For the first time, individual shareholders have brought a suit against the Federal Housing Finance Agency alleging that the Treasury profit sweep was illegal and accused the agency of violating the Housing and Economic Recovery Act. The May lawsuit was filed in the U.S. District Court for Northern Iowa by three individual shareholders who owned stock in Fannie Mae and Freddie Mac prior to the Third Amendment.Thomas Saxton owns shares in the Z series of Freddie preferred stock and he owns shares of Freddie common stock with Ida Saxton.The pair own common stock both jointly and individually and acquired their shares in 2008. The third plaintiff is Bradely Payner, who owns shares of Fannie common stock.
After a pilot jumbo mortgage loan program between the Federal Home Loan Bank of Chicago and Redwood Trust kicked off this quarter and expanded into a full roll-out beginning June 1, it was announced this week that the loan limit will just about double. The new single-family loan limit for the Mortgage Partnership Finance Direct program will increase from the current $729,750 to $1.5 million in the third quarter. The MPF Direct loan limit was raised primarily to help members that operate in urban or other areas where home prices are higher than the national average, said John Stocchetti, an executive vice president at the FHLB Chicago and group head of the MPF program.
With just six months lefts to meet the new private mortgage insurer eligibility requirements, Genworth U.S. Mortgage Insurance is making moves to ensure it will be in compliance by the end of the year. “We did disclose a gap of $500 to $700 million, but at the same time we said we will fulfill that gap with a combination of reinsurance and cash. We are working at a very aggressive pace to make sure that we meet that standard sooner than later,” said Rohit Gupta, Genworth’s president and CEO. In addition to reinsurance and working on payment plans, Rohit said last month the company sold 14 percent of its Australian mortgage insurance business on the Australian...
As mortgage insurers rally around the call for expanded risk sharing, the Federal Housing Finance Agency confirmed this week that it’s exploring the possibility of pilot testing risk-sharing through deeper mortgage insurance coverage. The U.S. Mortgage Insurers trade group said that deeper MI coverage would reduce risks to taxpayers while allowing the GSEs to lower their fees. “And with lower GSE fees, this approach would reduce costs to borrowers. In addition, MI can be used to provide front-end risk sharing on loans with down payments greater than 20 percent,” it said. A prudently underwritten 5 percent down payment loan with MI actually reduces taxpayer exposure below a comparable 20 percent down payment loan without MI, according...
Community development financial institutions are feeling left out in the cold when it comes to joining the Federal Home Loan Bank system due to stricter collateral requirements. These nondepository CDFIs, which provide credit and financial services to underserved communities, represented less than six percent of FHLB members as of the end of the year, according to the U.S. Government Accountability Office. This translates to 30 members out of the 522 CDFIs nationwide.Treasury-certified non depository CDFIs were permitted to become members in 2008, allowing CDFIs to use their current loan portfolio to raise cash and originate new loans. The GAO performed an analysis of CDFI membership rates after being asked to review the FHLBanks’ implementation of the Housing and Economic Recovery Act provisions.
Freddie Mac’s recent sale of $201 million in delinquent mortgages to Lone Star Funds was the fourth non-performing loan transaction this year by a GSE. Lone Star purchased the 1,052 non-performing loans serviced by Ocwen as a single pool in late May. The loans have an aggregate unpaid principal balance of $201 million and have been delinquent for approximately three years on average. Earlier this year, Freddie executed two sales of NPLs at $392 million and then its largest ever at $985 million. And shortly after, Fannie Mae jumped into the game auctioning $786 million of delinquent loans. Although there’s been a notable increase in NPL sales by the GSEs, Fred Small, an analyst at Compass Point, said...
Nevada Addresses ‘Super Lien’ Concerns. Nevada’s governor signed legislation last week addressing concerns raised by the FHFA regarding homeowners’ association liens. In September, the Nevada Supreme Court determined that an HOA super lien has priority lien status, which can trump the GSEs’ first lien status during foreclosure. Senate Bill 306 in Nevada aimed to address some of those issues by establishing a new limited right of redemption for lien holders after an HOA foreclosure sale, among other provisions. The FHFA has repeatedly noted it has an obligation to protect the GSEs’ rights, and will aggressively do so by bringing or supporting actions to contest HOA foreclosures that purport to extinguish GSE property interests in a manner
“Without nonbanks, today’s sluggish mortgage market would be much less vibrant,” according to research released this week by two researchers associated with Harvard University. Their working paper stresses that implementing bank-like standards for nonbanks isn’t the best strategy to mitigate risks in the housing finance system. The paper was authored by Marshall Lux, a senior fellow of the Mossavar-Rahmani Center for Business and Government, which is part of the John F. Kennedy School of Government at Harvard University; along with Robert Greene, a research assistant at the same center. They called...
If Fannie Mae and Freddie Mac were privatized, they would likely have to increase their capital from current levels and face increased borrowing costs.
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