Fannie Mae’s new mortgage insurance pilot announced last week is troubling to mortgage insurers who continue to question the GSEs’ blurring of lines between primary and secondary markets. Fannie’s Enterprise-Paid Mortgage Insurance program is billed as just a way to give lenders another option for obtaining mortgage insurance for high loan-to-value loans. Under the pilot, Fannie will arrange primary MI coverage for existing private MIs or a panel of affiliated reinsurers. Fannie said the new option allows the GSE to streamline the operational requirements of participating lenders, increase the certainty of coverage and better manage Fannie’s counterparty risk. Fannie officials explained that they expect traditional mortgage insurance to be the primary cover for loans with LTVs over 80 percent.
The Milken Institute said the GSEs’ duty-to-serve policy is more complicated than other affordable housing reform issues because it forces the secondary market to boost lending in the primary market and assumes those private firms are underperforming. The conservative think tank published a paper this week authored by Michael Stegman and Phillip Swagel on the role of duty-to-serve in which it examined the policy and its potential impact on the mortgage market. While DTS currently encompasses manufactured housing, rural housing and affordable housing preservation, Milken said housing finance reform debates have centered on creating a DTS that includes areas beyond those three targets.
There was some discussion as to whether credit scores serve as a good mechanism to achieve cross subsidization as well as a need for better data to manage risks, during an Urban Institute panel discussion last week focused on subsidies and GSE pricing. Credit scores aren’t a good tool to achieve cross-subsidization, according to Andrew Rippert, CEO of Global Mortgage Group at Arch Capital. He said the goal should be to serve low- and moderate-income borrowers, not necessarily to subsidize people who make a lot of money but have bad credit scores and don’t manage their credit. “Our belief is that we can do a lot better if we were very explicit about the risk in the system with regards to FICO scores,” Rippert said.
The GSEs are picking winners, not helping to level the playing field and they are blurring the lines between primary and secondary market activities, according to panelists expressing concern over the mortgage giants’ growing market share. As Fannie Mae and Freddie Mac continue to introduce and test pilot programs, the industry questions why the GSEs appear to be expanding their activities instead of shrinking them. During a panel sponsored by the American Enterprise Institute late last week, six participants from several think tanks and the mortgage industry discussed some of the alleged...
The deadline for comments on the Federal Housing Finance Agency’s proposed capital rule for Fannie Mae and Freddie Mac does not close until next month and so far, there have been about 25 official written comments registered and various opinions floated around Washington. Michael Stegman, senior fellow at the Milken Institute, said he was encouraged by FHFA’s proposed capital rule for the GSEs and Ed DeMarco, president of the Financial Services Roundtable Housing Policy Center, said the proposal should compel everyone to think about the implications. “This rule is much too important and far too complex to be digested and commented on in 60-days,” he said. “A critical question in evaluating this...
Mnuchin Wants GSE Reform in Next Congress. Treasury Secretary Steven Mnuchin is worried about Fannie Mae and Freddie Mac expanding their already large role in the mortgage market and said he’s not against taking administrative action absent a legislative solution for reforming the mortgage giants.During the secretary’s annual testimony to the House Financial Services Committee late last week, Mnuchin reiterated his position in wanting lawmakers to reform the GSEs and said he expects that to happen in the next Congress. “This is something that I am determined, in the next Congress, should be a major focus of ours, hopefully on...
As refinance business declines, the government-sponsored enterprises are stepping up efforts to help lenders produce more volume in other areas. At the California Mortgage Bankers Association’s secondary market conference this week in San Francisco, officials from Fannie Mae and Freddie Mac touted various efforts to help lenders and ultimately prop up GSE MBS issuance.
While the GSEs have been engaging in risk-based pricing for mortgage guarantees since the crisis, very large cross subsidies remain, according to one panelist from the Federal Reserve…
CoreLogic is touting a new on-demand service that makes residential condominium lending a less strenuous process for lenders even as Fannie Mae and Freddie Mac warm up the market with policy changes to drum up new business. The new service, CondoSafe Express, simplifies condo lending by taking over the extra layer of work lenders must perform to originate a condo loan. “Lenders not only have to get a borrower’s credit report, verify income and ... [Includes one data chart]
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