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...
The volume of defective Fannie Mae and Freddie Mac mortgages repurchased by lenders increased modestly in the second quarter of 2017, according to a new Inside Mortgage Trends analysis of buyback disclosures filed by the two government-sponsored enterprises. Lenders repurchased some $244.44 million of home loans or made other indemnification to the GSEs during the second quarter. That was up 2.5 percent from the previous three-month ... [Includes two data charts]
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