President Obama this week affirmed his view that Fannie Mae and Freddie Mac should be wound down through a “responsible transition” to a new mortgage finance system that preserves the 30-year fixed-rate mortgage while emphasizing private capital. In a highly anticipated speech in Phoenix this week, Obama listed among his key reform principles that private capital should be in a first-loss position and the government should provide an appropriately priced, explicit guaranty to ensure continued access to the 30-year FRM. Those are the major components of the bipartisan reform legislation drafted by Sens. Bob Corker, R-TN, and Mark Warner, D-VA, although the president did not mention the bill by name. Obama also said...

The wrath of Wall Street has descended upon Richmond, CA, after the city council adopted a plan using eminent domain to seize underwater mortgages, as a last resort, and resell them to beleaguered homeowners at a lower price. The American Securitization Forum, the Securities Industry and Financial Markets Association and the Association of Mortgage Investors condemned Richmond’s decision to implement an April 2 agreement with Mortgage Resolution Partners (MRP) to use eminent domain to address the city’s severe foreclosure problem. The city became the first municipality in the country to adopt such an approach, though not the first to consider the idea. Richmond, like many California cities and municipalities, was hit...

The Senate Committee on Banking, Housing and Urban Affairs this week approved bipartisan legislation to strengthen FHA solvency and oversight authority over lenders, paving the way toward dealing with the larger issue of housing finance reform. Introduced by Committee Chairman Tim Johnson, D-SD, and Ranking Minority Member Mike Crapo, R-ID, the FHA Solvency Act (S. 1376) passed by a vote of 21-1. The approved bill included...

Fannie Mae, Freddie Mac and their government conservator are all calling on the Consumer Financial Protection Bureau to amend proposed changes to its mortgage servicing rule because certain provisions would inhibit similar servicing goals put forth by the Federal Housing Finance Agency. In a comment letter, the FHFA said its servicing alignment initiative has pushed for improved practices that are similar to the goals of the CFPB rule, but “several provisions in the recently proposed amendments would actually make those goals more difficult to achieve.” The four areas of the CFPB proposal that are especially important cover...

Policymakers should replace Fannie Mae and Freddie Mac with mandatory mortgage insurance and a catastrophic guaranty from the federal government, according to a new paper from Promontory Financial Group, a consulting firm. The paper was prepared at the request of Genworth Financial and Promontory said the mortgage insurance firm didn’t influence the recommendations. Under Promontory’s proposal to reform the government-sponsored enterprises, private entities would both issue and guarantee their own mortgage-backed securities, private MI would be required on a loan-level basis for mortgages securitized in the new system, and a government agency would provide a back-up guaranty on the MBS payable only upon default by the MBS issuer. “Our proposal is...

Several provisions in FHA solvency legislation are emerging as potential hot-button issues for lenders, according to legal experts. There is growing industry concern over indemnification provisions, which appear to be more stringent in the Senate’s FHA Solvency Act of 2013 than in H.R. 2767, Protecting American Taxpayers and Homeowners Act (PATH Act), which the House Financial Services Committee passed this week. Under Title II (FHA reform) of the PATH Act, a lender may be required to indemnify the FHA if the agency determines that ...

The House Financial Services Committee this week reported out a legislative package of housing finance system reforms, including measures designed to reduce FHA’s role in the mortgage marketplace, strengthen lender oversight and avoid a potential taxpayer bailout. The bill, Protecting American Taxpayers and Homeowners Act (H.R. 2767), passed by a vote of 30 to 27 despite mixed responses from industry experts, academics, financial trade associations and consumer advocates. Critics called for changes. Offered by Rep. Jeb Hensarling, R-TX, chairman of the Financial Services Committee, the bill proposes ...

FHA officials, industry groups and consumer advocates appear to be leaning more towards a Senate FHA reform bill that is moderate and far less ambitious than legislation approved by the House Financial Services Committee this week. Introduced by Senate Banking Committee Chairman Tim Johnson, D-SD, and Ranking Minority Member Mike Crapo, R-ID, the FHA Solvency Act of 2013 “focuses on the right issues, not like the House bill, which tries to dramatically alter the program and affect borrower eligibility,” said an industry observer. Testifying as the sole witness at a Senate Banking Committee hearing on FHA solvency this week, FHA Commissioner Carol Galante said ...

A former FHA commissioner said he supports a proposal in the Protecting American Taxpayers and Homeowners Act (PATH Act) to spin off the FHA from the Department of Housing and Urban Development as an independent government-owned corporation. Brian Montgomery, who was assistant secretary for housing and head of the FHA during the Bush administration, said the separation, if enacted, would transfer authority, resources and personnel from HUD to the FHA to manage the insurance fund. “This is something I have advocated both during and after my more than four-year tenure as FHA commissioner,” said Montgomery, who ...

The FHA is trailing Fannie Mae, Freddie Mac and the Department of Veterans Affairs in the disposition of real estate-owned properties, according to a new study from the Government Accountability Office. The study found that FHA’s net proceeds from REO sales from January 2007 through June 2012 were about 4 to 6 percentage points lower than Fannie’s and Freddie’s returns. The differences in combined returns between FHA and the government-sponsored enterprises persisted at an estimated 2 to 5 percent even after controlling for differences in value, location, market conditions and other relevant factors. In addition, the FHA took about ...