Rather than ending the net worth sweep outright and agreeing to write off some of its preferred shares, Treasury is essentially simply allowing Fannie Mae and Freddie Mac to continue their practice of retaining earnings.
On the rural housing front, Freddie expects to increase its SFI purchase target from 3,600 to 3,900 loans in 2020 to as much as 4,800 units this year...
Questions posed by the FHFA include whether the GSEs should use appraisal waivers and how lenders might manipulate automated underwriting systems when seeking an appraisal wavier from the GSEs.
Mark Calabria: “Requiring the enterprises to develop living wills helps FHFA fulfill its responsibility to ensure that the failure of an enterprise would harm neither taxpayers nor the mortgage market.”
The “alternative methods for documenting income” for self-employed borrowers includes the use of unaudited income statements. But borrowers will now have to provide three months of bank statements instead of the traditional two.
But the stratagem comes with costs. According to FHFA estimates, Fannie and Freddie will face between $1.1 billion and $1.7 billion in additional charges due to the extension. That’s on top of the estimated $6 billion the two have already incurred.
Despite this "relief" measure, the GSE regulator has been sharply criticized by lenders because the fee is so steep: 500 basis points for first-time buyers and 700 bps for everyone else.
As Brown and Reed point out, unless Fannie and Freddie specifically require it, the parties purchasing these loans are under no obligation to provide forbearance to the borrowers.
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