Some in the industry have criticized Freddie Mac’s Integrated Mortgage Insurance credit-risk transfer program, but its founders recently spoke out to clear the air on a number of misconceptions. Top executives at both Arch Capital and Freddie defended the new credit-risk transfer program in which they are partners. A group of mortgage insurers complain that the program creates an unlevel playing field and promotes “capital arbitrage.” Andrew Rippert, CEO of Arch Capital, said during a recent industry conference that counterparties must keep up with changing times. He said one of the goals of IMAGIN is to deliver a more efficient form of mortgage insurance at a lower cost to borrowers.
The GSEs are preparing to issue their first credit-risk transfer under the real estate mortgage investment conduit structure in 2019 and analysts predict, while it will be a boon for new investors, it’ll take time to ramp up. Freddie Mac plans to issue its first credit-risk transfer deal as a trust execution this month in preparation for the new REMIC structure, according to Michael Reynolds, vice president of credit-risk transfers. The GSE has been issuing its Structured Agency Credit Risk notes as debt and the new structure will be a more traditional trust issuance.
Freddie Mac’s recent decision to extend a line of credit to a nonbank seller/servicer has set off a mini firestorm, with some industry stakeholders taking issue with a government-controlled company providing a service readily available from the private sector. As one industry consultant phrased it: “It sounds to me like they’re undercutting the warehouse banks.”The credit in question is an LOC collateralized by a mortgage-servicing portfolio whose size is reportedly in the range of $5 billion to $7 billion. The loan amount was not released, but could total $50 million, said one advisor who claimed to have knowledge of the transaction.
Investors arguing that the net worth sweep was unjust hit a roadblock late last week when the Seventh Circuit Court ruled that they can’t claim GSE profits post-conservatorship.This latest ruling also led the Federal Housing Finance Agency to try to influence the outcome in similar cases against the agency. The shareholders sought to overturn a 2017 ruling in which a federal judge went against them and granted the government’s motion to dismiss the complaint.In this case, Christopher Roberts, et al., vs. the Federal Housing Finance Agency et al., similar to other shareholder complaints, investors argued that the...
Fannie Mae’s latest two front-end Credit Insurance Risk Transfer transactions included a record number of reinsurers taking on about $20 billion in unpaid principal balance. There were 22 reinsurers in all participating in the GSEs’ fifth and sixth transaction. The risk transfer will take place before Fannie’s acquisition of the covered loans. And insurance coverage will be in effect immediately after the loans are acquired.They both became effective in March. The GSE explained that CIRT FE 2018-1 will shift a portion of the credit risk to a group of reinsurers on a pool of 21 to 30-year single-family fixed-rate loans.
While technological advances such as automated evaluations are improving the quality of the origination process, Fannie Mae said that the industry will still need appraisals. Renee Schultz, Fannie’s senior vice president of single-family, said everyone gets so concerned about this technology but it’s really just bringing the industry to the 21st century. “Even doctors now are going away from paper,” she added. “All of the technology that we’re working on is about making the process more simple, more certain, and more transparent for lenders and servicers and investors,” said Schultz, while speaking at a Credit...
Freddie Mac Reviewing Support to Potential Predatory Lender. Freddie Mac is looking into a loan it guaranteed as part of an affordable single-family rental pilot program. This comes after a housing advocacy group filed a lawsuit in federal court in April that argued an investor in Indianapolis was selling rental homes through a rent-to-own arrangement that is supposed to be excluded from the program. Casas Barata Aqui allegedly targets Latino buyers and is in violation of the Fair Housing Act. The group received financing that was a part of loans issued by CoreVest Finance. Fannie Promotes Chief Risk Officer. Fannie Mae recently promoted Kimberly Johnson from chief risk officer to executive vice president and chief operating officer.
A former Fannie executive (pre-federal takeover) said that when he worked at the GSE, “We looked at doing this, but were told it wasn’t in the charter and so we didn’t proceed.”
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