Freddie Mac CEO Donald Layton said the GSE is exploring the single-family rental market, in consultation with the Federal Housing Finance Agency, and touted the affordability aspect of the plan. “We believe it’s appropriate to enter that market with care and where there are additional social benefits, and significant affordable characteristics. So it’ll be on a smaller scale,” he told Inside The GSEs. “We have permission to go for a limited amount of volume to learn about the business.”This is in contrast to Fannie Mae’s entry into the single-family market. Earlier this year Fannie did a $1 billion deal with Invitation Homes as a pilot program.
The Mortgage Bankers Association released a paper focused on how the various aspects of its reform proposal could impact consumer costs and concluded any impact would be minimal.The trade group explained that costs under the MBA proposal, which calls for multiple privately owned guarantors, are likely to be similar to costs in today’s mortgage market. “While the precise impact on consumer costs from true housing-finance reform may be difficult to gauge, we know that attempts to shortcut reform through recap and release would lead to much higher costs for consumers,” said the MBA, adding that global investors have been clear that they don’t want to return to a world of implicit guarantees.
In preparation for the launch of the uniform-mortgage backed security in 2019, Freddie Mac will release new single-security-related disclosures for investors beginning on Aug. 28. The UMBS was originally scheduled to launch next year but was delayed to allow more time for development, testing and validation of controls. The disclosures are in conjunction with the single-security initiative, designed to increase liquidity and fungibility in the $3.5 trillion to-be-announced MBS market. Mark Hanson, Freddie’s senior vice president of securitization, called the launch a “successful joint effort among several parties that will enhance the U.S. mortgage industry by modernizing the TBA market for both Freddie Mac and Fannie Mae.”
The Federal Housing Finance Agency Office of Inspector General said the FHFA’s suspended counterparty program needs better oversight. In a recent audit of counterparty risk, the IG found deficiencies in the FHFA’s Office of General Counsel review of suspended counterparties. Suspended counterparties are businesses that have engaged in misconduct. The suspended counterparty risk management programs were designed to manage counterparty risk through various means that include maintaining eligibility standards, evaluating counterparties’ financial conditions, monitoring exposure to potential losses, and working with counterparties to limit realized losses. Fannie Mae, Freddie Mac and the Federal Home Loan Banks can also chose to cease doing business with counterparties that appear to have unacceptable risks.
Real estate investment trusts that focus on the residential MBS market reported a modest increase in their portfolios during the second quarter of 2017. The 15 mortgage REITs tracked by Inside MBS & ABS held a combined $233.34 billion of residential MBS at the end of June. That was up 1.4 percent from the end of the first quarter, though down 2.9 percent from the midway point in 2016. Ten of the REITs reported...[Includes one data table]
Fannie Mae and Freddie Mac continued to lean heavily on their structured debt programs to meet credit-risk transfer goals originally set by their regulator that have become key features in their business strategies. The two government-sponsored enterprises issued $4.48 billion of credit-risk transfer debt during the second quarter, a modest 5.8 percent increase from the first three months of the year. Overall MBS issuance by the two GSEs was down during that period, but their CRT debt issuances are typically linked to MBS issued six months prior. Fannie’s Connecticut Avenue Securities program produced...[Includes one data table]
The clock is ticking on the phrase-out of the London Interbank Offered Rate, or LIBOR, a benchmark the mortgage market has relied on for the past few decades. Now comes the debate: is it something to worry about or no big deal? A new report from Bank of America Merrill Lynch suggests that when it comes to MBS at least, the changes will be felt, depending on the sector. “Certain agency MBS cash flows will be impacted directly,” BAML notes. “For example, underlying cash flows on LIBOR-indexed hybrid ARMs may change if an alternate index is chosen.” The researchers noted...
This year, nonprime production across the U.S. might top $3 billion to $4 billion at best. At its peak last decade, it was a $1 trillion a year business. That’s not a misprint…
Watt, a former Congressman, wants Congress to reform the GSEs legislatively to solve their conservatorship status and find a path forward for the two enterprises.
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