Browse articles from all of our Newsletters related to FHFA.

February 17, 2017 - Inside MBS & ABS

Key Players in GSE Reform: Treasury Secretary Mnuchin, Commerce Chief Wilbur Ross, Craig Phillips and Others

Now that investment banker Steven Mnuchin has been installed as the Treasury secretary, work can begin on finding a solution to Fannie Mae and Freddie Mac, the giant government guarantors that serve as the linchpin to housing and mortgage markets. For the most part, senior mortgage officials who have been in the business for a decade or more applauded President Trump’s choice of Mnuchin, pointing to his days as the head of MBS trading at Goldman Sachs & Co. “At the very least, this is...

February 10, 2017 - Inside The GSEs

Judge Rejects Government Efforts To Keep Docs Privileged

After the government stalled on a September ruling to turn over close to 60 documents regarding the GSEs’ net worth sweep, a judge rejected its appeal. The court ordered the government to disclose the bulk of the documents to the plaintiff’s attorneys in Fairholme Funds Inc. v. United States. The U.S. Court of Appeals ruled in favor of Fannie Mae and Freddie Mac investors, upholding Judge Margaret Sweeney’s earlier decision. The government is to release all…

February 10, 2017 - Inside The GSEs

GSE Roundup

FHFA PLS Actions Update. The Federal Housing Finance Agency published an update on litigation it initiated against 18 financial institutions for securities law violations and fraud regarding private-label securities sales. Seventeen cases were settled in 2013 and 2014. JP Morgan Chase settled for $4 billion, Deutsche Bank settled for $1.9 billion and Goldman Sachs for $1.2 billion. A case against the Royal Bank of Scotland remains. The settlement money ultimately goes to the Treasury through the dividend sweeps. Fannie Exec Tapped for CFPB? Brian Books, Fannie Mae’s general counsel, is being considered by the White House to head the Consumer Financial Protection Bureau, according to a...

February 10, 2017 - Inside The GSEs

MBA Proposal Raises Competition, Government Guarantee Questions

Uneconomic price competition coupled with Congressional discord are some of the concerns analysts have expressed about the Mortgage Bankers Association’s newly released plan for GSE reform. The MBA’s proposal recommends multiple privately owned guarantors, preferably more than two, to increase competition in the market. Fannie Mae and Freddie Mac would be the first two and the MBA suggests that new guarantors receive a charter to enhance competition. “The more market participants that compete, the better for consumers, the economy and the system,” said Rodrigo Lopez, MBA chairman. GSE Reform Principles and Guardrails also suggests that Congress sanction an “explicit government guarantee for eligible securities in order to entice domestic and foreign investors to keep buying...

February 10, 2017 - Inside The GSEs

Reform Still a Treasury Priority, Weighing Administrative Options

Treasury secretary nominee Steve Mnuchin still has GSE reform high on his list, according to one of President Trump’s top economic advisors. Meanwhile, speculation abounds as to whether there’s an administrative solution to GSE reform absent any legislative action. After some back and forth on the topic since the announcement of Mnuchin’s nomination his subsequent comments on the GSEs, economic advisor Gary Cohen said in national media outlets late last week that GSE reform is definitely a priority for Mnuchin. In fact, he said that it’s something Mnuchin’s spent a lot of time working on. “Once he gets approved and confirmed, Steve will be taking that on as one of this early priorities. So we definitely have some plans...

February 9, 2017 - Inside Mortgage Finance

Fairholme Explains That It’s Not a ‘Speculator’ in GSE Stock; Waiting on a Resolution that May Never Come?

In a new annual letter to shareholders, Fairholme Capital Management once again lays out its argument for investing in Fannie Mae and Freddie Mac stock, trying to explain to its wealthy investors that it feels more secure in owning junior preferred shares than common stock. Among other things, Fairholme said the preferred stock “provide(s) us with greater security and certainty than the common stock and, as you know, we are not speculators.” When it comes to a liquidation preference, preferred shareholders are senior to common shareholders, who often receive nothing when a company goes bust. But Fairholme’s problem – one shared by other firms that still own this class of stock – is...

