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Inside The GSEs

August 30, 2013

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FHFA Ready to Unveil Lower GSE Loan Limits?

The Federal Housing Finance Agency is expected to announce lower GSE loan limits by October, a move that should provide a further boost to the jumbo mortgage-backed securities market, according to housing lobbyists and other industry observers tracking the issue. However, it’s unclear how much of a reduction to the current cap of $625,500 might occur.“I think everyone in the business is anticipating this and getting ready for it,” said one mortgage insurance source. A housing lobbyist added that, “Right now it’s a matter of timing. Will it come in October or a little later than that?” Read More

Radian Cuts MI Coverage Deal with Freddie

Radian Guaranty, the nation’s second largest mortgage insurer in terms of new policies written, late this week reached an agreement with Freddie Mac, limiting its exposure on a group of 25,760 legacy loans to $840 million. In a new filing with the Securities and Exchange Commission, the publicly traded MI said it expects to record a loss of $20 million in the third quarter because of the settlement. The Radian-guaranteed mortgages were delinquent as of the end of 2011. The MI has already paid $632 million to cover loss claims on these loans through two different payments. It also had set aside $205 million in a collateral account to cover what it calls “loss mitigation activity” on the notes. Read More

Fannie Cuts Maximum LTV to 95 Percent

Fannie Mae is lowering its maximum loan-to-value ratio to 95 percent come November, a move that could lead to more business going to the FHA. The policy change was confirmed by the GSE when it recently sent out an update to users of its automated underwriting program, Desktop Originator. It also means that mortgage insurers could lose business at a time when many have shown a new willingness to take on more credit risk amid improving delinquencies and earnings. Read More

GSEs Unaffected by New QRM, Issues QM Updates

Six federal regulators, including the Federal Housing Finance Agency, re-proposed risk-retention requirements, as well as the definition for qualified residential mortgages this week, making significant changes that had been sought by lenders. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk-retention requirement of the Dodd-Frank Act. Among other things, the rule would recognize the full guaranty on payments of principal and interest provided by Fannie Mae and Freddie Mac for their residential mortgage-backed securities as meeting the risk-retention requirements while the two GSEs are in conservatorship or receivership and have capital support from the federal government. Read More

OIG Flags Review Shortfalls in Fannie/BofA Deal

The official watchdog of Fannie Mae's regulator has flagged "several opportunities for improvement" in the Federal Housing Finance Agency's oversight of the nearly $12 billion buyback settlement between Bank of America and the GSE announced earlier in the year. In its review of the January BofA/Fannie settlement, FHFA's Office of Inspector General credits the agency for its adherence to its repurchase settlement guidance, an IG-recommended policy that the regulator issued in June 2012. However, FHFA's repurchase guidance and consequently its oversight of the buyback settlement fell short regarding the resolution of compensatory fees and the transfer of mortgage servicing rights, the OIG report found. Read More

Fannie Tweaks Glitch That Reports Short Sales as Foreclosures

Fannie Mae has come up with a workaround for a computer software problem that erroneously reported short sales as foreclosures on consumer credit reports. “In an effort to assist borrowers in obtaining a new loan in an appropriate timeframe, [Desktop Underwriter] will be updated to disregard the foreclosure information on the credit report when instructed to do so by the lender on the online loan application,” Fannie explained in a recent updated notice. Read More

New Shareholder Suit Aims At Treasury’s GSE ‘Sweep’

The Federal Housing Finance Agency is ignoring a clear directive to rehabilitate Fannie Mae and the GSE conservator’s failure to restore the firm to financial health has come at the cost of the company’s common shareholders, according to a new lawsuit filed against the government earlier this week. Fannie shareholders Bryndon Fisher and Bruce Reid filed suit against the United States government, as well as Fannie as a nominal defendant, in the U.S. Court of Federal Claims. This latest shareholder lawsuit does not challenge the legality of Fannie’s placement into conservatorship in September 2008. Read More

Loss of GSEs Would Have ‘Signifcant Impact’ on CUs

Credit unions utilize Fannie Mae and Freddie Mac more than any other financial institutions, with the GSEs playing a “critical role” in their ability to deliver mortgage products to their members, according to a recent survey from the National Association of Federal Credit Unions. The tally, published in NAFCU’s Economic & CU Monitor, found that a majority of CU member respondents, 71.4 percent, said that their board policies restrict the percentage of real estate loans held… Read More

G-Fee Hikes Will Take Shape of GSE Reform

Future guaranty fee increases promulgated by the Federal Housing Finance Agency will be driven by the shape of the mortgage market to come, according to a new report from Barclays. The FHFA has telegraphed additional g-fee increases in 2013 following two hikes last year. Currently g-fees average 50 to 55 basis points compared to 24 bps in 2009, noted Barclays. “Further g-fee hikes will depend on the path of GSE reform, the amount of capital various entities in the system are required to hold and the cost of capital of these entities,” said Barclays. Read More

OIG: Despite HARP 2.0 Success, Outlook Uncertain

With more than two years left to go in the Home Affordable Refinance Program, it remains to be seen how many HARP-eligible loans will ultimately be refinanced as borrower education and lender participation in the program continue to be major challenges, according to a recent report by the Federal Housing Finance Agency’s official watchdog. In its “mid-program assessment,” the FHFA’s Office of Inspector General report noted that since HARP was launched in March 2009 through March 2013, 2.4 million HARP refis have been completed. The HARP 2.0 modifications rolled out in late 2011 and subsequent changes made throughout 2012 and 2013 have “substantially increased” the program’s refi volume, particularly for loans with loan-to-value ratios greater than 105 percent, said the OIG. Read More

FHLBank Agency MBS Investments Rise in 2Q13

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the second quarter of 2013, with a negligible increase from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted a modest but noticeable decline within the FHLBank system during the period ending June 30, 2013. GSE MBS accounted for 73.9 percent of combined FHLBank MBS portfolios, up 1.9 percent from the first quarter. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share. Read More

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