A ranking Republican on the House Financial Services Committee this week gave notice that GOP lawmakers will be looking to rein in the Federal Reserves radical and unfettered influence and authority over the nations financial system during the 113th Congress next year. Rep. Scott Garrett, R-NJ, chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, outlined his two top priorities for Congress in 2013 just as the Federal Open Market Committee announced plans to add about $40 billion a month to its massive agency MBS portfolio. Garrett said the committees first priority will be...
The Federal Housing Finance Agency incorrectly piggybacked and failed to independently verify Fannie Maes and Freddie Macs mandated assurances or covenants that the GSEs were in compliance with the Treasury Departments terms in exchange for taxpayer support during conservatorship, according to a recent report by the FHFAs official watchdog. The FHFAs Office of Inspector General noted a gap in the Finance Agencys compliance with the terms of the preferred stock purchase agreement with the Treasury.Until June 2012, FHFA did not provide Treasury with a certification that the enterprises filings and related documents were free of materially false or misleading statements, said the OIG report, issued in August.
Last months surprise move by the Treasury Department to revise the preferred stock purchase agreements with Fannie Mae and Freddie Mac definitively settles the question of when not if the two government-sponsored enterprises are to be wound down but it also removes any remaining sense of urgency to push a legislative solution to GSE reform, according to industry analysts. On Aug. 17, Treasury announced it will require Fannie and Freddie to turn over any profits they earn to the government. Rather than continue to borrow from the Treasury to make a 10 percent dividend payment to the Treasury, the revised PSPA implements a full income sweep of GSE profits. Additionally, Treasurys announcement calls...
The battle over legacy MBS continues to rage in courts across the country as Bank of New York Mellon filed repurchase-related lawsuits against two financial institutions, Massachusetts Mutual was allowed to proceed with its claims against Countrywide, and a federal banking regulator sued major banks for alleged MBS misrepresentations. On Aug. 21, BNY Mellon, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, sued WMC Mortgage and GE Mortgage Holdings for their alleged failure to repurchase approximately $680 million in defective residential mortgages. According to the lawsuit filed in New York state court, a holder of more than 25 percent of the voting rights under the pooling and servicing agreement notified...
Fannie Mae and Freddie Mac late this year will raise guaranty fees on single-family mortgages by another 10 basis points, under a directive that the government-sponsored enterprises conservator announced late last week. The g-fee increases will be effective on Dec. 1, 2012, for loans exchanged for mortgage-backed securities, and on Nov. 1, 2012, for loans sold for cash. According to FHFA Acting Director Edward DeMarco, who telegraphed the move in a notification to Congress earlier this summer, the g-fee increases are designed...
The Small Business Administration is urging the Consumer Financial Protection Bureau to delay making any changes until it has fully analyzed the impact of a proposed rule establishing new disclosure requirements and forms under integrated federal consumer protection regulations. Speaking on behalf of small banks and settlement service providers, the SBAs Office of Advocacy in a comment letter warned that proposed changes to the finance charge and to the high-cost mortgage coverage test could potentially lead some small businesses to leave the marketplace or stop making mortgage loans. In addition, the agency reiterated its concerns about the inadequate notice for small entities about the proposal. On Aug. 23, the CFPB published...
The Consumer Financial Protection Bureaus recent proposed rule regarding loan originator compensation would expand and clarify anti-steering rules established by the Federal Reserve, in effect since April 2011. Compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms, according to the CFPB. The regulators proposed rule cited a consent order issued by the Fed in 2011 regarding subprime steering by Wells Fargo ...
M&T Bank announced this week that it will acquire Hudson City Bancorp for $3.7 billion. The jumbo lender will merge into a subsidiary of M&T. Hudson City was the 10th-ranked non-agency jumbo lender in 2011, according to Inside Nonconforming Markets, with an estimated $3.15 billion in such originations. Officials at M&T said they acquired Hudson which was having difficulties funding its jumbo originations to expand M&Ts retail branch network. Officials at Hudson City said M&T will help expand ... [Includes five briefs]
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.
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.