The Federal Housing Finance Agency recently announced that Fannie Mae and Freddie Mac loans originated on or after Oct. 1, 2017, are eligible for their new refinance programs aimed at borrowers with underwater loans. The FHFA expects applications for the new high loan-to-value streamlined refinance program, originally announced last August, to be available in late 2018. To be eligible for Fannie’s High LTV Refinance Option and Freddie’s Enhanced Relief Refinance program, borrowers must benefit from a reduced monthly payment, lower interest rate, shorter amortization term or by switching from an adjustable-rate mortgage to a fixed-rate loan. One of the benefits of the newer programs, which...
The Federal Housing Finance Agency Office of Inspector General said there’s a gap in the FHFA’s quality control review process in monitoring examination activities, which results in potentially false expectations that a problem has been resolved. The OIG said there are instances when the FHFA doesn’t perform a quality control review of examination conclusions. In other words, examiners don’t issue correspondence that notifies the GSE of the results of the ongoing monitoring activity. Based on the OIG’s review of documents and discussions with examination officials, the regulator determined that the reports of examination issued for the 2015 supervisory cycle contained conclusions derived from ongoing monitoring activities that had...
The Treasury Department should not bail out the GSEs’ subordinated debt again, according to Alex Pollock, senior fellow at the R Street Institute. He criticized the Treasury’s decision to pay off $13.5 billion in subordinate debt at the start of the conservatorship nine years ago and said that it created a lack of market discipline. “Instead of experiencing losses to which subordinated lenders can be exposed when the borrower fails, they got every penny of scheduled payments on time,” he said, calling the structural reason for bailing out the subordinated debt an “unusual occurrence.” The former head of the Federal Home Loan Bank of Chicago noted that the role of subordinated debt is...
The GSEs’ credit-risk transfer program remained healthy in the second quarter having issued a combined $4.48 billion of credit-risk transfer debt. That’s up 5.8 percent from the first quarter but an impressive 25.4 percent more than midyear in 2016. Moreover, since the second quarter, Fannie has already priced two more of its popular Connecticut Avenue Securities risk-sharing deals. July and August marked the 5th and 6th transaction of CAS deals issued this year. The most recent deal was CAS Series 2017-CO6, a note offering $1.069 billion that was expected to settle this week.
Investors in Fannie Mae and Freddie Mac continue to grow weary of the drawn out discovery process in shareholder lawsuits and recently filed another motion in hopes of expediting things. Fairholme Funds attorneys filed a motion last week asking to view about 1,500 government documents in a lawsuit challenging the government’s net-worth sweep of profits at Fannie and Freddie. In the new motion, the Fairholme attorneys asked the Federal Claims Court to use the “quick peek” procedure for some documents dating back to May 2012. These are among the many documents the plaintiffs say the government is still hoping to keep secret under the deliberative process and bank examination privileges.
The Federal Housing Finance Agency Office of Inspector General recently released a white paper highlighting the GSEs’ pre-conservatorship statutory capital requirements and their current shortfalls.With the 2008 conservatorship, capital requirements for Fannie Mae and Freddie Mac were suspended so the paper mostly emphasizes the lack of capital for housing-finance and GSE reform debate purposes. “Because of heightened public interest in the role of the enterprise, if any, in the future structure of the housing finance system, FHFA-OIG prepared this white paper to explain the current statutory and regulatory capital requirements for the enterprises,” it explained.
Whether increased competition in the government mortgage-backed securities market would benefit the industry as a whole continues to be a bone of contention in the housing market. While some believe any talk of GSE reform should include ending the duopoly of Fannie Mae and Freddie Mac by adding more guarantors to the mix, small lenders in particular say they already have their hands full keeping up with requirements for the two GSEs.
Relatively stable pricing and fairly healthy returns are giving mortgage reinsurers hope for a more robust market, according to a new analysis from Standard & Poor’s. Reinsurers seeking respite from a deteriorating property casualty reinsurance sector have found mortgage reinsurance a promising business diversification and source of growth – at least for now, said the rating service. However, reinsurers coming late to the feast might find...
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