquent NPLs in April and it sold on June 3.The EXPO gives smaller investors who may need more time to secure funds for bidding a longer timeframe to do so.Having smaller pool sizes and a longer marketing timeframe differentiates the EXPO initiative from Freddie’s standard pool auctions. The loans were all based in Miami-Dade County, FL, and have an aggregate unpaid principal balance of $31 million. Freddie said the loans had been delinquent for close to four years on average.

Investors Unite: Don't Compare AIG Lawsuit to GSE Case

On the heels of a final ruling this week where a federal judge said the government went too far in its takeover of American International Group as part of its 2008 bailout, some are comparing the lawsuit to the one bought by Fannie Mae and Freddie Mac shareholders. In this ruling, the federal judge decided not to award damages to AIG shareholders, even as it said the government was wrong in taking a 79.9 percent stake in the company in exchange for an $85 billion loan that helped keep the company on firm ground during the downturn. Judge Thomas Wheeler believed shareholders did not need to be compensated because AIG...

Recommendation Says Use Treasury Warrants for Housing

Contributing Treasury’s warrants for common stock of Fannie Mae and Freddie Mac to the affordable housing funds is one of the ways that the Leadership Conference on Civil and Human Rights says the GSEs can help earmark financial resources toward affordable housing. In a June report published by the Leadership Conference, the organization offered a few of its housing finance recommendations to support affordable housing goals. The report noted that often lost in public discussion of the GSE conservatorships is the fact that the Treasury owns warrants for 79.9 percent of the common stock of both Fannie and Freddie. “The value of the warrants could easily exceed $100 billion,” the group said in its recommendation.

Freddie: Credit Quality Improved, Names Tope 3 Loan Defects

Credit quality has improved over the last two years, according to Chris Mock, vice president of single-family quality control for Freddie Mac, but there is still plenty of room for improvement. These days he said the top three common defects are missing documentation, insufficient funds to close, and insufficient income. “The first one is we are unable to calculate income and match it to the income the lender calculated on the loan file,” he said in an interview with Inside The GSEs. “And that one is mainly driven by documentation that is missing when the customer sends us a file.” Mock said that Freddie shares a list of the top 10 missing documents with lenders...

GSE Roundup

Bank Acquitted in Charges of Selling Fannie Bad Mortgages. Abacus Federal Savings Bank was acquitted of grand larceny and conspiracy charges earlier this month from a case bought by the New York District Attorney’s office that involved Fannie Mae. Following a four-month trial, a New York jury acquitted Abacus and two of its senior offices. The Manhattan-based bank, which primarily serves Chinese-Americans in the New York area, was accused of falsifying documents and selling faulty mortgages to Fannie from 2005 to 2010. Freddie Says Look Out for IRS Rejection Messages. To ensure the quality of loans sold to Freddie, the GSE says sellers and servicers must take all appropriate steps to clear red flags typically found in fraud schemes focused...


A lot has been written about the ‘Millennial Generation’ being key to the future of the housing/mortgage market, but how much of your mortgage workforce includes Millennials – those born roughly between the years 1980 to 1999?

Less than 10 percent
11 to 30 percent
Greater than 30 percent
It’s so small we can’t even measure it.
We’re tired of reading about how important Millennials are…

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