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Volume 18 - Number 2

January 19, 2018

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GSE Servicing Market Became More Top-Heavy in 4Q17

The ongoing growth of New Residential Mortgage resulted in an increase in concentration among the top servicers of single-family Fannie Mae and Freddie Mac loans in the fourth quarter. New Residential, a real estate investment trust that invests in mortgage servicing rights and related assets, has rocketed up the ranks of GSE servicers. After picking up its seller-servicer approvals in the third quarter of 2016, the company had amassed a $229.57 billion MSR portfolio by the end of last year. The REIT so far hasn’t invested in Ginnie Mae servicing. Its Fannie/Freddie holdings grew by 13.5 percent during the fourth quarter, enough to vault over Bank of America to become the third-largest investor in GSE MSR. New Residential pays subservicers to handle loan administration duties.

FHFA Director Joins the GSE Reform Conversation, Seeks Explicit Guarantee

After years of being mum on what he thinks a reformed secondary mortgage market should look like, Federal Housing Finance Agency Director Mel Watt revealed FHFA’s goals for a post-conservatorship housing-finance system. Prompted by what Watt called “the growing perception that reform could be achievable this year,” he wrote to the Senate Committee on Banking, Housing and Urban Affairs on Jan. 16 outlining FHFA’s views on reform, which include an explicit government guarantee for mortgage-backed securities comprised of conventional home loans. According to the document, a copy of which was provided to Inside The GSEs, Watt and his staff reiterated that an ongoing conservatorship is not sustainable.

Treasury Advocates for Legislative Solution to GSE Reform

Craig Phillips, counselor to the secretary at the U.S. Department of Treasury, advocated for a legislative solution to the ongoing conservatorships of Fannie Mae and Freddie Mac. He said the decision to allow the GSEs to retain a small capital buffer was a litmus test on housing reform. Although he said Treasury didn’t feel that Fannie and Freddie have an immediate capital problem because they have lines of credit, Phillips said there was somewhat of an “optical issue,” which led to the Treasury’s decision to allow the GSEs to retain up to $3 billion in capital in December. Speaking at a Women in Housing and Finance public policy luncheon in Washington, he said, “We think that decreases tension over this point. There was...

Law Firm Forecasts GSE Reform to Happen Within First Half of Year

The stars are aligning for housing-finance reform, according to an analysis by K&L Gates. The law firm said it believes that reform may finally be addressed in the first half of this year. Sens. Bob Corker, R-TN, and Mark Warner, D-VA, have been circulating a draft proposal to other senators and the Trump administration. The firm noted that the Corker-Warner proposal contains features such as a federal government guarantee for mortgage-backed securities in the event of catastrophic losses, and it has the GSEs continuing to exist under government conservatorship until competitors enter into the securitization market for mortgage loans.

GSEs Align MI Rescission Relief With Reps and Warrants

Fannie Mae and Freddie Mac issued new GSE rescission relief principles to mortgage insurers this week that are designed to align better with the current representation-and-warranty framework. Early last year, the Federal Housing Finance Agency suggested that private MIs work on aligning their buyback and rescission guidelines with the mortgage giants. The new principles will add clarity, incorporate new features and allow for more rescission relief without increasing risk to the GSEs’ most significant counterparties, according to the announcement by the Federal Housing Finance Agency. This year, the mortgage insurers will revise their master policies to reflect the new principles and obtain the required approvals...

Housing-Finance Reform Should Address Servicing Issues

Issues related to mortgage servicing, including the rising costs to service mortgages today, should be included in talk of housing-finance reform, according to a new paper by the Urban Institute. Since the housing downturn, mortgage servicing costs have risen dramatically, which has reduced access to credit and forced some depository institutions to leave the market. The UI said that the foreclosure crisis in 2007 upended the pre-crisis servicing model. And despite its importance, the report said, mortgage servicing is frequently overlooked in major policy conversations. “That is a mistake. The servicing industry has changed dramatically since the 2008 mortgage default and foreclosure crisis and subsequent Great Recession,” said the paper.

GSEs Report Record-Breaking Multifamily Market for 2017

Freddie Mac set a new company record for multifamily lending last year by financing $73.2 billion in loan purchase and guarantee volume. That’s a noteworthy 30 percent increase from the $56.8 billion financed in the previous year and translates to 820,000 units. Freddie attributes the growth to a host of new offerings and executions. The GSE set records in small-balance loans, targeted affordable housing and its Green Advantage businesses. “The strength of our innovative products, underwriting and world-class securities brings liquidity to every corner of the multifamily market,” said David Brickman, Freddie’s executive vice president and head of multifamily.

IG Says Fannie, Freddie ARMs Purchase Up Since 2016

The GSEs have been purchasing more adjustable-rate mortgages in the past year and the Federal Housing Finance Agency Office of Inspector General said that warrants monitoring. Since November 2016, the GSEs’ purchase of ARMs has grown. The numbers are far lower than the volume of ARMs purchased during the housing bubble in the early 2000’s, a new IG white paper noted. The ARM share of single-family mortgage purchases by the GSEs dropped from around 20 percent in 2006 to 12 percent in 2007. And by 2009, ARM purchases by Fannie and Freddie tumbled to just 2.3 percent of their single-family business. From 2007 to 2010, the GSEs tightened restrictions on their purchase of ARMs, including those with nontraditional features and layered risk.

Housing-Reform May Negatively Impact Rural Lending

Borrowers in rural communities would suffer if the resolution of the limbo status of Fannie Mae and Freddie Mac winds up creating more headwinds for community-based banking institutions. The Brookings Institute published a new report by the Center for Responsible Lending explaining how housing-finance reform proposals will profoundly affect lending in rural communities. The report said the GSE financing meets a critical need in rural areas, home to almost a quarter of the population and17.5 percent of mortgage loans in the U.S. In 2016, 30.3 percent of all loans originated in rural areas were sold to Fannie and Freddie, the CRL said.

GSE Shareholders Continue Battle Against Government Agencies

In a joint brief filed this week, federal respondents took issue with arguments made by GSE shareholders in their fight against the net worth sweep and said a shareholder petition for a Supreme Court review of their case should not be granted. Shareholders in several cases filed three petitions for a writ of certiorari back in November. The plaintiffs asked the Supreme Court of the United States to intervene to “restore certainty and uniformity.” They claim that the Federal Housing Finance Agency acted unconstitutionally when it imposed the net worth sweep.

GSE Roundup

Freddie Mac Names Head of HR and Diversity. Freddie Mac announced that Jacqueline Welch has been named head of the Human Resources, Diversity & Inclusion (HRDI) division and chief diversity officer. In her expanded role as senior vice president of HRDI and CDO, Welch will be a member of the company’s senior operating committee and will report directly to Freddie Mac CEO Donald Layton. Welch joined Freddie in December 2016, and the GSE says she brings more than 20 years of experience in HR strategy and execution to the company. Chicago’s Bridgeview Bank Now Fannie Mae Approved. This week, Chicago-based Bridgeview Bank announced it has received Fannie Mae approval, which allows the company to expand its consumer home financing business.


How many new retail loan officers (net) is your shop looking to hire in the first quarter of 2018?

1 to 10. We’re being careful.
11 to 30. We’re feeling slightly bullish.
31 or more. We’re in expansion mode.
None. We’re staying right where we are, for now.
We’re cutting back.

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