February 3, 2017 - Inside MBS & ABS

Fed Judge Puts an End to the Stall: Government Must Release Documents to GSE Shareholders in Legal Case

A federal appeals court has rejected government efforts to reverse a September ruling by Federal Claims Court Judge Margaret Sweeney ordering the government to turn over various memos, emails and presentations to investors in litigation involving the Fannie Mae and Freddie Mac net worth sweep. On Jan. 30, the U.S. Court of Appeals for the Federal Circuit ruled in favor of investors in the two government-sponsored enterprises, upholding Sweeney’s earlier decision, and ordered the government to release 48 of the 56 documents because they don’t merit privilege treatment. Eight of the documents were...

February 3, 2017 - Inside MBS & ABS

Fannie Mae’s $1 Billion Commitment to Invitation Homes Has a Few Critics, But What’s the Big Deal Anyway?

Fannie Mae’s recent decision to provide a $1 billion financing commitment to single-family rental operator Invitation Homes has raised a few eyebrows, but for the most part it appears to be a fairly benign transaction that should benefit both parties. The arrangement was sanctioned by the Federal Housing Finance Agency, which views the relationship as just another way for Fannie to finance rental housing. The rental units are 50,000 single-family residences scattered around the country – not apartment buildings. “Given the growth in the single-family rental market, FHFA considered...

February 2, 2017 - Inside Mortgage Finance

New Residential Bulks Up on MSR Assets. Regulatory Scrutiny Not Far Behind? Behind the Scenes: Fortress

Real estate investment trust New Residential Investment Corp. has been quietly trolling for mortgage servicing assets the past year and snagged a big one this week when it agreed to buy $97 billion in agency rights from Citigroup. Now comes the hard part: incorporating the receivables into an already fast-growing portfolio and convincing regulators at the Federal Housing Finance Agency and Ginnie Mae officials that it has both the management structure and the financial wherewithal to handle so much product. According to a tally from Inside Mortgage Finance, since early December New Residential has acquired...

January 27, 2017 - Inside The GSEs

GSE Lawsuit Plaintiffs Hopeful New Administratin is on Their Side

With the Trump administration now officially in office, GSE shareholders are optimistic about their cases against Fannie Mae and Freddie Mac being resolved. Investors Unite hosted a call last week during which legal experts weighed in on the outlook for GSE shareholder cases. Plaintiffs have been arguing that a government bailout of the GSEs and the subsequent Treasury sweep were unnecessary and illegal. John Yoo, Heller Professor of Law at the University of California Berkley School of Law, said he thinks the election makes a big difference because it gives an incoming president the opportunity to review the constitutional claims of the last president and decide whether to change them.

January 27, 2017 - Inside The GSEs

FHFA Seeks Input on Chattel Loans for Manufactured Housing

The Federal Housing Finance Agency is taking steps to explore financing personal property loans for manufactured housing and is seeking input on initiating a pilot program. Manufactured housing advocates have been pushing for greater support from Fannie Mae and Freddie Mac, especially in the form of establishing a secondary market for chattel lending, in which the home is not permanently affixed to the real estate and titled as personal property. The Manufactured Housing Institute has been in talks for some time with the GSEs and FHFA, making the case that chattel loan performance demonstrates that the GSEs can purchase chattel lending safely and profitably.

January 27, 2017 - Inside The GSEs

Mnuchin Sets the Tone for Bipartisan GSE Reform

Treasury Secretary nominee Steven Mnuchin’s recent comments that he’s not a fan of recapitalizing and releasing Fannie Mae and Freddie Mac and wants to find a “bipartisan solution” to GSE reform has caused speculation about what reform will look like under the Trump administration.The comments, made during his Senate confirmation hearing last week, presented a softer take on housing reform than his earlier comments suggested. Shortly after being ...

