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Inside The GSEs

September 20, 2006

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Customer Concentration Puts GSEs at Risk

Fannie Mae and Freddie Mac each boast several thousand customers, but a disproportionate share of their business comes from only a handful of lenders. In fact, just three lenders made up half of Freddie’s business during the first half of 2006, according to an analysis by Inside The GSEs, based on data contained in the Inside Mortgage Finance Secondary Market Database. Fannie’s top 10 customers accounted for 61.6 percent of its business as of June 30...[Includes two data charts from the Inside Mortgage Finance Secondary Market Database.] Read More

Lawmakers Slam Retained Earnings Proposal

The forecast for the Federal Housing Finance Board’s controversial proposal on retained earnings and excess stock is mostly cloudy right now, after outbursts of some heated criticism on Capitol Hill. During an appearance earlier this month before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, Finance Board Chairman Ronald Rosenfeld presented a spirited defense of the proposal... [Includes sidebar, "WaMu Funding Gets Dragged Into Retained Earnings Scrum."] Read More

GSE Reform Pot Still Bubbling, But to What End?

Proponents of GSE reform continue to be tantalized by signs of possible movement on a legislative compromise, only to be doused by a subsequent cold shower. Last week, Sen. Richard Shelby, R-AL, chairman of the Senate Banking, Housing and Urban Affairs Committee, seemed to open the door to a compromise when he expressed a willingness to let a reform measure move forward without strict limits on the retained portfolios of Fannie Mae and Freddie Mac, as long as the risks they represent are addressed somehow... Read More

Fannie, Freddie Getting Their Reporting in Order

Fannie Mae and Freddie Mac seem to be on track to complete their respective financial reporting initiatives, according to separate presentations that Freddie Chairman and CEO Dick Syron and Fannie’s new CFO Robert Blakely provided at a Lehman Brothers Financial Services Conference last week. “The restatement process is the top priority at Fannie Mae,” Blakely said. “The production work streams for the restatement are complete; the regulatory settlement with OFHEO is behind us, as is the Justice Department investigation”... Read More

Another Fed Study Discounts GSE Portfolio Effect

A new study by Federal Reserve Board economists concludes that the large retained portfolios of Fannie Mae and Freddie Mac “have essentially no short- or long-term effects on either primary or secondary market spreads.” The researchers – Andreas Lehnert, Wayne Passmore and Shane Sherlund – looked at monthly purchase activity by the government-sponsored enterprises and mortgage origination estimates by Inside Mortgage Finance, an affiliated newsletter. They reported finding evidence that GSE portfolios tend to rise when... Read More

Freddie Mgmt Thwarts Call for More Disclosure

Freddie Mac’s management defeated a shareholder proposal that called for a semiannual report on the GSE’s charitable contributions. The action occurred during the GSE’s lightly attended annual shareholder meeting Sept. 8 at the company’s headquarters in McLean, VA. The proposal called for Freddie to semiannually disclose its policies and procedures for charitable contributions, the monetary and non-monetary contributions made to nonprofit organizations, and to provide a business rationale for each donation. It also would... Read More

OFHEO, HUD Eye GSE Patents; Congress Interested

Mortgage lender groups are prodding GSE regulators to take a closer look at applications for patents filed by Fannie Mae and Freddie Mac. Echoing a recent brouhaha over Fannie’s construction financing program, questions are being raised about possible conflicts with the GSEs’ charters when they seek patents for certain business processes and systems. The Office of Federal Housing Enterprise Oversight and the Department of Housing and Urban Development are reportedly reviewing some of the patents, and one industry lobbyist... Read More

Finance Board Proposes New Banking Rating System

The Federal Housing Finance Board is releasing for public comment a proposed Federal Home Loan Bank Rating System that’s intended to be more comprehensive and transparent than the current system – with an eye toward adoption and implementation by January 1, 2007. However, the proposed transparency would only go so far, as the ratings for individual FHLBanks would not be made public. Under the proposal, drafted by the Finance Board’s Office of Supervision, each FHLBank would be assigned a composite rating, on a scale of 1 to 4 (with... Read More

FHFB Strategic Plan Includes Risk-Based Oversight

The Federal Housing Finance Board will emphasize risk-based supervision in the next few years, according to its new strategic plan for 2007-2012. “In carrying out its duties, the Finance Board will execute an effective, risk-based supervisory and regulatory program to promptly identify and address current and emerging risks to the FHLBanks,” Chairman Ronald Rosenfeld said in the Chairman’s Message section of the plan. As part of that program, the Finance Board plans to implement a risk rating system. (See related... Read More

News Stories in Brief

OFHEO Hammer May Fall on Fannie Mae Executives; Freddie Believes Justice Investigation is Closed; Freddie Adds 13 to its Board; Freddie Adds James Hughes as New Information Chief; Fannie Adds Ex-Fed Official, Citigroup Executive to Board... Read More

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