After a year of looking, the Federal Housing Finance Agency announced last week it has finally picked a chief executive to run the fledgling Common Securitization Solutions: industry veteran David Applegate, who has a long resume in mortgage banking. Applegate led both GMAC Mortgage and GMAC Bank during a 17-year career at General Motors Acceptance Corp He also worked at mortgage insurer Radian Guaranty. Applegate’s last job title was president and chief executive officer of Homeward Residential, Dallas, a mortgage-banking firm.
The Mortgage Bankers Association is calling on the Federal Housing Finance Agency to direct Fannie Mae and Freddie Mac to review “and if appropriate” adopt new validated credit score models and allow for the use of alternative methods of scoring. In a letter last week to FHFA Director Mel Watt, the MBA said that, through this action, the Finance Agency could directly increase the number of borrowers eligible for conventional mortgages.
Look for the Federal Housing Finance Agency’s new guidelines for loans with loan-to-values between 95 percent and 97 percent to take into account “compensating factors” to offset reduced borrower equity. In a speech last week at the National Association of Realtors conference in New Orleans, FHFA Director Mel Watt elaborated only a little further on the agency’s recently announced mortgage guidelines, noting they will include safety and soundness standards to best manage the GSEs’ risk.
Ohio Court Sides With Freddie in Pre-Crisis Shareholder Lawsuit. An Ohio federal court late last week tossed out a shareholder class action lawsuit that accused Freddie Mac of lying about its exposure to subprime loans prior to the 2008 financial crisis. The suit, filed in 2008 by the Ohio Public Employees Retirement System, claimed that Freddie artificially inflated the value of its common stock by making false public financial statements that obscured its subprime exposure.OPERS claimed it lost as much as $27.2 million as a result of Freddie’s alleged cover-up of its subprime exposure.
Fannie Mae and Freddie Mac reported a combined $6.0 billion in net income for the third quarter of 2014, up from $5.1 billion in the previous quarter. The two GSEs will send to the Treasury $6.8 billion as return on the government’s senior preferred stock. That will bring cumulative payments under the GSE conservatorships to $225.5 billion. Fannie and Freddie were given a total of $187.4 billion in government funds in order to stay in business.
Loan Banks jumped 22.0 percent to $627 million in the third quarter of 2014, up from $514 million in the second quarter, according to the Federal Home Loan Bank Office of Finance. The increase resulted primarily from increases in non-interest income and net interest income, partially offset by an increase in non-interest expense, explained the Office of Finance. However, net income declined 8.2 percent compared to the first nine months of last year.
Although Fannie Mae and Freddie Mac reported combined comprehensive income of $6.8 billion in the third quarter of 2014 – thanks in no small part to strong guaranty fee revenue – the two government-sponsored enterprises both said they’re keeping a wary eye on the precarious financial condition of private mortgage insurers. Fannie noted in its 10-Q filing with the Securities and Exchange Commission that although the financial condition of its primary MI counterparties approved to write new business has improved, there is still risk that they may fail to honor the GSE’s insurance claims. “If we determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer counterparties, or if we have already made that determination but our estimate of the shortfall increases, it could result...
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