The Federal Housing Finance Agency’s official watchdog recommended in a report this week that the agency devise a way to measure how its guaranty fee hikes of the past two years have actually increased the participation of private investment in the mortgage-backed securities sector. As Fannie Mae’s and Freddie Mac’s conservator, the Finance Agency directed the GSEs to increase their guaranty fees as a means to encourage greater private-sector investment in mortgage credit risk, reduce their dominant position in housing finance and limit potential taxpayer losses, the FHFA Office of Inspector General report noted. “The enterprises’ average combined guaranty fees have nearly doubled since 2011 – due to legislation and FHFA’s initiative – and FHFA plans further gradual guaranty fee increases to spur private-sector mortgage investment,” said the OIG. “However, it is not yet clear how high FHFA must increase guaranty fees to achieve its objectives.”
California remains the top source of new single-family mortgages for Fannie Mae and Freddie Mac, even as Fannie remains the dominant GSE in terms of production through the first half of the year, according to an Inside The GSEs analysis. A total of $160.3 billon home loans on Golden State properties were securitized by the two GSEs during the first six months of 2013, accounting for 23.1 percent of their total business for the half year. That was up 21.2 percent from total California production during the first six months of 2012 as the overall GSE market rose 20.2 percent from a year ago.
While Congress drafts and debates different legislative remedies to GSE reform that could take at least two years to materialize, regulators and administration officials can, and must, begin to act now to implement a mortgage finance solution, the head of the Mortgage Bankers Association said this week. At a press briefing, MBA President and Chief Executive Officer David Stevens rolled out the trade group’s five-point plan – “Key Steps on the Road to GSE Reform” – that could be immediately implemented by the Federal Housing Finance Agency and/or by Fannie Mae and Freddie Mac without the need for authorizing legislation and without disrupting the housing finance system. “Given the recent market recovery, some worry that if the status quo were to change, lenders could end up being in a worse position and lose some of the parity gained,” said Stevens. “We believe these steps are extremely important to support a competitive, robust and sustainable housing finance system regardless of the ultimate path taken by policymakers in Washington.”
A Manhattan federal judge earlier this month dismissed a class-action lawsuit against Standard & Poor’s Financial Services after finding no evidence that the rating agency defrauded investors when it gave a favorable rating to Fannie Mae stock prior to the financial crisis.The suit, filed in December 2012 on behalf of potentially hundreds of thousands of investors who bought stock in an offering by Fannie in May 2008, four months before the GSE was taken over by the government, alleged that S&P knowingly misrated Fannie’s stock. Valued at about $25 per share when it was issued, the stock dropped to about $3 per share after Fannie’s government conservatorship began in September 2008.
The purchase-mortgage market in the first half of 2013 has shown solid gains over the same per-iod last year, especially in a handful of booming state markets, but different lenders are having widely varying success getting on top of the wave. A new Inside Mortgage Finance analysis of Fannie Mae and Freddie Mac loan-level data shows that 20.2 percent of single-family mortgages securitized by the two government-sponsored enterprises in the first half of the year were purchase-mortgage loans, and total volume was up 31.1 percent from the same time last year. First-time homebuyers accounted...[Includes two data charts]
The recent sharp increase in mortgage interest rates has priced some borrowers out of the market and motivated others to complete home purchases, according to industry participants. If interest rates stay near current levels, home affordability is expected to remain strong, encouraging home purchases. The market for non-distressed properties is still healthy, according to results from the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Average time on market for non-distressed properties is declining, the average number of offers is increasing and sales-to-list price ratios are at elevated levels. The trends have been driven...
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