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Volume 17 - Number 19

September 22, 2017

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GSE Seller Buybacks Edged Higher In Second Quarter, Pipeline Shrank

Mortgage lenders that sell loans to Fannie Mae and Freddie Mac saw a modest increase in the volume of loans they repurchased from the GSEs during the second quarter of 2017, according to a new Inside The GSEs analysis of disclosure reports filed with the Securities and Exchange Commission. During the second quarter, lenders repurchased or made indemnifications on $244.44 million of single-family loans pooled in Fannie and Freddie mortgage-backed securities. That was up 2.5 percent from the first three months of the year. On a year-to-date basis, seller buybacks totaled $483.01 million, a 14.5 percent drop from the first six months of 2016.

Groups Tell Treasury, FHFA: Legislation Not Recap

Fifteen industry trade groups and other organizations sent a letter to Treasury Secretary Steve Mnuchin and GSE regulator Mel Watt late this week, reminding them that Fannie Mae and Freddie Mac should be reformed through legislation and not some type of recapitalization plan where Congress is cut from the equation. “We are increasingly concerned about efforts to derail comprehensive reform,” they write. “We urge both Treasury and Federal Housing Finance Agency to focus on continuing to work with Congress to end conservatorship through comprehensive, bipartisan, legislative reforms.” No specifics are provided regarding the derailment comment. Presently, there are no viable bills before Congress where a consensus on GSE reform might be reached.

Policing the Flood Insurance Policies, GSEs Say Loans Compliant

Despite reports showing that many homeowners lack required flood insurance policies, Fannie Mae and Freddie Mac said data show that most of their loans do have the appropriate coverage. Recent hurricanes in Houston and Florida revealed that borrowers either never had coverage or let their policies lapse. Flood insurance is a requirement for GSE loans in designated flood areas and the mortgage giants say that servicers are responsible for enforcing the policies. Nevertheless, getting to the root of the disconnect is complicated. Although the GSEs said it’s up to servicers to evaluate whether loans meet flood insurance requirements, they said they also have their own systems in place to help ensure compliance.

IU Criticizes MBA Reform Plan, Says Geared Toward TBTF Banks

Investors Unite, an advocacy group for GSE shareholders, criticized the Mortgage Bankers Association’s plan for GSE reform and stated that the trade group is promoting too-big-to-fail banks. The comments come after MBA President and CEO David Stevens blogged about the nine-year anniversary of the conservatorship earlier this month, and touted the benefits of MBA’s proposal for GSE reform. The group’s plan replaces the implicit government guarantee of Fannie Mae and Freddie Mac with an explicit guarantee. “In our plan, private capital would assume more risk, which would lessen the exposure of taxpayers during any economic headwinds,” he said. Stevens also went on to praise...

Fannie Mae’s Latest RPL Sale Goes to Goldman Subsidiary

Fannie Mae’s most recent reperforming loan sale of 10,700 loans went to Goldman Sachs subsidiary, MTGLQ investors. It was the GSEs’ fourth reperforming loan sale transaction of 2017. The loans were divided into three pools and totaled $2.4 billion in unpaid principal balance. MTGLQ won all three pools and is expected to close on Oct. 26. The largest pool consisted of 4,482 loans with an unpaid principal balance of $9.9 billion and average loans size of $220,626. Another pool had 4,200 loans with a UPB of $9.8 billion and average loan size of $234,433. And, the last included 2,001 loans with an aggregate UPB of $4.6 billion and an average loan size of $230,751.

Freddie Mac Relaxes Appraisal Policies for Trainees

Freddie Mac has decided to buy mortgages with appraisals made by trainee appraisers. The GSE made the announcement in a recent bulletin updating appraisal requirements. Freddie said it made the change in response to seller inquiries. “We are also specifying that an unlicensed or trainee (or similar classification) appraiser may perform a completion report as long as a supervisory appraiser also signs the completion report,” said Freddie. The Loan Product Advisory tool has already been updated to reflect the change. The appraisal shortage likely played a role in that decision as Realtors and lenders complained about a lack of qualified appraisers and out-of-town appraisers not familiar with local market conditions incorrectly valuing homes.

OIG: Complex Multifamily Market Needs Continued Monitoring

Inspector General recently released a paper about the need for continued oversight of activity in the growing GSE multifamily market. Combined, Fannie Mae and Freddie Mac purchased $112 billion in multifamily mortgages last year. The paper noted that while much of the reform discussion has focused on single-family housing, the GSEs’ role in the multifamily market is a critical aspect of the housing finance system. Market-wide multifamily originations, along with Fannie and Freddie purchases of multifamily mortgages, have grown to record levels in recent years, said the OIG. But multifamily mortgages are more complex to underwrite than single-family loans. “Underwriters of multifamily loans must understand the business and...

Federal Home Loan Bank Advances Up in Second Quarter

Bank and thrift members of the Federal Home Loan Bank system had outstanding advances of $565.7 billion at June 30, a quarterly increase of 8 percent, according to an analysis by Inside The GSEs. Year-over-year numbers are also up, with the second quarter of 2017 now 4 percent higher than the $545.6 billion reported in the first quarter of 2016. In fact, the number reported in the second quarter represented the largest volume of advances for the past 12 months. However, the top three advance users were both down for the quarter. Although JPMorgan Chase continues to lead among borrowers with $68.5 billion in advances, it was down some from the $74.3 billion...

Freddie CRTs Indicate G-Fees More Stable Than Private Sector Pricing

multifunctional in that they do more than just help take the risk off the GSEs. They’re also a good indicator for setting guarantee fees. Freddie Mac said CRTs are often indicative of what the private market would charge for the risk taken on by a GSE. And the appropriate level of g-fees has been an important issue in housing finance. “CRT is not only shifting risk away from taxpayers and creating new asset classes for investors it is a key benchmark for policy discussions by providing information about what the private capital markets would charge for absorbing the credit risk...

GSEs Detail Requirements for New High-LTV Refinance Product

Fannie Mae and Freddie Mac recently released more details on requirements for participating in their new refinance option for loans originated after Oct. 1. This option allows borrowers with high loan-to-value ratios to refinance. While the official start date is next month, the GSEs said that a minimum of 15 months must have passed between the note date of the existing loan and the start of the new loan. For example, if the mortgage is originated in October 2017, the note date of the new loan can be no earlier than February 2018. To participate, the loans must be owned or securitized by Fannie or Freddie and can include loans that are part of its risk-sharing structure.

GSE Roundtop

GSEs. Congress should be the one that makes the ultimate decision on deciding the future of Fannie Mae and Freddie Mac, according to a just-completed poll from Inside Mortgage Finance. Roughly, 28 percent of industry professionals picked Congress as the ultimate decider with the Federal Housing Finance Agency coming in a close second at 25 percent. Treasury finished third in the poll at 18 percent. Then again, the fourth choice – “I wish we had another option, but we don’t” actually garnered the highest response at 29 percent. Wells Fargo Analysis of GSEs’ Portfolio. Wells Fargo said that the GSEs’ portfolio needs to be able to buy out seriously delinquent loans from mortgage-backed securities and provide

Poll

The year is almost 75% done. How is mortgage origination volume at your shop?

We will fund about the same as we did in 2016.
We will fund more than last year – by a little.
We will fund more than last year – by a lot.
We will fund less than last year – by a little.
We will fund less than last year – by a lot.

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