Speculators have been driving up the price of Fannie Mae and Freddie Mac junior preferred stock, hoping that given the GSE’s rapidly improving fortunes they could make a killing down the road. One hedge fund official told Inside The GSEs that Fannie junior preferred shares that had an original face value of $50 are trading in the secondary market for $8 to $9 a unit. Stock originally priced at $25 can be had for $5 and change. Fannie common stock is now trading at $2.20 per share compared to a 52-week low of just 9 cents. Fannie and Freddie recently reported record quarterly profits of $63 billion, a large chunk of it tied to the recapture of deferred tax assets. But on a pure operating basis – minus the DTA – their combined earnings are in the range of $12 billion, which is almost $50 billion annualized.
The watchdog agency charged with overseeing the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks said it plans to remain “active on the law enforcement front.” In its semi-annual report to Congress issued this week, the Federal Housing Finance Agency’s Office of Inspector General gave a tally of its accomplishments for the six-month period ending March 31, noting that it issued 13 audit, evaluation survey and white paper reports, and participated in several criminal and civil investigations.
Sens. Mark Warner, D-VA, and Bob Corker, R-TN, are working on legislation that would create a new federal mortgage guarantor, replacing Fannie Mae and Freddie Mac, according to trade and legislative officials familiar with the matter. However, as Inside The GSEs went to press this week, little was known in terms of specifics. “This would be a federal insurance entity, involving insurance wraps” said one trade group official. “It would involve a tiered risk-sharing system.”
Two repurchase lawsuits in the New York state court involving allegedly defective mortgage-backed securities and the state’s six-year statute of limitations have resulted in different outcomes for defendants, one of which could potentially limit MBS putback claims in the Empire State. In a May 13 decision, Justice O. Peter Sherwood of the Commercial Division of the New York Supreme Court dismissed with prejudice a $259 million MBS putback lawsuit against Nomura Credit & Capital. The decision was significant in part because it was the first among dozens of MBS putback cases currently pending in NY state court that was dismissed with prejudice on grounds that the six-year statute of limitations has expired, according to defense attorneys. Two affiliates of hedge fund Fir Tree Partners filed...
Ginnie Mae has proposed revising its buyout policy to eliminate inconsistencies in servicers’ repurchase practices and to discourage early buyouts of seriously delinquent loans from Ginnie MBS. Under the current policy, Ginnie Mae issuers may buy out delinquent loans if the borrower fails to make any payment for three consecutive months. However, many issuers have been applying the policy inconsistently, according to Michael Drayne, senior vice president for issuer and portfolio management at Ginnie Mae. Some servicers have been interpreting...[Includes one data chart]
Freddie Mac this week issued $1.04 billion of MBS backed by modified loans, making a small dent in the government-sponsored enterprise’s portfolio of distressed mortgages. The securities were issued under a new MBS prefix reserved just for modified loans, and Freddie officials indicated that the securities would be held in portfolio rather than sold in the market. All of the modified loans are fixed-rate mortgages, although $138.2 million of the loans were originally adjustable-rate mortgages. Most of the loan mods have 30-year terms. The loans in the first batch of mod MBS were originated...
When was the last time a financial institution operating under a government conservatorship started a new company, one that potentially stands to make a bunch of money, given the rapidly improving mortgage market? Answer: Never. This and other questions are being asked by mortgage executives who are trying to track the progress of the Federal Housing Finance Agency’s common securitization platform, a joint venture between Fannie Mae and Freddie Mac. FHFA officials...
Even as industry chatter increases about an effort to extend the eligibility date of the Home Affordable Refinance Program, analysts speculate that more HARP may be too much of a good thing for the mortgage market. Analysts at Bank of America Merrill Lynch and Keefe, Bruyette & Woods cite evidence of a “creeping goal line” to move back by 12 months the June 1, 2009, cut-off date for HARP eligibility. KBW cites a Saturday morning address by President Obama earlier this month on the subject of refinance. “While he did not specifically mention extending HARP, we think an announcement could be coming over the next few weeks to extend the eligibility back one year,” said KBW. More telling, said BAML, is...
The $443 million non-agency MBS, Chase’s second of the year, is set to receive AAA ratings with credit enhancement ranging from 6.90 percent to 10 percent for the top tranches.
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