New rules set to take effect next month that would permit eligible underwater homeowners holding Fannie Mae and Freddie Mac mortgages to leave behind the home and the remaining loan debt are designed to make the best out of a bad situation, say the GSEs. Starting March 1, GSE servicers will have expanded authority to approve a deed-in-lieu of foreclosure to non-delinquent Fannie or Freddie borrowers who can no longer stay in the home and can demonstrate a “hardship.”Although deed-in-lieu servicing guidelines were issued by Fannie and Freddie in November, a published report this week gave it renewed attention and speculation that the GSEs were letting borrowers off too easily.
The Federal Housing Finance Agency and other government regulators could “permanently enshrine” Fannie Mae, Freddie Mac and other government housing entities “as the only large-scale source of mortgage credit in our country” if they fail to design a new mortgage rule with care, says one senior Republican senator. Sen. Bob Corker, R-TN, a member of the Senate Banking, Housing and Urban Affairs Committee, in a letter last week urged federal regulators to “simplify and synchronize underwriting standards for new mortgage lending rules to avoid permanently regulating the private sector out of the housing finance business.” Corker, in his letter to the FHFA, Federal Reserve, Department of Housing and Urban Development, and the Securities and Exchange Commission, among other agencies, noted that the proposed, but yet to be finalized, “qualified residential mortgage” rule exempts loans sold to Fannie, Freddie and the Federal Housing Administration.
Fannie Mae and Freddie Mac dominated the residential mortgage market to a greater degree in 2012 than the GSEs ever had before, according to a new Inside The GSEs analysis. Fannie and Freddie issued a whopping $1.675 trillion of new single-family mortgage-backed securities last year, which equaled 75.7 percent of total market production. That was up from 72.1 percent in 2011 and just shy of the record 77.0 percent the GSEs recorded back in 2008. It was also the biggest annual output since 2009, when Fannie and Freddie issued $1.776 trillion in new MBS. Although part of the increase in GSE share of new MBS issuance last year resulted from the rapid growth of the Home Affordable Refinance Program, their peak market share for the year came early, during the first quarter. HARP activity was heaviest during the second and third quarters.
A senior House Democrat has again filed legislation seeking a Congressional investigation of Fannie Mae’s and Freddie Mac’s past and present management and decision making authority.Filed by Rep. Marcy Kaptur, D-OH, in mid-January, H.R. 234, The Fannie Mae and Freddie Mac Investigative Commission Act, would empower a Congressional body to “investigate the policies and practices engaged in by officers and directors at Fannie Mae and Freddie Mac responsible for making the decisions that led to the enterprises' financial instability and the subsequent Federal conservatorship” of the two GSEs. The Fannie Mae and Freddie Mac Investigative Commission would be composed of eight lawmakers – appointed by House and Senate leaders from both political parties – to examine the practices, decisions and policies of the two GSEs that affect the financial stability of the mortgage firms.
A large and potentially lucrative RFP issued several months ago by FHFA regarding its strategic plan for taking the GSEs to the next stage in their evolution has yet to be awarded.
Underwater homeowners who have remained current on their payments will be able to relinquish their houses and cancel their debt under the terms of a new GSE policy change to take effect in March.
An Obama administration official stressed that the White House is working to craft a comprehensive plan for housing finance reform but wants input from industry participants.tasked with crafting a plan to reform the government-sponsored enterprises provided a strong response yesterday to criticism of the White House’s lack of progress on GSE reform.
Although Fannie Mae has set purchase limits on how much production newly approved seller/servicers can sell to the GSE, Freddie Mac has shied away from such caps.
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