In a recent conference call, Fairholme Capital Management founder and Chief Investment Officer Bruce Berkowitz stood his ground regarding the firm’s investment in Fannie Mae and Freddie Mac junior preferred shares, believing that the bet will pay off in time. He made it clear that Fairholme, at this time, has no plans to sell its stake, which the firm has valued at roughly $115.7 million. But Berkowitz also made it clear he sees little chance of GSE reform passing any time soon, and he anticipates that Federal Housing Finance Agency Director Mel Watt will not permit the Fannie/Freddie capital position to fall to zero in early 2018.
The common securitization platform, if expanded to allow other users, could become a centerpiece for housing finance reform. That’s the view of Jim Parrott, a fellow at the Urban Institute and former White House senior advisor at the National Economic Council under the Obama administration. Converting the CSP to a government or government-like utility open to issuance by other guarantors could help end the Fannie Mae and Freddie Mac duopoly by reducing barriers for new entrants. Parrott added that examining which functions the GSEs currently provide that could be moved to the CSP to help level the playing field for more competition would be ideal.
The Pacific Investment Management Company believes the private mortgage market should be revived before comprehensive GSE reform. In a paper published last week, the investment management firm weighed in on the debate to reform Fannie Mae and Freddie Mac. It noted that a few small legislative changes would make a huge difference in bringing private capital back to the housing-finance market. Growth in the housing market will come if policymakers are willing to modify existing laws and regulations governing the private mortgage market, according to PIMCO. The company said that would bring back responsible mortgage lending while boosting economic growth and providing more access to credit.
The Consumer Financial Protection Bureau plans to make some significant, but as yet unspecified, changes to its mortgage servicing rule sometime this fall, in response to concerns raised by the industry, the bureau revealed in a blog posting about its latest semiannual rulemaking agenda. The agency said it is “considering concerns raised by industry participants regarding a few substantive aspects of the mortgage servicing rule that we used in August 2016. These aspects may be posing particular complexities for implementation that were not anticipated in the course of the original rulemaking. We expect to issue a proposal to make one or more substantive changes to the rule in response to these concerns this fall – perhaps as early as September.” Edward Mills, an analyst with FBR Capital Markets & Co., said...
Pacific Investment Management Company published an opinion piece this week calling for changes in the non-agency market before policymakers enact reforms that affect the government-sponsored enterprises. PIMCO was also critical of other GSE reform proposals. “Without a functioning private mortgage market, it will be nearly impossible for the GSEs to shrink their footprint without significant disruption to the housing market and to the underlying homeownership rate,” PIMCO said. PIMCO was...
Although reform of the government-sponsored enterprises is highly unlikely this year, community lenders went to Capitol Hill this week, testifying that equal opportunity in the secondary market and preserving the cash window are sacred tenets that cannot be compromised. At a GSE reform hearing late this week, Sen. Mike Crapo, R-ID, chairman of the Senate Banking Committee, called small lenders “fixtures in their communities” with local knowledge and expertise. “As we prepare to reform the system we must understand how small lenders access the market,” he said. Many community lenders access...
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