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Inside The GSEs

October 25, 2013

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Experts: Final GSE Reform a Long Way Off But Policy Work Progresses

As lawmakers turn their attention to mortgage finance reform, including a final resolution of Fannie Mae and Freddie Mac, industry observers point to the current bipartisan effort in the Senate as the most promising avenue to legislative consensus. However, practical complexities and political considerations all but guarantee that the answer to the GSE question won’t be arrived at the easy way or anytime soon. Read More

DeMarco Hints at GSE Loan Limit Cut at Least Six Months Away

The Federal Housing Finance Agency will make “across the board” reductions to Fannie Mae’s and Freddie Mac’s conforming loan limits that affect all markets, but the industry will have ample time to plot necessary course corrections, according to FHFA Acting Director Edward DeMarco. During remarks this week at a conference sponsored by Zillow and the Bipartisan Policy Center, DeMarco said he will announce his loan limit decision in late November – the traditional timing of the announcement. Read More

Jury Sides with Government Over BofA in Mortgage Fraud Case

Countrywide Financial Corp. committed fraud when it sold questionable mortgages to Fannie Mae and Freddie Mac prior to the financial crisis, a New York federal jury determined this week. Bank of America acquired CFC in 2008 and is liable for the fraud. The jury also found that Rebecca Mairone, a former chief operating officer for CFC’s subprime division, Full Spectrum, is liable for fraud for her role in leading its “Hustle” loan program, which was designed by Countrywide to speed up approvals for unqualified borrowers. Read More

FHFA Pushing JPMorgan, BofA for Billions in MBS Lawsuit Deals

More than two years after it first filed its massive legal action against some of the nation’s largest financial institutions, the Federal Housing Finance Agency is demanding a high-cost exit fare before it will let two big banks off the hook. The FHFA reportedly is in separate talks with JPMorgan Chase and Bank of America to pay billions to quiet claims that the firms sold faulty mortgage-backed securities prior to the 2008 mortgage market meltdown. … Read More

Fannie: Why Aren’t Some Seller/Servicers Issuing MBS?

Although Fannie Mae has been pushing certain thinly capitalized nonbanks to its cash window for loan sales, it also wants to know why others that have the capital – and approvals – aren’t issuing mortgage-backed securities. A Fannie spokesman had this to say on the matter: “If not, why not? Maybe it’s time for us to have a conversation with them.” Read More

Booker’s Senate Election Doesn’t Improve Watt’s FHFA Prospects

Despite regaining an additional likely vote following New Jersey’s special Senate election last week, industry observers note that Rep. Mel Watt’s, D-NC, confirmation prospects to be the next Federal Housing Finance Agency director remain doubtful. With the election of Newark Mayor Cory Booker, D, to fill the seat formerly held by Sen. Frank Lautenberg, D, until his June 2013 death, the unofficial vote count for Watt’s nomination rises back to 56 to 44. Read More

Expect More, Expanded GSE Risk-Sharing Deals Going Forward

Building on both GSEs’ recent risk-sharing transactions to achieve the Federal Housing Finance Agency’s $30 billion 2013 Conservatorship Scorecard target, the head of the FHFA said this week to expect more of the same as well as additional risk-sharing innovations. In a speech at the Bipartisan Policy Center, FHFA Acting Director Edward DeMarco said that Fannie Mae and Freddie Mac, in concert with the Finance Agency, are “planning for the scope and depth of risk-sharing transactions to continue and expand.” Read More

House Dem Says FHFA Plans to Shrink GSE MF Increases Risk

The Federal Housing Finance Agency should think twice, then disregard any plans to further cut the multifamily business of Fannie Mae and Freddie Mac, according to the ranking member of the House Financial Services Subcommittee on Capital Markets and GSEs. In a letter to the FHFA earlier this month, Rep. Carolyn Maloney, D-NY, noted that since the Finance Agency implemented “an arbitrary” 10 percent cut in GSE multifamily business for 2013, “an additional reduction further depresses the housing market nationwide, reduces the availability of rental housing, and actually harms the financial stability” of Fannie and Freddie by limiting proven revenue-generating opportunities. Read More

FHFA Moves to Codify GSE Suspended Counterparty Program

The Federal Housing Finance Agency moved this week to formalize an anti-fraud initiative it rolled out some 16 months ago that requires Fannie Mae, Freddie Mac and the Federal Home Loan Banks to notify the agency forthwith of fraudulent activity by a GSE-associated individual or company. The interim final rule published in the Oct. 23 Federal Register generally codifies the procedures under the FHFA’s existing Suspended Counterparty Program, established in June 2012, with a request for public comment. Read More

ABA: FHLBanks Suffer From (Lack of) Image Problem

The Federal Home Loan Bank System is suffering from a public image problem. It doesn’t have much of one and what the public, and more importantly policymakers, don’t know about the 12 regional FHLBanks and/or their 7,600 member owners could hurt them, according to the American Bankers Association. The problem for the FHLBanks the trade group noted in its most recent edition of ABA Federal Home Loan Bank Member Insights is that the low profile which has served the Bank system so well in the past has become a “sizable policy risk” as relatively few people who will be directing housing finance reform know or understand just what the FHLBanks do. Read More

Fannie, KPMG Class Action Lawyers Seek $45M Settlement Payday

The law firm that pursued a nearly decade-long class-action fraud lawsuit on behalf of investors against Fannie Mae and their former auditor, KPMG LLP, until its settlement in May say they are entitled to a piece of the $153 million payout, plus expenses. In papers recently filed with the U.S. District Court of the District of Columbia, the firm of Markovits, Stock & DeMarco of Cincinnati is seeking attorneys’ fees in the amount of $29.1 million or 22 percent of the settlement amount, plus $15.3 million in “out of pocket” expenses incurred in the nine years of pursuing the class action. Read More

GSEs’ Purchase Mortgage Business Drops in September

The incredibly shrinking refinance market helped continue the shift in the mix of single-family mortgages securitized by Fannie Mae and Freddie Mac in the month of September, according to a new Inside The GSEs analysis. Fannie and Freddie issued $78.6 billion in single-family mortgage-backed securities in September, a 20.0 percent decline from August, but a 7.0 percent rise for the first nine months of 2013. [Includes one data chart.] Read More

Enterprise Endnotes

Fannie, Freddie Update Mortgage Servicing Requirements. Fannie Mae and Freddie Mac have released updated mortgage servicing requirements in response to the Consumer Financial Protection Bureau’s servicing rule. All of the announced changes are effective for servicing activities completed on or after Jan. 10, 2014. The updated servicing requirements relate to early intervention and communication with delinquent borrowers, alternatives to foreclosure and right of appeals, foreclosure referral and foreclosure suspension, and error resolution. Read More

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