The streamlined short sale programs announced last week by Fannie Mae and Freddie Mac could increase losses on bank holdings of second liens, according to industry analysts. The changes, directed by the Federal Housing Finance Agency, include the ability for the government-sponsored enterprises to offer up to $6,000 to second-lien holders to expedite a short sale. Previously, second-lien holders could slow down the short sale process by negotiating for higher amounts, the FHFA said. Overall ...
The Treasury Departments surprise announcement late last week that it will now sweep up any and all future profits from Fannie Mae and Freddie Mac in lieu of the dividends the GSEs had been paying in return for taxpayer support solves some problems but creates new ones, industry observers say. Rather than continue to borrow from the Treasury to make dividend payments to the Treasury as the GSEs have since they were placed in conservatorship in September 2008 the revised preferred stock purchase agreements will replace the 10 percent quarterly dividend with a full income sweep of every dollar of profit that each firm earns going forward, according to Michael Stegman, counselor to the Treasury for Housing Finance Policy.
The Federal Housing Finance Agency this week announced that Fannie Mae and Freddie Mac will implement new short sale guidelines that expand eligibility criteria, as well as align and consolidate existing GSE short sales programs into one standard offering. The new guidelines, which go into effect Nov. 1, will permit homeowners with a Fannie or Freddie mortgage to sell their home in a short sale even if they are current on their mortgage, provided they have an eligible hardship.
Fannie Mae announced last week that it is amending its guidance regarding custodial bank accounts, effective immediately. Prior to the companys Aug. 15 servicing guide announcement, tax and insurance escrow funds for Fannie mortgage loans with all remittance types could be commingled in the same custodial account, although the servicer could establish separate accounts for T&I payments for each remittance type if it chose to do so.
Fannie Mae and Freddie Macs newly amended preferred stock purchase agreement with the U.S. Treasury requiring the companies to accelerate the rate at which they reduce their investment portfolios will have little immediate impact but will become more challenging to the GSEs as time goes on, analysts predict. The Treasurys amended agreement calls for the GSE portfolios to be wound down at an annual rate of 15 percent, instead of the 10 percent annual reduction originally required of the two companies. The more aggressive 15 percent reductions will go into effect in 2013. Consequently, Fannies and Freddies portfolios must be reduced to the $250 billion target by 2018, four years earlier than initially scheduled.
Half a dozen federal regulators last week, including the Federal Housing Finance Agency, issued inter-agency proposed new appraisal requirements for certain “higher-risk mortgage loans.” The proposed rule, required by Dodd-Frank Act revisions to the Truth in Lending Act, applies to loans for which the annual percentage rate exceeds the average market rate by 1.5 percent for first-lien loans, 2.5 percent for first-lien jumbo loans, and 3.5 percent for subordinate-lien loans.
Both Fannie Mae and Freddie Mac retained their dominant shares of mortgage-backed securities with something of a slide during the second quarter of 2012, according to an Inside The GSEs analysis. The two GSEs issued a combined $273.9 billion MBS during the second quarter, a 10.2 percent decrease from the first quarter. Compared to the second quarter of last year, however, Fannie and Freddie saw an ample 76.8 percent increase in MBS issuance.
A federal appeals court has agreed to hear a rare appeal by one of the non-agency mortgage-backed securities issuers and underwriters being sued by the Federal Housing Finance Agency for allegedly misrepresenting the deals that were sold to Fannie Mae and Freddie Mac. A three-judge panel of the Second Circuit Court of Appeals accepted UBS Americas appeal to re-argue and reverse a lower courts denial of the banks motion to dismiss the FHFAs suit as time-barred under the Housing and Economic Recovery Act.The FHFA sued UBS in July 2011 on behalf of Fannie and Freddie, seeking damages and civil penalties on behalf of the government-sponsored enterprises under the Securities Act of 1933.
The Federal Housing Finance Agency violated federal law when it rolled back the Property Assessed Clean Energy program without going through the required notice and comment period, a California federal judge ruled earlier this month. U.S. District Judge Claudia Wilkens Aug. 9 ruling held that the FHFA was not acting as conservator of Fannie Mae and Freddie Mac but as a regulator that had improperly exercised substantive regulatory oversight in violation of the Administrative Procedure Act when the agency put a stop to GSE involvement with PACE programs.The FHFAs directives on PACE obligations amount to substantive rule-making, not an interpretation of rules that would be exempt from the notice and comment requirement, wrote Judge Wilken. The notice and comment process must be followed.
A New York federal judge has denied a motion by former Fannie Mae top executives to dismiss a civil action brought against them by the Securities and Exchange Commission concerning the companys misrepresentations about its exposure to subprime and Alt A mortgages in the two years leading up to the GSEs government takeover. On Aug. 10, U.S. District Court Judge Paul Crotty rejected the motion brought by former Fannie CEO Daniel Mudd, former Chief Risk Officer Enrico Dallavecchia and former EVP for Single Family Thomas Lund. The defendant trio argued that investors had sufficient information to form their own conclusions about the viability of Fannies subprime and Alt A portfolio.