January 26, 2017 - Inside Mortgage Finance

Mnuchin Softens His Stance on GSE Privatization, Seeks Bipartisan Solution

Prospects for a relatively speedy administrative solution to the eight-year-old conservatorship of Fannie Mae and Freddie Mac appeared to dim after Treasury Secretary-nominee Steve Mnuchin backtracked from earlier comments on swiftly addressing the plight of the two government-sponsored enterprises. During a Jan. 19 Senate confirmation hearing, Sen. Mark Warner, D-VA, asked Mnuchin if he supports a recapitalization-and-release plan for the GSEs, as several industry groups have proposed. “First, let’s be clear,” Mnuchin said. “My comments were...

January 20, 2017 - Inside MBS & ABS

GSEs Working on Accounting, Tax Issues Likely To Emerge in the Transition to Single Security

Freddie Mac has begun talking with the Internal Revenue Service and the Securities and Exchange Commission about issues that are likely to crop up as the two government-sponsored enterprises implement the new Single Security, according to a summary of the most recent meeting of the Industry Advisory Group in December. One issue is the tax treatment of compensation that MBS investors receive for converting legacy Freddie participation certificates for the new uniform MBS, which will have a longer payment delay. “Although it is not definitive, we believe the IRS will ultimately view the float compensation as well as any incentive payment that is paid as part of the exchanges as taxable income when received,” the meeting summary states. Freddie provided...

January 13, 2017 - Inside The GSEs

IG: FHFA Should Better Manage Nonbank Servicer Risks

A recent audit showed that the Federal Housing Finance Agency needs to do a better job at managing nonbank risks such as mortgage servicing transfers. In response, the FHFA said it will finalize a risk-based proposal to examine how well the GSEs manage that and other risks by the end of this month. The FHFA’s Inspector General said that the agency has not made sure that both Fannie Mae and Freddie Mac are tackling potential risks. The IG noted that out of three advisory bulletins issued that addressed nonbank servicer risk, one of the GSEs only complied with one of the bulletins.The heavily redacted report doesn’t mention which GSE failed to comply with the bulletins, but a...

January 13, 2017 - Inside The GSEs

Treasury Dept. Talks Housing Progress and New Goals

As the guard prepares to change in a week, Treasury Secretary Jacob Lew said in an exit memo released last week that only legislation can comprehensively address “the ongoing shortcomings of the housing finance system.” In the memo, Lew documents the Treasury’s progress over the last eight years and outlines his goals for the future of the department. He said that fixing the housing finance system remains the major unfinished piece of work of post-financial crisis reform. While he said the housing market has improved, Lew acknowledged that many homeowners and neighborhoods continue to struggle. “A starting point for such legislation should be the principles President Obama laid out in 2013, which stressed a clearly-defined role for the...

January 13, 2017 - Inside The GSEs

FHLBanks to Expand Diversity and Inclusion Program, Other Changes

The Federal Home Loan Banks Office of Finance announced changes this week to some of their debt programs and said they will allow more securities dealers to participate in their diversity and inclusion program. The FHLBank is planning to incorporate other aspects of diversity, beyond what’s already been established, in order to help expand the scope of dealers eligible to participate in the program. The first change went into effect Jan. 10 when the minimum new issue par amount for negotiated callable bonds decreased. That number will drop from $15 million to $10 million when diversity and inclusion dealers participate in the underwriting group.

January 13, 2017 - Inside The GSEs

Investors Unite Hopes Privatization Leads to Shareholder Fairness

With increased talk of privatizing Fannie Mae and Freddie Mac, Investors Unite wants reassurance that shareholders will be treated fairly. The GSE shareholders rights trade group said, “Now everybody is talking about ending the conservatorship,” in a recent blog posting. While that may be an exaggeration, since the presidential election there has been a renewed interest in bringing the GSEs out of its eight-plus years conservatorship, where they’ve been since September 2008. Recent talks began with and snowballed after Treasury-secretary designee Steve Mnuchin said that getting the GSEs out of government control would be a top priority for the new presidential administration. And Mnuchin said that he plans to do this “reasonably fast.”

