Residential MBS production continued to gain speed in the second quarter of 2015 while non-mortgage securitization remained strong, according to a new Inside MBS & ABS analysis. A total of $419.42 billion of single-family MBS and non-mortgage ABS were issued during the second quarter, an increase of 21.2 percent from the first three months of the year. It was the strongest new issuance total since the third quarter of 2013 and marked the fifth straight quarterly increase since the market hit a cyclical low at the beginning of last year. Most of the gain came from the agency MBS sector, which totaled $352.73 billion in new issuance, a gain of 29.7 percent from the first quarter. All three agencies posted hefty gains, with the biggest coming at Ginnie Mae, where new issuance jumped 46.7 percent to hit $120.36 billion. A lot of Ginnie’s growth is coming from an unusual surge of refinance activity, which accounted for ... [ charts]
Average MBS guaranty fees charged by Fannie Mae and Freddie Mac last year were 7 basis points higher than in 2013, but the government-sponsored enterprises were less profitable last year, according to the Federal Housing Finance Agency. The average MBS guaranty fee was 58 bps in 2014, the FHFA reported, up from 51 bps in 2013. Both components of the g-fee – the loan-level upfront fee (15 bps) and the ongoing annual fee (43 bps) were up from the year before. For several years, 15-year mortgages had been more profitable for the GSEs than 30-year loans, so the fee hike in December 2012 was designed to even them out by raising the fees more for 30-year loans. But instead of narrowing the gap, 30-year loans were even more unprofitable last year, the FHFA said in its annual report on g-fee pricing released this week. This biggest factor may have been self-inflicted as both GSEs ...
A pay raise windfall is coming for the CEOs of Fannie Mae and Freddie Mac as the Federal Housing Finance Agency revealed this week the removal of a pay cap and approval of a raise that could reach $4 million each in annual total compensation. The GSE executives, Timothy Mayopoulos of Fannie and Donald Layton of Freddie, each earn approximately $600,000 without bonuses. This amount was part of a salary cap initiated by the FHFA in 2012 in response to concerns voiced by lawmakers. The compensation increase announcements were disclosed in separate filings made by Fannie and Freddie with the Securities and Exchange Commission.
Access to mortgage credit is expanding, according to panelists at a real estate conference in Miami last week, albeit slowly, and some agree alternative scoring models are needed. Franklin Codel, executive vice president with Wells Fargo, said the company has expanded its credit parameters on FHA, Fannie Mae and Freddie Mac loans. “About 10 percent, maybe a little bit more, of the lending we’re doing today, a year and a half or two years ago would have been either an exception or outside our policy. We have expanded our credit box at Wells Fargo, and I think a lot of other lenders have done the same thing.”
Fannie Mae has done away with its Desktop Underwriter fee to encourage more lenders to take advantage of the tool. The GSE also has plans to introduce a new loan delivery interface in late 2015.Fannie said the new loan platform will provide lenders with “a more intuitive and easier-to-navigate user interface, enhanced reporting capabilities, and improved delivery edit messaging.” Fannie plans to provide guidance to customers on the new system in the coming weeks but said it’s being designed to help lenders deliver loans more efficiently and with greater transparency. Len Israel, president of mortgage banking with Flagstar Bank, said “Flagstar would welcome any new delivery system Fannie may have on tap to streamline processes without sacrificing quality.”
Two activist investors have authored a report highlighting the debate surrounding the facts and numbers that led to Fannie Mae and Freddie Mac being placed into conservatorship in 2008. In the 27-page report, Adam Spittler and Mike Ciklin argue that the Treasury unfairly justified GSE conservatorship via “tricky accounting” methods. In the second quarter of 2008, the report said Fannie reported a net loss of $2.8 billion. But they noted some discrepancies. “As per our analysis, we must add back the non- cash Loan Loss Reserve of $5.5 billion. After this adjustment, Fannie Mae shows a cash net income figure of $3.2 billion. This is poor evidence of a ‘failing business model,’” said the report.
The Federal Housing Finance Agency released its performance review of first-quarter earnings for the GSEs this week and it stands to reason that Fannie Mae and Freddie Mac could post strong earnings for the second quarter. Here’s why: loan production was decent, which means guaranty fee income should be as well. But the real gain could come from rising interest rates. When rates fell during the first quarter, Fannie and Freddie booked $4.2 billion losses from the markdown on the value of derivative securities they use to hedge. Rates increased in the second quarter, which means the question now becomes: how much of a gain will the two book? Fannie Mae and Freddie Mac reported continued profitability in the first quarter of 2015...
Wells Fargo was the top seller to Freddie Mac in 2Q with $12.6 billion, according to newly compiled figures from Inside Mortgage Finance, but BofA was a somewhat close second...
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