While hopes were high for GSE reform with the incoming Trump administration, housing industry experts seem to agree that major changes at Fannie Mae and Freddie Mac may not happen anytime soon. Panelists at a housing finance conference sponsored by Moody’s agreed with the ratings agency’s sentiment and said that the policy environment is in flux and unpredictable with GSE reform unlikely in the near term. “The election of Donald J. Trump as president amid Republican control of Congress has created a new political landscape with potential implications for the U.S. housing and finance markets,” said Moody’s in a recap of the conference. “However, panelists at our conference saw targeted legislative or regulatory changes as...

The Treasury Department reneged on its support of the Federal Housing Finance Agency’s single- director structure last week. The issue stems from a recent PHH Mortgage-initiated lawsuit challenging the Consumer Financial Protection Bureau’s structure as unconstitutional, which led to questioning the similarly structured FHFA. Although the Treasury previously sided with the FHFA, the Trump administration decided to side with the mortgage lender. The Treasury Department is now making a similar argument that the FHFA’s structure is also unconstitutional. The CFPB and FHFA, the GSEs’ regulator, are independent agencies led by a single director whom the president can only fire for cause.

For years, officials at the Federal Reserve seemed nonchalant about coming up with a final exit strategy for the U.S. central bank’s massive holdings of agency MBS and debt and Treasury Securities, currently valued at approximately $4.5 trillion. But now, in relatively short order, the prospect of the Fed beginning to reduce its holdings has become a “thing” – so much so, in fact, that officials there reportedly are starting to put together just such a plan. The likelihood of such a move suddenly got much stronger when the Commerce Department announced late last week that the personal-consumption expenditures price index rose 2.1 percent from a year ago. The Fed has been striving to achieve 2 percent inflation for at least the last five years, and now appears to have the green light it has been waiting for. According to various press reports, the Fed’s plan would entail...

Despite rumors to the contrary, Fannie Mae and Freddie Mac forked over most of their fourth-quarter earnings to the Treasury Department at the end of March, as scheduled. But some industry insiders wonder whether the timing of future payments will be altered to reduce the likelihood that either of the government-sponsored enterprises might need another bailout. In early March, there were talks predicting, or hoping for everything from a possible suspension of the Treasury sweep to replacing the quarterly payment with an annual one. Speculation may have been fueled by uncertainty about what the Trump administration wants to do about the now eight-year-old conservatorships of the two GSEs. In 2017, Fannie and Freddie can only retain...

The Consumer Financial Protection Bureau late last week filed its much-anticipated response to the decision by the U.S. Court of Appeals for the District of Columbia Circuit to grant the agency’s request for an en banc rehearing in its legal wrangling with PHH Mortgage over allegations of violating the Real Estate Settlement Procedures Act. The CFPB made three main arguments. First, the bureau’s structure is constitutional. “Neither the bureau’s single-director structure, nor the for-cause removal provision, unduly interferes with the president’s ability to take care that the laws be faithfully executed” under the U.S. Constitution, it said. If the court were to decide that the agency’s structure is unconstitutional, the bureau added...

Treasury Secretary Steven Mnuchin made it clear after being nominated that resolving the conservatorships of Fannie Mae and Freddie Mac would be a top priority for his department. And although Mnuchin will clearly be a player in the debate, the policy “ax” on the issue will be Craig Phillips, recently tapped to serve as counselor with an agenda that includes fixing the two government-sponsored enterprises. Most mortgage professionals have applauded President Trump’s pick of Mnuchin and now Phillips. Mnuchin was the former head of Goldman Sachs’ MBS department, and Phillips was a former managing director of Morgan Stanley’s fixed-income division. Phillips was...

The mortgage market has paid close attention to a lawsuit brought by PHH Mortgage that challenges the constitutionality of the Consumer Financial Protection Bureau, and the Trump administration’s recent move to side with the mortgage lender. Now, the Treasury Department is making a similar argument that the structure of the Federal Housing Finance Agency is also unconstitutional. Both the CFPB and FHFA, the regulator of Fannie Mae and Freddie Mac, are independent agencies led by a single director whom the president can only fire for cause. In an advisory filed March 24, the Treasury backed...

There was little change in the amount of agency MBS held by the Federal Reserve in 2016 compared to the previous year, although the account generated a whopping $46.3 billion in net interest income last year. The 2016 net interest gains from Fannie Mae, Freddie Mac and Ginnie Mae MBS were down slightly from 2015, when the Fed reported $49.0 billion, according to an independent annual audit of the Fed. Conducted by KPMG, the audit estimated...

A proposal in Congress to define all mortgages held in portfolio as qualified mortgages has some bipartisan support, but lenders are divided on the matter. “I caution the use of portfolios to add loans that are not standard,” said David Motley, president of Colonial Companies and chairman-elect of the Mortgage Bankers Association. “The rules of the qualified mortgage, I believe, should be the same for everybody.” He made the remarks this week at a hearing by the ...

As the clock ticks down on Fannie Mae and Freddie Mac running out of a capital buffer in early 2018, there is a growing belief in the mortgage industry that the Federal Housing Finance Agency will move to change dividends payments by the two from a quarterly to an annual basis. If the FHFA pulls the trigger, it would allow the government-sponsored enterprises to sit on a pile of cash before upstreaming it to Treasury – money that would give them a buffer if rates turn the wrong way and a hedging loss ensues in a given quarter. Ron Haynie, senior vice president of mortgage policy at the Independent Community Bankers of America, told...