Although it's unlikely that Fannie Mae and Freddie Mac will engage in principal reductions anytime soon, a new report from CBO says it could do some good.
Will investors in GSE stock sue the federal government for "sweeping" earnings out of Fannie Mae and Freddie Mac? Meanwhile, PennyMac worries about its "Countrywide" problem.
Whether or not President Obama’s pick to become the new permanent director of the Federal Housing Finance Agency overcomes the long odds and expected Republican opposition to win Senate confirmation, it’s a win-win for the White House, say industry observers. Last week, Rep. Mel Watt, D-NC, a 20-year House veteran, all of it spent serving on the Financial Services Committee, was selected by Obama to become the new FHFA director, replacing FHFA Acting Director Edward DeMarco, who has served as the agency’s acting head since September 2009. Although Watt had been on the short list of FHFA nominees, it was widely believed that Moody’s Analytics’ Chief Economist Mark Zandi would be the president’s pick, largely because Zandi was seen as “confirmable” by both Democrats and Republicans.
Fannie Mae is working on what it calls an “out-of-region” data center with IBM, which will make the GSE’s business “more resilient,” a spokesman for the secondary market giant told Inside The GSEs. The official noted that eventually IBM will “assume some data center activities” but provided little in the way of details on the matter. The comments about the data center came after weeks of rumors that IBM had landed a huge outsourcing contract with Fannie. The GSE acknowledged the data center work.
Fannie Mae and Freddie Mac will no longer purchase loans that are interest-only, loans with 40-year terms or loans with points and fees exceeding the thresholds of the Consumer Financial Protection Bureau’s “ability to repay” rule, the Federal Housing Finance Agency announced this week. The FHFA said it is directing the GSEs to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the CFPB’s “ability to repay” requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Fannie Mae and its former auditor KPMG LLP have agreed to pay $153 million to resolve a long-simmering class action lawsuit brought by investors seeking to recover damages, according to an announcement Tuesday by Ohio Attorney General Mike DeWine. Two Ohio pension funds – the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio – filed suit in 2004 related to a $6.3 billion overstatement of earnings against Fannie and three former GSE executives, including then-CEO Franklin Raines.
Fannie Mae hit an earnings home run in the first quarter while revealing that it has released $50.6 billion in “deferred tax assets,” an allowance that sets up a massive cash payment to the U.S. Treasury by the end of June. Fannie estimates that based on a net worth of $62.4 billion at March 31, it will have a dividend obligation to Treasury of $59.4 billion, a cash payment that appears all but certain. Following an edict from Treasury last summer, the GSEs cannot build retained earnings and can only maintain a small “buffer” of net worth. The rest of their earnings must be given to Treasury, which controls their preferred stock.
Preliminary combined net income for the 12 Federal Home Loan Banks fell 12.3 percent to $580 million in the first quarter of 2013, down from $661 million at the end of the fourth quarter and a 20.9 percent decrease from the same period last year, according to the Federal Home Loan Bank Office of Finance. The FHLBank systems’ $153 million year-over-year decrease was driven primarily by lower net interest income, partially offset by lower assessments and non-interest expense. Total FHLBank assets were $738.7 billion on March 31, 2013, down 3.1 percent from $762.5 billion on Dec. 31, 2012, due to declines in investments, advances, mortgage loans and other assets.
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