The calculus is straightforward: With that much capital tied up in equity, it’s difficult to see how the GSEs could generate adequate returns to attract investors.
Fannie and Freddie reported a combined profit of $6.69 billion in the third quarter, a 54.8% sequential increase. However, year-to-date profits were down more than 19% due to COVID and CECL implementation. (Includes data chart.)
Former MBA president David Stevens believes the adverse market fee has nothing to do with COVID-induced risk. “It’s about building up the capital of Fannie and Freddie,” he said.
The senator flagged the risk of improper foreclosures if servicers begin the foreclosure process before a borrower has an opportunity to either extend forbearance or be evaluated for a modification.