Fannie Mae and Freddie Mac should focus on things like cash flow projections, diversified funding and identifying potentially adverse events to manage their liquidity risk, according to a new advisory bulletin issued late this month by the Federal Housing Finance Agency.

Fannie Mae and Freddie Mac should focus on things like cash flow projections, diversified funding and identifying potentially adverse events to manage their liquidity risk, according to a new advisory bulletin issued late this month by the Federal Housing Finance Agency. The regulator said it expects the GSEs to use liquidity metrics that coincide with their funds management strategies and provide a comprehensive view of their liquidity risk to make sure enough funds are available, at reasonable cost, to meet potential demands. “Strong liquidity risk management enables an enterprise to be financially sound to perform its public mission and to limit and control shortfalls in cash,” said the FHFA.

The fast-growing multifamily loan programs of Fannie Mae and Freddie Mac are garnering a bit of attention these days – but not necessarily for good reasons. The Federal Housing Finance Agency wants the two mortgage giants to take more precautions when selecting and monitoring their multifamily seller/servicers. Also, the FHFA’s Office of Inspector General and the FBI are investigating a multi-million-dollar mortgage fraud scheme in the multifamily sector that impacted Fannie Mae and Freddie Mac MBS. The FHFA recently issued an advisory bulletin detailing its expectations for Fannie and Freddie to institute proper controls and perform monitoring to identify and manage multifamily counterparty risks.

Fannie Mae and Freddie Mac shareholders faced another hurdle last week when the Eighth Circuit Court ruled that the Treasury sweep of GSE profits was legal. In fact, in the 14-page ruling, filed on Aug. 23, the judge said, “This shareholder lawsuit crashes into a roadblock before it can get started,” and stated that the Federal Housing Finance Agency did not exceed its conservatorship powers, as the plaintiffs argued. “Congress, intentionally or otherwise, may have created a monster by handing an agency breathtakingly broad powers and insulating the exercise of those powers from judicial review. Even so, clear statutory text dictates the outcome,” said Judge David Stras in Saxton vs. the FHFA.

After exploring and dipping their toes in the single-family rental market since 2016, the GSEs have ended their somewhat controversial pilot programs that provided financing to corporate landlords. The Federal Housing Finance Agency announced last week it was pulling the plug on the programs because SFR operators don’t need the “liquidity provided by the enterprises.” This was welcome news to some who believed that institutional investors don’t need a taxpayer guarantee on top of rental revenues.The agency approved several “test and learn” pilot transactions and solicited industry feedback but ultimately concluded that it was premature to allow the GSEs to enter this portion of the single-family rental market.

New housing finance structures created to increase private capital would leave borrowers with slightly higher interest rates but greatly reduce federal costs, according to a new report from the Congressional Budget Office. The report examined several structures, ranging from a fully federal guarantee on mortgage-backed securities to a largely private market. On a “fair value” basis, it will cost the federal government $19 billion over the next 10 years to backstop an estimated $12 trillion in Fannie Mae and Freddie Mac mortgage-backed securities. The CBO notes the cost “represents the estimated amount that the government would have to pay private guarantors to bear the credit risk of the new guarantees.”

A dozen or so mortgage, housing and consumer groups are putting the final touches on a new letter to Treasury Secretary Steven Mnuchin, asking that the department not make any radical administrative changes to the operations of Fannie Mae and Freddie Mac, according to industry stakeholders familiar with the matter. The immediate and chief concern is that Federal Housing Finance Agency Director Mel Watt could depart prematurely, throwing the balance of power over to the White House, which would then move to pick a new FHFA director. The industry fears the administration’s pick, working in tandem with Treasury, would then move to cut GSE loan limits as a test to see if the private...

Increases to interest rates on mortgages are prompting changes in the types of refinances that are being originated. The cash-out share of refi business is increasing and credit quality is declining, according to an analysis by CoreLogic. Frank Nothaft, an executive and chief economist at CoreLogic, projects that the cash-out share of refi business will be near 40.0 percent this year. He said that would be the highest share for cash-out refis since 2005. In 2017, around 25.0 percent of refis ...

As residential lending goes, so goes the fortunes of the Mortgage Bankers Association, the residential finance industry’s largest trade organization. MBA saw its revenues decline by 8.2 percent to $62.0 million in fiscal 2017 as its investment income plunged to $719,773 from $7.9 million the year prior, according to the trade group’s form 990 tax return. MBA’s “profit” (revenue less expenses) declined by 33.5 percent in FY 2017 to $12.7 million, a drop of $6.5 million ...

After losing an average of $118 per loan originated in the first quarter of 2018, nonbanks made some adjustments and turned profits in the second quarter, according to a survey from the Mortgage Bankers Association. Some 343 nonbanks reported a net gain of $580 on each loan they originated in 2Q18. After an exceptionally weak start to the year, production profitability improved in the second quarter as volume picked up from the spring home buying season,” said Marina Walsh ...