The Treasury Department said the so-called GSE patch gives Fannie Mae and Freddie Mac an unfair advantage in the mortgage market, and it recommended eliminating this exception to the qualified-mortgage rule. In a financial regulations report released this week, the Treasury detailed a host of executive actions and regulatory changes that it believes can immediately stimulate economic growth, increase capital access and protect taxpayers. Adjusting and clarifying the ability-to-repay/qualified mortgage rule and phasing out the GSE patch are among those changes listed. The GSE patch, created under Dodd-Frank, allows GSE eligible loans to qualify for QM status, even if the DTI exceeds the standard 43 percent ratio.
The Missouri Court of Appeals recently reversed a judgment that was in favor of Fannie Mae in a case the GSE brought against a couple who purchased a foreclosed property. The disagreement about the property, purchased by Harvey and Christine Pace in 2002, centers on who owns the title to the home. At the time of the home purchase, the property’s seller lived out of state and executed a special warranty deed conveying the property to the Paces. But the promissory note to purchase the home only identified the husband as borrower because the wife did not sign the note or the deed of trust.
A new lawsuit arguing the merits of the Treasury net worth sweep was filed in Michigan, while other cases continue to hang in the balance in various phases of discovery. Michael Rop, Stewart Knoepp and Alvin Wilson v. the Federal Housing Finance Agency was filed this month by three shareholders who want the court to vacate the third amendment to the preferred stock purchase agreement and declare the structure of the Federal Housing Finance Agency unconstitutional.According to court documents, the trio is looking to challenge “both past and ongoing abuses of power by a federal agency that operates wholly outside of the system of limited and divided government established by the constitution.”
This week, the Federal Reserve’s Open Market Committee provided a bit more information on the process it plans to follow in shrinking the size of its massive balance sheet, once it decides the time is right to finally begin. “Provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance sheet normalization program this year,” Fed Chair Janet Yellen said in her post-meeting press conference. The hope is to initiate an incremental and largely predictable decline in the U.S. central bank’s securities holdings. The FOMC intends...
The Trump administration wants to pare back regulations that inhibit the non-agency MBS and ABS market and tilt current securitization economics that favor the government-sponsored enterprises over private issuers. “In order to revitalize a responsible [private-label securities] market, it is important to improve incentives for issuers through reasonable reductions in costs and regulatory burdens,” the Treasury Department said in a new report released this week. In particular, it aimed at adjusting relative economics for the government-sponsored enterprises and FHA/VA mortgage programs. On the regulatory side, Treasury recommends...
Fannie Mae General Counsel Brian Brooks is rumored to be up for a top post at the Treasury Department, a development that if consummated would add yet another seasoned industry veteran familiar with the government-sponsored enterprises to the agency. What that might mean for “administrative” reform of Fannie Mae and Freddie Mac is another question. As Inside MBS & ABS went to press this week, Brooks – who joined Fannie from OneWest Bank in November 2014 – had not been...
The average daily trading volume in agency MBS fell to $185.1 billion in May, the lowest reading of the past 17 months, according to the Securities Industry and Financial Markets Association. Year-to-date, the average is still ahead of last year’s pace but not by much: $204.2 billion compared to $201.9 billion for 2016. But these are interesting times for investors as both bonds and stocks continue to rally near new highs. Earlier this week, the yield on the benchmark 10-year Treasury fell to 2.12 percent, the lowest reading since the November election. It’s...
The Federal Housing Finance Agency is backing recommendations for additional authority that would allow it to examine third parties that do business with Fannie Mae and Freddie Mac. In its 2016 Annual Report to Congress released this week, the FHFA said it concurs with recommendations made by both the Government Accountability Office and the Financial Stability Oversight Council that Congress grant the agency authority to oversee the entities that provide critical services to the government-sponsored enterprises. While counterparty oversight is critical to the safety and soundness of the GSEs, it is...
The U.S. Court of Appeals for the Fifth Circuit rebuffed arguments that would have subjected mortgage lenders and other secondary-market participants to increased liability under the Equal Credit Opportunity Act. In a published opinion that appeared in the Banking Law Journal, the Fifth Circuit court rejected plaintiffs’ argument that mortgage investors that promulgate discriminatory lending guidelines could be held liable as the original creditor. ECOA prohibits...
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