Industry observers like Tim Howard, a former Fannie CFO, said that while reducing the corporate tax rate would lower the taxes the GSEs pay in the long run, it would drain the value of their DTAs in the short term.
Some in the industry believe the GSE common shares are essentially worthless with the junior preferred falling into the category of being a speculative bet.
Fannie Mae and Freddie Mac reported strong first quarter combined earnings this week of $5.0 billion, but that was down by almost half from the 9.9 billion they earned in the previous quarter. The GSEs attributed the quarterly decline to smaller interest rate increases in the first three months of the year and less income from refinancing. While Fannie earned $2.77 billion in the first quarter, a 44.9 percent sequential decline from the fourth quarter of 2016, Freddie earned $2.21 billion, which represented a 54.4 percent decline. “This is down from the fourth quarter of 2016, but up from a year ago. I know that this number has definite market sensitivity to it just beyond...
Treasury Secretary Steve Mnuchin has been vocal about his views on the GSEs the past week or so, and on May 1, he stated that he wants Fannie Mae and Freddie Mac to keep sending their profits to the Treasury per the terms of the preferred stock purchase agreement. Mnuchin kicked off the week by speaking at a conference hosted by the Milken Institute in Los Angeles. …
The Trump administration’s corporate tax rate proposal would not be a good look for Fannie Mae and Freddie Mac, according to a new analysis by Moody’s Investors Service. The ratings firm called a lower tax rate credit negative for the GSEs since it would affect their deferred tax assets and require a Treasury draw. Last week, top administration officials outlined Trump’s tax plan, which included cutting tax rates for businesses. Fannie Mae would have to write down its DTA by $15.6 billion and Freddie Mac by $5.7 billion if the corporate tax rate is reduced to 15 percent from the current statutory amount of 35 percent.
Although Fannie Mae’s new plan is designed to help clear the pathway for borrowers burdened with student loans to get a mortgage, there are both benefits and pitfalls to be aware of, according to the Consumer Federation of America. Fannie announced new policies last week that will help more borrowers with student debt qualify for a mortgage loan. The GSE noted that recent graduates average about $34,000 in student loan debt. Under the new policy, Fannie offers a number of changes. The first includes allowing borrowers to pay off their student loan debt and get a better interest rate. Homeowners with a minimum of 20 percent equity in their homes can get a cash-out refinance to pay off one or more student loans.
The House Financial Services Committee passed the updated version of the Financial CHOICE Act, which includes a new provision that lets the president fire the director of the Federal Housing Finance Agency at will and makes Congress responsible for setting the agency’s budget. The CHOICE Act 2.0 removed the original text, which recommended restructuring the agency to a five-member board. So while the current single-directorship structure would be maintained, the FHFA director can be asked to vacate the position by the president at any time. FHFA Director Mel Watt’s five-year term ends in early 2019. The provisions in this Republican bill would make widespread changes to the Dodd-Frank Act, but...
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