Pointing to unemployment rates that reached 14.7% in April, and a 7.3% decline in consumer expenditures in March, FHFA is simply acknowledging the obvious: The U.S. economy has entered a recession of unprecedented depth and unknown duration.
Although the FHLBanks market themselves as local lenders, this image doesn’t match their operations. Ten of the nation’s largest commercial banks account for about 30% of FHLBank advances.
The “implied guarantee subsidy” that underpins the FHLBank operations is the reason why financial institutions of all kinds are clamoring for membership, according to former Freddie CEO Don Layton.
The Federal Housing Finance Agency said it lacks sufficient data to create statistical models to “reflect economic conditions for 2021” because of the market disruption caused by the coronavirus.
Some industry players believe FHFA Director Mark Calabria wants to use an activities-based review of the market to reduce regulations, which many observers think increase the cost of mortgages.
The panel this week heard testimony that servicers failed to inform borrowers of their right to forbearance, offered less assistance than required by law and provided inaccurate information on lump-sum repayments.
Since the financial crisis, Fannie’s single-family book of business has posted a loss rate of 31.5 basis points. In contrast, residential loans at commercial banks averaged a loss rate of 86 bps, 5.7 times higher.