Housing finance and housing policy should be clearly separated, said Rep. Randy Neugebauer, R-TX, speaking on a Bipartisan Policy Center GSE reform panel with Rep. John Delaney, D-MD, in Washington, DC, on July 16. “We should detach the financial piece away from the political process,” he said, adding that the market should determine how many houses and apartments to build, not the government. Neugebauer and Delaney agreed that reform needs to happen and that today’s housing finance system is largely controlled by the federal government. “The government’s role is to provide liquidity to the market and be more predicable like the banking system, which I’m a big supporter of,” said Delaney. “Then there’s the role of pricing risks, which I’m not a supporter of. The government has its roles mixed up.”
The servicing of Fannie Mae and Freddie Mac single-family mortgages remained heavily concentrated among a relatively small number of companies, but the market continued to gradually de-consolidate during the second quarter of 2015. An Inside The GSEs analysis of new Fannie and Freddie disclosures reveals that the top five players in the market serviced 46.8 percent of securitized single-family mortgages outstanding at the end of June. At the end of the first quarter, they serviced 47.6 percent of the market. Freddie business was more concentrated – 51.0 percent of Freddie servicing was held by the GSE’s top five companies. These percentages are based on the servicing of outstanding mortgage-backed securities where a servicer is identified in MBS...
Fannie Mae completed its second credit risk- sharing transaction with the reinsurance industry this week and last week Freddie Mac introduced two new Agency Credit Insurance Structure transactions that gives it coverage based on both first loss and actual losses realized in a reference pool of residential mortgages. Under the two ACIS transactions, Freddie took insurance policies that move most of the remaining credit risk associated with the two Structured Agency Credit Risk debt notes executed in early 2015 to insurers and reinsurers. The two policies cover up to a combined maximum of approximately $223 million of losses that Freddie incurs when homeowners default. This is the 9th ACIS transaction since 2013.
Fannie Mae and Freddie Mac will take part in more risk-sharing transactions in the coming months, especially upping their involvement in actual-loss deals as mortgage-backed securities investors appear to be willing to buy more risk, said Fitch Ratings in a report released this week highlighting GSE risk-sharing deals and trends. Freddie has had two risk-sharing deals this year where actual losses are passed on to investors based on actual recoveries at loan liquidation.Prior to those deals, risk-sharing transactions used pre-set loss severity schedules to determine investor loss exposure. Fannie said it plans to come to market with its first actual-loss deal as early as the fourth quarter of 2015.
Fannie Mae unveiled its second auction of nonperforming mortgages this week, $777 million of delinquent notes offered in two pools and a smaller $11 million pool that falls under its “Community Impact” program. The $11 million package includes just 75 loans. The collateral is located in Tampa, FL. The two larger pools include 3,900 mortgages. The GSE said it hopes to “inspire” nonprofits, small investors, minority- and women-owned businesses (MWOBs) and community groups to bid and then help borrowers avoid foreclosure. “We recently held a training forum to bring diverse stakeholders together to explore ways to participate in upcoming NPL sales,” said Joy Cianci, Fannie’s senior vice president for credit portfolio management.
With several cases underway involving Fannie Mae and Freddie Mac, Investors Unite hosted a status update teleconference in which one legal scholar referred to the Fairholmes case as an “open scandal” because of the government’s refusal to make the documents surrounding the case public.The three cases discussed included Fairholmes Fund v. The United States, Perry Capital Inc. v. Lew, and an individual shareholders suit in Iowa. Both RichardEpstein, NYU law professor and a senior lecturer at the University of Chicago, and Matthew McGill, partner with Gibson, Dunn and Crutcher, who is representing Perry Capital in its lawsuit and subsequent appeal, questioned the government’s secrecy in these cases. “The Obama administration has pledged to be the most open, and they have completely failed in this regard,” said Epstein.
First-time homebuyer mortgages acquired by the GSEs performed worse than repeat homebuyer mortgages, said the Federal Housing Finance Agency in a new working paper. But that doesn’t necessarily mean they are riskier. Although the study found first-time homebuyers likely to face more mortgage-related challenges, the FHFA said the difference is based on demographics. “They are younger, and have lower credit scores, lower home equity, and less income and therefore are less likely to withstand financial stress or take advantage of financial innovations available in the market than repeat homebuyers,” said Saty Patrabansh, senior economist and author of the white paper. However, once these differences are taken into account he said there appears to be no difference between first-timer and repeat homebuyers in their probability of default.
RSS