New margin rules for broker-dealers may trip up mortgage bankers using mortgage-backed securities to hedge their businesses, according to experts discussing various liquidity issues during last week’s Secondary Market Conference sponsored by the Mortgage Bankers Association. Fannie Mae has traditionally reserved the right to invoke margin calls if the government-sponsored enterprise needed to, even before the Treasury Practices Market Group issued new best practices on the subject, said Renee Schultz, a Fannie vice president, but this right was rarely used. When the TPMG recommendation came out, it appeared to be aimed at systemic risk. But since it was addressed to all broker-dealers, Fannie adopted it. Fannie has implemented...
Look for the various lawsuits filed by private owners of Fannie Mae and Freddie Mac stock against the federal government to take a “very long time to be decided,” as the courts may take up to a year to resolve just the introductory motions, according to a legal expert. Beyond that, the litigation over shares in the two government-sponsored enterprises could stretch out to the U.S. Supreme Court. Brooklyn Law School Professor David Reiss, speaking during a Bloomberg Industries webinar last week, noted that lawsuits stemming from the savings and loan debacle of 20 years ago give a sense of the possible timeframe, but litigation brought by disenfranchised Fannie and Freddie investors against the government offers an entirely different and deeper set of legal complexities. “These are...
A lack of overwhelming support in the Senate for legislation to reform the government-sponsored enterprises has shifted the housing finance policy debate from reform to preservation. If Congress fails to act, the Federal Housing Finance Agency is set to drive mortgage policy for years to come. Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, initially delayed the Senate Committee on Banking, Housing, and Urban Affairs’ recent markup of S. 1217, the Housing Finance Reform and Taxpayer Protection Act, in an effort to increase support for the GSE reform bill. But they failed to gain favor with a number of liberal members of the committee, and the bill ultimately passed on a 13-9 vote seen as dooming prospects for comprehensive action on GSE reform in Congress. Sens. Chuck Schumer, D-NY, and Elizabeth Warren, D-MA, were...
In his report, Guggenheim analyst Jaret Seiberg writes, “There is still anger in Congress over having to put cash into the enterprises in the first time."
Despite the not-so-good news on applications, one warehouse lender suggested to IMFnews that larger lenders are suffering much more than smaller firms.
“These are factually and legally complex cases and don’t trust anyone that thinks this is a slam dunk for any one of the parties,” predicted legal expert David Reiss.
Here’s what the current state of mortgage banking boils down to: Can the industry survive on $1 trillion to $1.2 trillion in production a year through 2015?
The slowdown in VA activity in the last quarter of 2013 spilled over into the first quarter of this year as lenders reported a 13.0 percent decline in loan production during the period, according to an Inside FHA Lending analysis of agency data. The downward trend in volume began at the end of the first quarter last year although VA still considered 2013 a record year for VA originations. VA lenders reported $19.5 billion in total production for the quarter, down from $22.4 billion in the previous quarter. Production, likewise, dropped 47.9 percent this year compared to the same period last year. Despite the slowdown, lenders remain optimistic about the VA market. “We have spent a lot of time understanding the perils of lending to veterans and learning to deal with the losses, and we are all in with VA lending,” said one lender. “When you do VA loans you talk about having ... [1 chart]
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