Fairholme Capital Management, in a new letter to clients, once again lays out its argument for investing in Fannie Mae and Freddie Mac stock, but also takes a subtle, but polite, swipe at those opposed to a “recap-and-release” plan for the GSEs. “Only the disingenuous would assert that recapitalization of these companies would take decades and come at taxpayers’ expense, as if retaining earnings precluded the ability of each company to raise equity from private investors,” the mutual fund manager writes. Fairholme also notes that it owns GSE junior preferred shares – as opposed to common – because “…the provisions of the preferred stock contracts that...
Uneconomic price competition coupled with Congressional discord are some of the concerns analysts have expressed about the Mortgage Bankers Association’s newly released plan for GSE reform. The MBA’s proposal recommends multiple privately owned guarantors, preferably more than two, to increase competition in the market. Fannie Mae and Freddie Mac would be the first two and the MBA suggests that new guarantors receive a charter to enhance competition. “The more market participants that compete, the better for consumers, the economy and the system,” said Rodrigo Lopez, MBA chairman. GSE Reform Principles and Guardrails also suggests that Congress sanction an “explicit government guarantee for eligible securities in order to entice domestic and foreign investors to keep buying...
Fannie Mae recently made changes to its appraisal process and financial eligibility requirements for seller/servicers. In order to be able to use its discretion to enforce breaches of financial eligibility requirements that apply to seller/servicers, the GSE said it had to change certain polices. This allows Fannie, when warranted, to determine whether a breach of the lender contract should be called. “The changes include how lenders can comply with our requirements for maintaining minimum acceptable levels on capital,” said Jude Landis, Fannie’s vice president of credit policy. Prior to the change, explicit criteria in its selling guide limited Fannie’s ability to apply enforcement discretion.
Fannie Mae’s new regional headquarters under construction in the Dallas metro area is the target of criticism from Sen. Chuck Grassley, R-IA.He questions the Federal Housing Finance Agency’s management of the project in which the GSE is combining three locations into the one leased building. This comes on the heels of the FHFA Office of the Inspector General issuing a management alert late last year raising concerns about the cost of the consolidation and relocation of Fannie’s high-rise offices in Plano, TX. Grassley wants answers as to how the agency plans to address the issues identified in the IG management alert.
The Federal Housing Finance Agency this week extended the deadline for public input on a potential chattel-loan pilot to support manufactured housing. The reactions so far to the manufactured home portion of the final duty-to-serve rule, which included a request for input on chattel lending, have been mixed. In December, the FHFA gave the green light for Fannie Mae and Freddie Mac to begin pilot programs for the loans. Since then, the agency issued the RFI and extended the original deadline of Feb. 17 to March 21, 2017. The FHFA also hosted several listening sessions on the topic to get input. During the first session in Chicago, one organization called the FHFA’s DTS rule on manufactured home lending “intolerable.”
Fannie Mae’s recent dip into testing the single-family rental market in an agreement to fund up to $1 billion of collateral owned by Invitation Homes has caught the industry’s attention, and not necessarily in a good way. This is the first time the GSE has financed a large institutional single-family rental home investor. The Dallas-based company is a subsidiary of The Blackstone Group and has about 50,000 homes in its portfolio that it acquired from foreclosure auctions. However, some are now accusing Fannie of mission creep. The National Community Stabilization Trust President Robert Grossinger said, “I am perplexed to see Fannie Mae place a taxpayer guarantee behind the same private interests whose risky practices led to...
FHFA PLS Actions Update. The Federal Housing Finance Agency published an update on litigation it initiated against 18 financial institutions for securities law violations and fraud regarding private-label securities sales. Seventeen cases were settled in 2013 and 2014. JP Morgan Chase settled for $4 billion, Deutsche Bank settled for $1.9 billion and Goldman Sachs for $1.2 billion. A case against the Royal Bank of Scotland remains. The settlement money ultimately goes to the Treasury through the dividend sweeps. Fannie Exec Tapped for CFPB? Brian Books, Fannie Mae’s general counsel, is being considered by the White House to head the Consumer Financial Protection Bureau, according to a...
Industry observers and groups expressed support this week for President Trump’s move to put the Dodd-Frank Act under the microscope, with an eye toward scaling back its regulatory burden and possibly replacing at least parts of it with more pro-market reforms. Late last week, Trump signed an executive order that directs the Treasury secretary to consult with the heads of the agencies that comprise the Financial Stability Oversight Council, review the current regulatory structure for the U.S. financial system, and report back in 120 days. The order also lays...
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