Industry insiders are continuing to play the speculation game regarding who might replace Mel Watt as director of the Federal Housing Finance Agency, a position that holds immense power given the role Fannie Mae and Freddie Mac play in the housing market. So far, analysts and lobbyists have identified a handful of potential candidates who might replace the director when his five-year term ends early next year, including Treasury counselor Craig Phillips; Mark Calabria, chief economist to Vice President Mike Pence; and Michael Bright, EVP of Ginnie Mae, among others. Another candidate who has been mentioned is Comptroller of the Currency Joseph Otting, who was sworn into that post in late November of last year.

There are benefits to merging Fannie Mae and Freddie Mac with the Department of Housing and Urban Development, according to one conservative think tank opining on the future of the GSEs.The American Action Forum said because the government-sponsored enterprises are being funded in part by taxpayers, and treated as being on the federal budget, the goal should be to align policy with the budget. “This raises an intriguing possibility. Merge Fannie and Freddie into the Department of Housing and Urban Development,” said Douglas Holtz-Eakin president of the AAF and a former director of the Congressional Budget Office in the early 2000’s.

The Federal Housing Finance Agency plans to propose a new risk-based capital rule for the GSEs based on current operations to replace the old Office of Federal Housing Enterprise Oversight capital regulation.But just like the OFHEO rules, the proposed ones will be suspended as long as Fannie Mae and Freddie Mac are in conservatorship. Having a capital framework is useful when it comes to evaluating business decisions, according to FHFA Director Mel Watt. But he was quick to emphasize that the proposal is not based on some grand scheme to promote recapitalizing the GSEs. In fact, it’s largely an exercise that Watt said is...

Brookings Encourages Fannie to Expand CRT Market. The Brookings Institute applauds Fannie Mae’s credit-risk transfer program in a paper published this week, but said the GSE should increase the amount of credit it transfers to investors. The think tank also noted that guaranty fees that Fannie mortgage originators chose should be based on the implied g-fee paid to investors. Moreover, Brookings said that Fannie should continue to examine how much risk they should transfer using the Connecticut Avenue Structure program and look at past losses during times of stress. Freddie Prices Largest STACR SPI Deal to Date. Freddie Mac had its second Structured Agency Credit Risk - Securitized Participation Interests (STACR SPI) deal of the year. The $263.5 million STACR 2018 and SPI2 securities are backed by participation...

Ginnie Mae this week warned that VA refinance loans, particularly Interest Rate Reduction Refinance Loans, may not be included in any new pool or loan package if they do not comply with the newly enacted law protecting VA borrowers from predatory lending. The agency announced new pooling guidance pursuant to the loan-seasoning provision in the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law last week (See details of the new law below ). The changes affect issuances of Ginnie mortgage-backed securities on or after June 1, 2018, but do not affect MBS issued before that date, according to the guidance. However, lenders seeking a guarantee after June 1 may have to recalibrate their loan-origination platforms to exclude refis that do not meet the new law’s seasoning requirements, said the Structured Finance Industry Group. The ...

Provisions to protect VA borrowers from abusive lending are now in effect after President Trump signed into law a broad regulatory relief package last week. The VA measures are part of S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which the U.S. Senate passed on March 14 and the House approved on May 22. The bipartisan measures became effective for VA loan applications taken on or after May 25, 2018. They were part of the bipartisan Protecting Veterans from Predatory Lending Act, which Sens. Thom Tillis, R-NC, and Elizabeth Warren, D-MA, introduced in January and later incorporated in S. 2155. The bill was designed to protect VA borrowers from loan churning or serial refinancing and specifically targeted the VA’s Interest Rate Reduction Refinance Loan program, where the churned VA loans ended up. According to the agency, such practices not ...

The tailored Dodd-Frank reform bill signed into law by President Trump this month should be a boon to investors in Ginnie Mae securities because it will reduce loan churning, but there could be some bumps along the road until all the details are ironed out.

Housing-finance reform won’t happen in the near future and the government-sponsored enterprises are busy expanding their footprint instead of reducing it, according to lawmakers voicing concerns during a Senate Banking, Housing and Urban Affairs Committee hearing this week.

A key Treasury Department official said regulatory reform could help rejuvenate the non-agency MBS market but offered little guidance on the future prospects for Fannie Mae and Freddie Mac.

Federal Housing Finance Agency Director Mel Watt said one of the challenges of being in a decade-long conservatorship is the inability to make strategic decisions on everyday operations. And it doesn’t look like that problem will be solved anytime soon. During a Senate Committee on Banking, Housing and Urban Affairs hearing this week, he said the decision to relocate Fannie Mae’s headquarters is an example of trying to make decisions for the GSEs amid an uncertain future. “Without looking somewhat down the road, FHFA and the enterprises would both lose their momentum and jeopardize day-to-day success.