The Treasury Department’s surprise move in the summer of 2012 to rewrite the Senior Preferred Stock Purchase Agreements it had with Fannie Mae and Freddie Mac was an “unlawful” action that could have a far-reaching impact well beyond the shareholders of the two government-sponsored enterprises, according to an attorney representing shareholders. Speaking Wednesday at a forum sponsored by Ralph Nader’s Shareholder Rights advocacy group, attorney Ted Olson of Gibson Dunn & Crutcher said Treasury’s Third Amendment to the PSPA was a calculated effort by the Obama administration to ensure that GSE stockholders got nothing, according to internal Treasury documents they obtained. The amendment replaced the quarterly GSE dividend payment with a net-worth sweep of all company profits. Perry Capital, represented by Olson, is...

The Federal Reserve’s move to reduce its purchases of agency mortgage-backed securities may eventually change the relative costs and benefits of financing new production through Fannie Mae, Freddie Mac and Ginnie Mae. “We’re in an environment where I think banks are going to get interested in at least the more attractive credit risks and holding those in portfolio,” said Mark Calabria, director of financial regulation studies at the libertarian Cato Institute in Washington, DC. “So, to me, the most important question going forward over the next two years for the MBS market is how much of this [new production] is going to make its way into MBS and how much will be held on balance sheets as whole loans.” Calabria predicted...

As mortgage lenders begin preparing for the new mortgage disclosure regime being instituted by the CFPB’s final rule, they should revisit lessons learned during their previous adventures with the Truth in Lending Act and the Real Estate Settlement Procedures Act. “RESPA reform from January 1, 2010, is still close in many of our minds, and we remember back to ’09 being a year that we spent a massive amount of time implementing that new regulation,” said Amy Thoreson Long, senior counsel in the consumer lending division at Wells Fargo. Then in 2010...

The Federal Reserve’s Open Market Committee fulfilled investor expectations this week by voting to reduce its support of the financial markets by another $10 billion overall, starting next month. That will reduce its targeted monthly increase in its agency MBS portfolio from $35 billion to “just” $30 billion. With new production of agency MBS falling more quickly than the central bank’s targeted purchases, the Fed may actually be taking a larger chunk of the market. When the Fed announced a $5 billion per month reduction in its MBS growth target in November, actual agency MBS issuance declined by more than twice as much, $11.3 billion, from the previous month. The FOMC said...[Includes one data chart]

President Obama’s scant mention of housing finance reform or mortgage policy during this week’s State of the Union address was not entirely a surprise, say industry observers, but an administration official’s remarks last week on the Home Affordable Refinance Program’s outlook were more encouraging. Obama spoke of housing exactly twice during his prime time speech: first to describe the housing market as “rebounding” and again to demand from Congress “legislation that protects the taxpayers from footing the bill for a housing crisis ever again.” Fannie Mae or Freddie Mac were mentioned...

The Treasury Department and the Structured Finance Industry Group announced separate initiatives last week aimed at increasing activity in the non-agency market. Both efforts plan to round up a variety of industry participants to work through issues that have prevented significant issuance of new non-agency mortgage-backed securities. “In the absence of an apparent leader, Treasury plans to coordinate a series of conversations with relevant regulators, market participants and other stakeholders to help ...

Amid growing calls by lawmakers and policy advocates to divert some of Fannie Mae’s and Freddie Mac’s increasing profitability to an affordable housing commitment, industry observers speculate that new Federal Housing Finance Agency Director Mel Watt is seriously inclined to act that way. The Housing and Economic Recovery Act of 2008 requires the government-sponsored enterprises to make annual contributions to the National Housing Trust Fund and Capital Magnet Fund. Fannie and Freddie were put in government conservatorship before they ever made any contribution. Late last week, more than 30 Senate Democrats told...

The consensus among speakers at the ABS Vegas conference this week appeared to be that the MBS market is unlikely to change significantly this year. “The status quo is comfortable,” said Larry White, an economics professor at New York University’s business school. Issuers of non-agency MBS are working on reducing the government-sponsored enterprises’ dominance of the secondary market for mortgages, but the chicken-and-egg problem persists. New non-agency issuance has ground to a standstill, and Congress has been slow to move housing-finance reform legislation. In the meantime, industry observers expect...

When Fannie Mae and Freddie Mac unveil their fourth-quarter 2013 results in February, the two government-sponsored enterprises are expected to again report strong earnings driven by: higher guaranty fee income, one-time gains tied to legal settlements, and a boost from lower loan-loss reserves. But most of the money will be swept straight into the U.S. Treasury. One of the major factors in the GSEs’ huge 2013 earnings so far – the release of deferred tax assets – will likely be...