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Inside The GSEs

August 2, 2013

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Freddie Inaugurates Risk-Sharing Transaction

Industry analysts predict that Freddie Mac’s recently announced deal to shed some of the credit risk of the mortgages it guarantees to the private sector could provide the template for a broader risk-sharing program for both GSEs and opens the door for potentially promising policy implications. The $500 million offering of Structured Agency Credit Risk securities, which Freddie priced last week, aims to diminish taxpayer risk while introducing more private capital into the market. Due to investor demand, the size of the offering was increased from $400 million to $500 million, and about 50 broadly-diversified investors participated in the offering, including mutual funds, hedge funds, REITs, pension funds, banks, insurance companies and credit unions, according to Freddie CEO Donald Layton. Read More

Fannie Taps National MI to Insure $5B Pool

Fannie Mae has selected National Mortgage Insurance Corp. to insure a pool of approximately $5.0 billion of mortgages as the GSE looks to expand its risk sharing with private firms, the mortgage insurer announced this week.The Emeryville, CA-based unit of NMI Holdings explained that the transaction was offered through a formal bid process to private mortgage insurers.“Fannie Mae selected National MI as the insurer based on its favorable terms and conditions, and beneficial risk-share attributes,” said National MI. Read More

Senate Delays Watt FHFA Vote Until After Recess

The Senate opted to leave town this week for its five-week August recess without calling a vote on President Obama’s nominee to head the Federal Housing Finance Agency. Two weeks ago, Rep. Mel Watt’s nomination cleared the Senate Banking, Housing and Urban Affairs Committee along a straight party-line vote, with some key Republicans vowing to block the North Carolina Democrat’s confirmation. Until the mid-week announcement by Senate Majority Leader Harry Reid, D-NV, that Watt’s nomination would not be taken up for debate before Congress returns from its recess on September 9, Capitol Hill watchers were wary of another potential nomination showdown between Dems and the GOP. Read More

FHFA Withdraws Proposed Rule on GSE PACE Liens

More than a year after it was issued under court-ordered duress, the Federal Housing Finance Agency has withdrawn its proposed rule concerning Fannie Mae and Freddie Mac underwriting standards related to mortgages affected by Property Assessed Clean Energy programs. Local governments use the PACE Program, which is part of the American Recovery and Reinvestment Act of 2008, to provide financing secured by a priority lien on the property to homeowners for the purchase of energy-related home improvements. While 27 states and the District of Columbia have legislation in place to permit PACE financing for “green” homes, in July 2010 Fannie and Freddie stopped purchasing PACE-related mortgages that had automatic first-lien priority over previously recorded mortgages. Read More

S&P Revises FHLBank of Seattle Outlook Upward to Stable

Standard & Poor’s Rating Services has revised its outlook for the Federal Home Loan Bank of Seattle to “stable” from “negative,” S&P announced two weeks ago. S&P said its revision reflects “significantly reduced losses within the bank’s private-label mortgage-backed securities portfolio and strengthening capital.” Read More

Committee Advances PATH Act to House Floor

House Financial Services Committee Chairman Jeb Hensarling, R-TX, last week pushed through committee his bill to replace Fannie Mae and Freddie Mac with a new securitization “utility” without any government backing, but opponents of the bill warn that the measure will have a much tougher time getting votes on the House floor. The Protecting American Taxpayers and Homeowners Act, H.R. 2767, was approved by a 30-27 margin with all the committee’s Democrats and even two Republicans voting against it. Before last week’s 10-hour bill markup, House Democrats released their principles for housing finance reform. In addition to preserving the 30-year fixed-rate mortgage, Dems aim to establish a system with an explicit government guaranty paid for by the private sector and maintain regulations that the House GOP wants to eliminate. Read More

Senate Democrat Introduces New HARP 3.0 Effort

A pair of newly filed bills by a lone Senate Democrat would see the Home Affordable Refinance Program further expanded as a means to provide underwater homeowners with new refi options. The Rebuilding American Homeownership Act, S. 1375, would modify HARP to allow loans “that lack a government guaranty” to be refinanced through HARP. The bill would also direct Fannie Mae and Freddie Mac to price for the risk that the GSEs would be assuming, so that the program has no net costs, as well as establish an automatic sunset for the program after 24 or 36 months. Read More

UBS to Settle FHFA GSE MBS Claims for $885 Million

The Federal Housing Finance Agency announced last week it has reached a settlement with UBS Americas for nearly $900 million to cover claims of alleged violations of federal and state securities laws regarding non-agency residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac. Under the terms of the agreement, the Swiss bank will pay some $885 million divided roughly in half between the two GSEs. UBS will pay Fannie approximately $415 million and $470 million to Freddie to settle claims related to residential MBS offerings between 2004 and 2007. “The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” said FHFA Acting Director Edward DeMarco. Read More

Appeals Court Upholds Dismissal of Lawsuit over Freddie Losses

A federal district court in Illinois did not err in dismissing a lawsuit by investors against a hedge fund over nearly $7 million lost in Freddie Mac stock before the GSE was forced into conservatorship, according to a recent ruling by the Seventh Circuit Court of Appeals. The appeals court agreed with the lower court that the plaintiffs failed to present any valid cause of action. Read More

FHFA Seeks Changes to CFPB Rule

Certain provisions in the Consumer Financial Protection Bureau’s proposed changes to its mortgage servicing rule conflict with Fannie Mae’s and Freddie Mac’s own servicing guidelines and should be amended, according to the Federal Housing Finance Agency. In a comment letter, the Finance Agency cited the similar goals of the FHFA’s single, consistent set of servicing procedures established in 2011 to form the Servicing Alignment Initiative and the bureau’s 2013 Mortgage Servicing Final Rule. … Read More

FHLBank Earnings Increase During 2Q 2013

Preliminary combined net income for the 12 Federal Home Loan Banks jumped 25.9 percent to $730 million in the second quarter of 2013, up from $580 million in the first quarter, according to the Federal Home Loan Bank Office of Finance. The FHLBanks’ net income for the six months ended June 30, 2013, was $1.310 billion, a 1.9 percent increase compared to the same period in 2012. “These increases were driven primarily by improvements in non-interest income and reductions in non-interest expense, partially offset by lower net-interest income,” noted the Office of Finance. Read More

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