A recent white paper by the Federal Housing Finance Agency Office of the Inspector General highlights the precariousness of GSE profitability. The IG questions whether Fannie Mae and Freddie Mac has the muscle to withstand adverse market conditions or other changes and uncertainties that could lead to additional losses.“The enterprises’ conditions have stabilized and market conditions have improved since 2008. They returned to profitability in 2012; however, the level of earnings they experienced in 2013 and 2014 is not sustainable over the long term,” the paper said. Record-breaking profits of a combined $132.6 billion were reported in 2013 for Fannie Mae and Freddie Mac. That number dropped significantly the following year to $21.9 billion.
The Federal Finance Housing Agency needs to be vigilant in its continued oversight in its management of Fannie Mae and Freddie Mac, according a report from the Office of the Inspector General. Because the FHFA’s actions aren’t subject to judicial review, the OIG said its oversight of the FHFA conservatorship actions and processes “is critical to safeguard taxpayer dollars and ensure that the FHFA is fulfilling its statutory duties.” In the new white paper, the OIG said Congress vested the FHFA with “sweeping powers” as conservator to potentially control every decision the enterprises make.In 2014 alone, the FHFA flexed its muscle to take more than 750 conservatorship “actions” against Fannie and Freddie.
Freddie Mac is offering another bulk sale of delinquent loans but is not releasing the details just yet. Thomas Fitzgerald, company spokesman, confirmed on Monday that there are nonperforming loans for sale, making this Freddie’s second offering this year so far. “We are sharing details about the sale solely with prospective bidders,” he said, adding that Freddie anticipates on providing more specifics on the results after the auction. Fitzgerald did confirm that the loans in the transaction are “deeply delinquent,” at least two years old, and said “the sales process is a round-one competitive auction.” Bloomberg reported that the three pools amount to $1 billion in nonperforming loans...
New GSE Reserve Fund Bill. Rep. Marsha Blackburn, R-TN, introduced legislation on March 26 requiring the GSEs to send future profits to a newly established reserve fund administered by the FHFA. The bill is titled ''Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015'' and it would “establish a secondary reserve fund for a housing enterprise under conservatorship to protect taxpayers against loss in the event of a housing downturn, and for other purposes." Jumpstart GSE Reform Amendment. On March 25, Sens. Bob Corker, D-TN, and Mark Warner, D-VA, offered an amendment to the Jumpstart GSE Reform Act that would prohibit...
The U.S. Supreme Court this week heard oral arguments on whether a second-lien lender is secured when a borrower with an underwater first lien declares Chapter 7 bankruptcy. SCOTUS in 1992 ruled that a creditor is protected when a partially underwater mortgage goes into bankruptcy. In most cases, the courts have said second-lien creditors are secured as well, even if there isn’t enough value to pay off the first lien. …
Home-equity lending gained modest momentum during the fourth quarter of 2014, although the outstanding supply of second-lien mortgage debt continued its seven-year decline. Mortgage lenders originated an estimated $21 billion of home-equity loans, including home-equity lines of credit and closed-end second mortgages, during the fourth quarter. That was up 5.0 percent from the third quarter and brought full-year production ... [Includes one data chart]
CFPB General Counsel Meredith Fuchs showed little sympathy for lenders worried about TRID's start date, referencing the rule's long implementation period.
The headline might sound promising, but keep in mind that during the housing boom of 2003 to 2007, the industry averaged nearly $340 billion a year in home-equity originations.
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