Fannie Mae and Freddie Mac continued to follow orders and prune their retained investment portfolios – and potential future income – during the first quarter of 2015. But the government-sponsored enterprises ended the period holding more of their own MBS than when it started. The combined Fannie/Freddie mortgage investment portfolio fell 0.5 percent during the first quarter of 2015. Under their conservatorship agreement, each GSE is required to reduce its mortgage portfolio to $250 billion by the end of 2018. They each have a little over $150 billion more to go and, as of the end of March, 15 quarters to do it. The Federal Housing Finance Agency has directed...[Includes one data chart]
Researchers at the Urban Institute found that, although the percentage of first-time homebuyers increased from 2011 to 2014, the national share of first-time homebuyers in the agency mortgage market fell from 57 percent in 2011 to just 54 percent last year. Researchers Bing Bai, Jun Zhu and Laurie Goodman, director of the Housing Finance policy center at the Urban Institute, attributed the change to a decline in FHA’s market share. From 2001 to 2003 ... [Includes one data chart]
Fannie Mae and Freddie Mac reported continued profitability in the first quarter of 2015 with net earnings of $1.9 billion and $524 million respectively. Both GSEs have been profitable for at least 13 consecutive quarters, but Fannie's earnings were down from the $5.3 billion in the first quarter of last year. Fannie said one factor was a $1.9 billion derivative loss in the first quarter, which is a jump from the $1.2 billion derivative loss in the first quarter of 2014. Freddie reported $2.4 billion in losses from derivatives and noted in its earnings statement that $1.8 billion of the charges were related to fair value changes. “The company’s use of derivatives reduces exposure to interest-rate risk on an economic basis; however, this can....
New life-of-loan representation and warranty- exclusion guidelines issued by the GSEs in November, appeared to have little impact on banks’ lending policies so far, according to a recent Federal Reserve Board survey.The rep-and-warrant changes were intended to reduce uncertainty and increase transparency in addressing lenders’ concerns about when they might be asked to repurchase a loan. The concerns were based on repurchase risk and other market factors that can cause an increase in credit overlays. “Addressing these concerns by providing tighter definitions and clarity should encourage sellers to serve a broader range of qualified borrowers,” said Dave Lowman, Freddie’s executive vice president of single -family business, when the changes were announced in November.
Refinance activity continued to dominate the flow business at Fannie Mae and Freddie Mac in April, but 2015 is shaping up as a decent year for purchase mortgages as well. The two GSEs securitized $26.34 billion of purchase mortgages in April, a 24.3 percent increase from the previous month. That’s still well below the level produced in the second half of 2014, when monthly production averaged $31.79 billion. But Fannie and Freddie securitized $96.86 billion of purchase mortgages during the first four months of 2015, a 20.0 percent increase from the same period last year. The refinance business has done most of the heavy lifting this year. Refi loan securitization was up 88.7 percent on a year-to-date basis and accounted for....(includes data charts)
Having been in conservatorship for what is approaching close to seven years now, industry insiders are offering up their opinion on what’s next for Fannie Mae and Freddie Mac as the GSEs remain uncertain about their future. A recent editorial piece that ran in The Hill suggests a seven-step plan that will lead them out of conservatorship. “Making a Fannie and Freddie We Could Live With” is the title of the article authored by Mark Calabria, director of financial regulation at the Cato Institute, and Alex Pollock, a fellow at the American Enterprise Institute. The authors said that “nobody wants the old Fannie and Freddie back; nobody wants them to stay on indefinitely in conservatorship.”
A 2011 document from the Treasury Department that was leaked last week has raised questions over whether or not all required documents pertaining to a dismissed suit against the Treasury were turned in.The suit stems from GSE shareholders suing over the Third Amendment profit sweep, which requires Fannie Mae and Freddie Mac to turn over the bulk of their profits to the Treasury. The Jan. 4, 2011, memo, leaked to Insider Sources, is from Undersecretary for Domestic Finance Jeffrey Goldstein and has the subject line “Housing Refinance Reform Plan.” The memo to former Treasury Secretary Timothy Geithner outlined a number of issues to reform the two, including privatization and proposals to wind down the GSEs.
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