Congress 11th hour decision at the end of last year to fund a temporary tax cut with a decade-long hike in the guarantee fees that Fannie Mae and Freddie Mac charge to offset potential losses from bad loans will likely prolong the intended wind down of the GSEs, making it much harder to untangle the government from the mortgage market, say experts.Late last month, the Federal Housing Finance Agency directed Fannie and Freddie to increase g-fees on new mortgage products by 10 basis points starting April 1.The FHFAs directive to the GSEs implements the Temporary Payroll Tax Cut Continuation Act of 2011, passed by the House and Senate and signed by President Obama on Dec. 23. The legislation mandates that Fannie and Freddie raise their single-family guarantee fees by not less than 10 bps. The provision is scheduled to sunset in 2021.
Demands to repurchase poorly performing mortgages have resulted in a spike in the number of mortgage fraud-related Suspicious Activity Reports (SARs) filed by banks in 2011, according to the Department of the Treasurys Financial Crimes Enforcement Network. In its 2011 annual report, FinCEN said increased buyback demands by investors have forced large mortgage lenders to conduct additional reviews of loans they originated, resulting in higher SARs filings last year. A review of SAR filings in the first quarter of 2011 found that the number of mortgage fraud reports rose to 25,485, up 31 percent from...
It started last week with an unsolicited white paper outlining a framework for thinking about certain issues and tradeoffs that policymakers might consider and blossomed into a coordinated assault by the Federal Reserve on the housing slump that wont go away. Having purchased over $1 trillion in mortgage securities in an effort to drive mortgage interest rates to all-time lows, the Fed appears to be using its speechmaking and paper-writing powers to try to get the rest of Washington moving on housing. In addition to the policy paper, Fed officials in the past week have made three speeches on...
A growing consensus is emerging among legal experts that someone will challenge in court President Obamas contentious recess appointment of Richard Cordray as the first director of the Consumer Financial Protection Bureau. But a final outcome could take years and have no impact on the agencys actions while the case is unfolding. These appointments establish a dangerous precedent that threatens the confirmation process and undermines the system of checks and balances embedded in the Constitution, a number of House Republicans said in a letter they fired off to the president after he made his...
Fed Governor Sarah Bloom Raskin late last week stumped for creating an effective enforcement system to deal with shortcomings in the mortgage servicing industry that have come to light since the foreclosure crisis, as state officials pressed to expand a potential settlement over past abuses. The law is not a scarecrow where the birds of prey can seek refuge and perch to plan their next attack, Raskin said in a speech to a group of attorneys. The Fed governor said its important for servicers to have transparent, enforceable and sensible rules, adding that deferring to standard industry...
President Obama this week moved to break a GOP blockade in the Senate by making a recess appointment of Richard Cordray to become director of the Consumer Financial Protection Bureau, a political maneuver that defies 20 years of precedent and may set the stage for a legal challenge. The Obama administration claimed that it is fully within its Constitutional authority to place the new director into his position, dismissing as a gimmick the pro-forma sessions Republicans used to block the nomination. A number of consumer groups came out in support of the appointment. The presidents allies in Congress were...
Theres a very good chance the final disposition of securities fraud charges leveled by the Securities and Exchange Commission against six former Fannie Mae and Freddie Mac top executives could be determined at trial rather than by a pre-trial settlement, thanks in part to a recent adverse SEC court decision, according to one legal expert. On Dec. 16, the SEC filed suit in the U.S. District Court for the Southern District of New York, alleging that former Fannie and Freddie executives made material misstatements to the public, investors and the media about the two government-sponsored...
The outcome of the securities fraud case leveled against six former top executives of Fannie Mae and Freddie Mac could hinge on what exactly is considered a subprime loan. At least one defendant is prepared to argue that there is no standard definition.In fact, the GSEs appear to still be reporting their subprime and Alt A exposure in much the same way they did in the period covered by the Securities and Exchange Commission lawsuits.Late last week, the SEC pulled the trigger on its three-year investigation of claims that the two GSEs failed to disclose to investors the companies exposure to subprime mortgages prior to the 2008 housing market crash.
The use of Federal Home Loan Bank advances among bank and thrift members fell overall during the third quarter of 2011. Two of the three top members show a drop-off larger than the overall industrys year-over-year rate of decline, according to the Inside Mortgage Finance Bank Mortgage Database.All of the nations bank and thrifts reported using a combined $323.3 billion in advances as of Sept. 30, 2011, down 5.2 percent from the second quarter and off 19.7 percent from the same period a year earlier.The Federal Home Loan Banks Office of Finance in its third quarter combined finance report cited decreased member demand, regular maturities and continuing prepayments for the third quarter decline.
Industry trade groups, as well as Fannie Mae and Freddie Macs regulator, are questioning the wisdom of Congress as lawmakers in both chambers have bills pending to hike the fees charged to guarantee GSE mortgages as a way to help offset the cost of extending the payroll tax cut through 2012.Both House and Senate versions of tax cut extension bills would add an additional 10 basis points to the guarantee fees charged by Fannie and Freddie through 2021. The increase would offset about $35.7 billion in costs, including $1.3 billion in the first year, according to the Congressional Budget Office.As Inside the GSEs went to press, the prospect of any tax cut extension was in doubt after the House rejected the bill calling for a two-month extension. Instead, House Republicans demanded immediate talks with the Senate on a year-long plan but the Senate ruled out further negotiations until the House passes the stop-gap measure.