Fitch Ratings released its “initial perspective” this week on how the Consumer Financial Protection Bureau’s ability-to-repay rule and requirements for qualified mortgages will impact ratings for new non-agency MBS. That makes Fitch the first rating service to provide formal insight on how the CFPB rule, which takes effect Jan. 10, will impact jumbo mortgage securitization. Fitch is considering requiring issuers to state the QM status of any mortgage to be included in an MBS, putting a greater emphasis on lender compliance and due diligence, and a focus on representations and warranties for compliance with the ATR rule and QM standards. “The rating approach will likely focus...
A reformed housing finance system should first and foremost put the risk and rewards of mortgage lending in the hands of “private actors,” with the government playing a key role to reduce the impact of the inevitable financial-market failures, “especially when their failures are exacerbated in a cyclical downturn,” an Obama administration official noted this week. Speaking at an Urban Institute event, James Stock, a member of the Council of Economic Advisers, outlined the administration’s central theme of “cyclical resilience” or the need for the mortgage finance system to provide liquidity at “reasonable rates” during both good and bad times. “A cyclically resilient housing finance system provides...
A Miami-based investment management firm, one of the largest junior preferred shareholders of Fannie Mae and Freddie Mac, this week offered to buy and operate the MBS guaranty businesses of the two government-sponsored enterprises with $52 billion of private capital and “a business plan that is sustainable with or without a federal reinsurance plan.” In a four-page letter to Federal Housing Finance Agency Acting Director Edward DeMarco, Bruce Berkowitz, chief investment officer of Fairholme Capital Management, proposed to form two new state-regulated insurance companies to own and operate the assets of Fannie and Freddie “that are relevant to the continuing insurance business.” Under the Fairholme plan, the new MBS guarantors would be capitalized...
The Federal Housing Finance Agency has directed the two GSEs to accelerate their portfolio trimming by focusing on “less-liquid” assets other than their own MBS.
Federal Reserve Vice Chair Janet Yellen, President Obama’s nominee to replace Fed Chairman Ben Bernanke, did not deviate in the slightest from Bernanke’s support for a policy that has resulted in the Fed buying two thirds of new agency MBS production, during her nomination hearing before the Senate Banking, Housing and Urban Affairs Committee this week. “The Federal Reserve is using its monetary policy tools to promote a more robust recovery,” Yellen said. “A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.” Sen. Mike Crapo, R-ID, ranking member of the committee, took issue...
Investors and analysts are starting to wonder if Nationstar Mortgage bit off more than it could chew with its multi-billion dollar servicing purchases of the past two years. Sources say the company recently hired PricewaterhouseCoopers as a consultant to look at its quickly growing $375 billion servicing portfolio. A spokesman for the company dismissed...
Will the banks that bought “junior” preferred stock in Fannie Mae and Freddie Mac prior to the housing bust ever be made whole? Will investors that purchased the preferred after that time eventually be rewarded for the gamble they took on such a highly speculative investment? Those two questions look a lot more interesting these days thanks to continued strong earnings from the two government-sponsored enterprises. According to filings with the Securities and Exchange Commission, Fannie and Freddie say...
Fairholme owns $3.5 billion (face value) of GSE junior preferred stock. After company chief Bruce Berkowitz sent his tender offer to FHFA and then went on CNBC to discuss the plan, you can bet that the price of GSE preferred probably increased a bit.
RSS