GSE Performance

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May 18, 2012 - Inside Mortgage Trends

Fed Studies Blunt GSE Role in Meltdown

Two separate working papers by Federal Reserve economists conclude that the two government-sponsored enterprises were not significantly responsible for the financial crisis of 2008, and that GSE mortgage standards had only a “modest impact” on loan terms in the years leading up to the mortgage meltdown. Fed economist Valentin Bolotnyy estimates that only 2.5 percent to 5.0 percent of additional credit to high-risk borrowers was made available to meet the GSEs’ Underserved Area Goals, a subset of the Affordable Housing Goals mandated by Congress in 1992. “The results suggest a small UAG effect and...


May 18, 2012 - Inside The GSEs

Freddie’s New CEO Busts FHFA New Salary ‘Cap’

Freddie Mac’s new chief executive is expected to have his work cut out for him when he takes possession of the company’s corner office starting next week, industry insiders say, as it remains to be seen how much of a change agent anyone serving as CEO under government conservatorship can be. Last week, Freddie’s board of directors announced, with Federal Housing Finance Agency consent, the appointment of Donald Layton as CEO and elected him a member of the board.


May 18, 2012 - Inside The GSEs

Fannie Profits, Freddie Loses in 1Q12

The two GSEs divulged not so wildly divergent earnings during the first quarter of 2012. Fannie Mae posted its first free-and-clear profit since being drafted into government conservatorship some 3½ years ago while Freddie’s positive net income wasn’t enough to honor its dividend obligation and it was forced to ask taxpayers for further fiscal life-support. One year after it posted a $6.5 billion net loss, Fannie reported $2.7 billion net income during the first quarter, following to a net loss of $2.4 billion in the fourth quarter of 2011. Freddie actually reported net income in the first quarter and the fourth quarter, $577 million and $619 million respectively, but not enough to repay $1.8 billion in preferred stock dividends for the first three months of 2012.


May 4, 2012 - Inside The GSEs

Freddie Cites Turnover ‘Risk’ as Another Exec Bails

The GSE executive exodus continued last week with the announcement that the executive who oversees Freddie Mac’s single-family mortgage business has resigned. Anthony Renzi, Freddie’s executive vice president of single-family business, operations and information technology, will leave the company effective May 11, according to a filing with the Securities and Exchange Commission. Renzi, who came to Freddie after being forced out of GMAC Mortgage in April 2010, will join Citigroup Inc. as its new chief operating officer. The company said Paul Mullings, senior vice president of single-family sourcing and securitization, will take over Renzi’s duties on an interim basis.


May 4, 2012 - Inside The GSEs

Freddie Dividends Turn Black to Red in 1Q

Dividend payments paid by Freddie Mac to the U.S. Treasury for its continued financial support held down the GSE during the first quarter of 2012 as Freddie would have otherwise posted a profit. Freddie, which posted its first quarter results late this week, actually reported $577 million in net income during the first three months of this year before having to repay $1.8 billion in preferred stock dividends to the government. Under the terms of the GSEs’ purchase agreement, the Treasury is entitled to a dividend of 10 percent per year on a quarterly basis. Freddie’s first quarter dividend payment more than offset the company’s comprehensive income of $1.79 billion, prompting the GSE to seek another $19 million from taxpayers.


April 20, 2012 - Inside The GSEs

Chicago FHLB Cease-and-Desist Order Lifted

Four and a half years after it was placed on a form of probation, the Federal Home Loan Bank of Chicago was officially released from its consent cease-and-desist order by the Federal Housing Finance Agency this week. FHFA Acting Director Edward DeMarco said the Finance Agency terminated the order because of improvements in the Bank’s financial condition and capital position, resolution of the agency’s risk management concerns and consideration of “specific comments and assurances made by the FHLBank’s board of directors to FHFA.”


April 6, 2012 - Inside The GSEs

OIG: FHFA’s Dual GSE Oversight Roles May Conflict

The inherent tensions between the Federal Housing Finance Agency’s dual role as both conservator and regulator of Fannie Mae and Freddie Mac pose “significant challenges” that may put the Finance Agency at cross purposes with its two missions, according to the FHFA’s official watchdog. A white paper issued by the FHFA’s Office of Inspector General last week offering its current assessment of the agency’s conservatorship of the GSEs cited the Finance Agency’s two main challenges as: attempting to advance the enterprises’ business interests while assisting distressed homeowners; and simultaneously serving as both conservator and regulator.


April 6, 2012 - Inside The GSEs

FHFA Reconsiders Principal Reduction Stance

The Federal Housing Finance Agency is in the midst of a full and frank appraisal of the Treasury Department’s recently proposed incentive program to spur GSE principal reductions through the Home Affordable Modification Program, with a final answer to be forthcoming later this month, according to the agency head. For months now, FHFA Acting Director Edward DeMarco has been the target of unrelenting political pressure from the Obama administration and Congressional Democrats to allow Fannie Mae and Freddie Mac to employ mortgage principal reductions as a tool to modify underwater GSE loans.


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Are current mortgage underwriting standards too tough?

Yes, they don’t reflect current market conditions and need to be adjusted to allow borrowers with below 700 FICO scores and smaller downpayments to qualify for mortgages.
Yes, and something needs to be done to significantly reduce repurchase or buyback risk so that lenders don’t apply even tougher underwriting overlays.
No, the standards are appropriate given current risks and the major default problems the mortgage market has experienced over the past several years.

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