Spot loans are currently prohibited, but the agency is said to be reevaluating the product because of reports of first-time homebuyers having difficulty in obtaining FHA financing for condo unit purchases and seniors seeking reverse mortgages to tap the equity in their units.
Fannie Mae and Freddie Mac can be rehabilitated and returned to the private sector, with or without Congressional action, an expert noted this week, adding his voice to the growing chorus of those calling to retain the GSEs. Speaking at a GSE forum sponsored by Investors Unite, Joshua Rosner, managing director at Graham Fisher & Co., said that GSE reform “shouldn’t reinvent a wheel that has driven the secondary market successfully for generations.”
Massachusetts Attorney General Martha Coakley last week filed suit against Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency, alleging that the GSEs are violating state law by failing to let non-profits buy foreclosed homes to sell them back to their former homeowners. In 2012, Massachusetts lawmakers passed An Act to Prevent Unnecessary and Unreasonable Foreclosures, which prohibits creditors from blocking or placing conditions on home sales to non-profits that intend to resell those properties back to their former owners. The AG’s complaint, filed in Suffolk Superior Court, says the GSEs failed to comply with the Bay State law by “blocking foreclosure buyback programs” designed to help residents keep their homes.
Attorneys for Fannie Mae and Freddie Mac junior shareholders have doubled down in their assertions that the government had no authority to initiate a “net-worth sweep” of nearly all GSE profits. They say a federal court should not only decline Uncle Sam’s recent motion to dismiss but also “vacate the illegal sweep amendment.” In a joint rebuttal motion filed last week in the U.S. District Court for the District of Columbia, attorneys for Perry Capital and Fairholme Funds note that in attempt to evade judicial scrutiny, the Treasury Department and the Federal Housing Finance Agency raise “a host of frivolous and irrelevant challenges” to the plaintiffs’ legal standing while ignoring investors” core assertion that the 2012 sweep was illegal.
A noted GSE hawk successfully pushed through a legislative amendment that would block Fannie Mae and Freddie Mac from paying into the National Housing Trust Fund “at a time when they still owe money to the American people.” The amendment by Rep. Ed Royce, R-CA, to H.R. 4745, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act of 2015, would prohibit the GSEs from using funds for the NHTF, which was established under the Housing and Economic Recovery Act of 2008.
A new analysis by the Urban Institute released last week found that GSE denial rates for weaker credit profile applicants, including many minority applicants, were much higher than denial rates for all applicants. The UI’s analysis of Home Mortgage Disclosure Act data found at least 16 percent of applicants were denied Fannie Mae or Freddie Mac loans for purchase of an owner-occupied property in 2012. However, when compared to CoreLogic’s data, the UI also found the denial rate for low credit GSE applicants was at least 54 percent.
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