January 13, 2017 - Inside The GSEs

GSE Reform Outlook Optimistic, Questions Remain

Although the question of when the conservatorship status of the GSEs will be resolved is still up in the air, a new administration has many speculating that change is on the horizon for Fannie Mae and Freddie Mac. The November election gave Republicans both houses of Congress and the executive branch. This seemed to lend itself to more talks on when and how to reform the GSEs as they approach close to a decade in conservatorship. But, while the sentiment to do something is apparent, agreeing on the best path forward is a different story. And, as in the past, there is no shortage of competing thought processes and proposals.

January 13, 2017 - Inside MBS & ABS

The Outlook for GSE Reform Brightens, But When and How is a Different Story

Change in the political balance in Washington that put the GOP in control of both houses of Congress and the executive branch has fueled speculation that something will finally be done to resolve the conservatorships of Fannie Mae and Freddie Mac. As in the past, there is no shortage of competing proposals. At an Urban Institute seminar this week, Rick Lazio, former Republican congressman from New York, said...

January 13, 2017 - Inside MBS & ABS

FHA’s New Pricing Adjustment Could Boost Ginnie Mae Issuance, Trigger Prepayments on Premium MBS

The 25 basis-point mortgage insurance premium cut announced this week by the Department of Housing and Urban Development’s departing leadership could switch $50 billion of issuance from Fannie Mae/Freddie Mac business to FHA as well as cause premium Ginnie Mae MBS to prepay faster, according to market analysts. Absent any adversarial pricing by private mortgage insurers, a guaranty fee adjustment by the Federal Housing Finance Agency or a reversal by the Trump administration, analysts with Bank of America Merrill Lynch see up to 12 percent of purchase and 2 percent of refis shifting to FHA. On June 9, HUD Secretary Julian Castro announced...

January 13, 2017 - Inside MBS & ABS

Fourth-Quarter Slump in New GSE Credit-Risk Transfers Leaves 2016 With Small Increase from Previous Year

Fannie Mae and Freddie Mac last year issued a combined $12.93 billion of debt notes that pay investors based on the performance of reference pools, according to a new Inside MBS & ABS analysis of their credit-risk transfer programs. That was up just 2.8 percent from the 2015 volume of new issuance in Fannie’s Connecticut Avenue Securities program and Freddie’s Structured Agency Credit Risk program. It brought total issuance in the two platforms, which started issuance in late 2013, to $38.08 billion. Interestingly, total new single-family MBS production by the two government-sponsored enterprises was...[Includes one data table]

January 12, 2017 - Inside Mortgage Finance

FHFA to Step Up Pressure on Fannie and Freddie to Manage Nonbank Servicer Risks

The Federal Housing Finance Agency says it will finalize new plans for examining how well Fannie Mae and Freddie Mac manage the risks of mortgage servicing transfers this month. The agency has been under scrutiny by its Inspector General for failing to push the two government-sponsored enterprises to manage risks posed by nonbank servicers. In a new report, the IG said the FHFA has not fully made sure that both GSEs are following the three advisory bulletins it has issued that address nonbank servicer risks, among other things. The report is heavily redacted, making it difficult to determine where FHFA examiners have failed, but it appears that there have been shortcomings for one of the GSEs. The three advisory bulletins address...

January 6, 2017 - Inside MBS & ABS

Freddie Mac Issues Its First Risk-Sharing Security Backed by Seasoned Mortgages

In late December, Freddie Mac issued a $934.27 million security backed by seasoned mortgages. It was the first seasoned credit-risk transfer from the government-sponsored enterprise. While Freddie has issued fully guaranteed securitizations backed by seasoned mortgages, Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2016-1 included tranches without a guarantee from the GSE, similar to a non-agency senior-sub MBS. The transaction included...


With rates higher this year, there has been talk of lenders liberalizing their underwriting standards in an effort to increase volume and make up for lower refis.

Do you think your shop will loosen standards over the coming three months?

Yes, but not by much.
Yes, by a lot.
Yes and, heck, we may even do non-QM lending.
No, not at all.
No and we may even tighten credit.

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