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Inside The GSEs

December 20, 2013

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Industry Asks Watt’s Next After Senate Confirms New FHFA Head

This year’s prolonged and bitter political fight to install Rep. Mel Watt, D-NC, as the new director of the Federal Housing Finance Agency may turn out to have been the easy part, say industry observers, as he prepares to assume his place as arguably the most powerful mortgage regulator in the U.S. Last week’s 57-41 vote was the second successful confirmation under new Senate rules that essentially eliminated the filibuster for presidential appointments. In November, Senate Democrats muscled through a procedural change that replaced the 60-vote supermajority on nominations with a simple majority vote, shutting down GOP efforts to block Watt’s advance to the Finance Agency’s corner office. Read More

FHFA Announces Reorganization in Advance of New Director Watt

One day after the Senate’s confirmation of Rep. Mel Watt, D-NC, as the new head of the Federal Housing Finance Agency, FHFA Acting Director Edward DeMarco last week announced senior staff changes and a significant reorganization of the agency’s internal structure. The Finance Agency will be combining two offices managing conservatorship-related matters into a new Division of Conservatorship to be led by Wanda DeLeo, currently serving as the FHFA’s deputy director in the Office of Strategic Initiatives. Read More

Fannie, Freddie Roll Out FHFA-Backed Sharp Increase in LLPAs

Incredulous mortgage industry trade groups are pushing back against a controversial increase this week in loan-level price adjustments for loans purchased by Fannie Mae and Freddie Mac. The two GSEs – under the direction of the Federal Housing Finance Agency – rolled out their LLPA revisions – Freddie calls them post-settlement delivery fees – through bulletins to seller/servicers. The LLPA adjustments follow the announcement last week by outgoing FHFA Acting Director Edward DeMarco of another 10 basis point increase of guaranty fees Fannie and Freddie charge lenders. Read More

FHFA Hikes Fannie, Freddie Guaranty Fees for 2014

Fannie Mae and Freddie Mac will drop the 25 basis point adverse-market fee that had been applied to all mortgages since 2008 as part of the Federal Housing Finance Agency’s three-pronged adjustment in the guaranty fee the GSEs charge lenders. The FHFA announced changes to GSE g-fees that will amount to an average increase of approximately 11 bps, to be implemented in March and April. Analysts at Barclays Capital said the effective g-fee on 30-year fixed-rate mortgages will be about 62 bps. Read More

FHFA Proposes Loan Limit Changes For Next Year, Seeks Comments

The Federal Housing Finance Agency proposed this week to establish “loan-purchase” limits for the GSEs which won’t occur until next October at the earliest. The regulator and conservator of Fannie Mae and Freddie Mac is seeking comments regarding loan-purchase limits 4.0 percent below the statutory GSE loan limits. The FHFA said it is considering a $600,000 purchase limit in the highest-cost markets and a purchase limit of $400,000 in non high-cost markets. Read More

FHFA Seeks Oversight of ‘Large’ Servicing Deals in M&A Market

The Federal Housing Finance Agency has issued guidance to Fannie Mae and Freddie Mac stating that it would like to review any transfer of mortgage servicing rights where 25,000 or more in loans are being sold, investment-banking officials told Inside The GSEs. Sales that entail MSR portfolios of under that amount will avoid FHFA scrutiny. Fannie and Freddie, as a technical matter, have control of the servicing rights to the loans they guarantee and contract out with mortgage firms to process the payments on a monthly basis. Read More

ACLU Files Suit Alleging FHFA Anti-Eminent Domain Stance Crooked

The American Civil Liberties Union and a Brooklyn-based advocacy group, the Center for Popular Democracy, have filed a Freedom of Information Act claim against the Federal Housing Finance Agency demanding that the regulator produce all agency records “pertaining to the use of eminent domain to purchase mortgages.” Filed in the U.S. District Court for the Northern District of California, the lawsuit seeks information regarding the FHFA’s relationship with big banks and mortgage-backed securities investors and whether such interests influenced the agency’s opposition. The suit was filed earlier this month on behalf of community housing advocates in California, New Jersey and New York. Read More

DC Judge Approves $153M Fannie, KPMG Class-Action Settlement

A nearly decade-long class-action fraud lawsuit on behalf of Fannie Mae investors and the GSE’s accountant KPMG LLP has been put to rest following the approval of a federal court judge earlier this month. In papers filed with the U.S. District Court of the District of Columbia, Judge Richard Leon said he found the $153 million settlement and plan for distributing it among the more than one million class members was “fair, reasonable and adequate.” Two Ohio pension funds – the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio – filed suit in 2004 related to a $6.3 billion overstatement of earnings against Fannie and three former GSE executives, including then-CEO Franklin Raines. Read More

OIG Lauds FHFA’s Steps to Boost GSE Exams, Room for Improvement

The Federal Housing Finance Agency has taken a number of positive steps to enhance and improve its deficient examination capacity of Fannie Mae and Freddie Mac, but the agency is still falling short of an optimal solution, according a new report by the Finance Agency’s official watchdog. This week’s evaluation report by the FHFA’s Office of Inspector General updates a September 2011 OIG audit that dinged the Finance Agency for shortfalls in its examination program, in particular its shortage of qualified examiners. The FHFA’s examination program – targeted examinations, continuous supervision, supervisory analysis and remediation activities – is the primary means by which the agency supervises and regulates Fannie and Freddie. Read More

PNC, U.S. Bancorp to Pay Freddie $140M to Settle Buyback Claims

PNC Financial Services will pay Freddie Mac $89 million to put to bed all buyback liabilities on home loans sold to the GSE in the years leading up to the mortgage-market meltdown, the lender announced earlier this month. The settlement resolves certain PNC repurchase obligations for both existing and future claims for approximately 900,000 loans that were sold to Freddie between 2000 and 2008. The $89 million payout, less credits of $8 million, will also be used to compensate Freddie for any losses that the GSE incurred in the past or any other losses that may result in the future, said PNC. Read More

Top Senate Banking Committee Dem, GOP ‘Bullish’ on GSE Reform

The top Democrat and Republican of the Senate Banking, Housing and Urban Affairs Committee admitted last week they will not make their ambitious deadline of clearing a housing finance reform bill by the end of this year, but the senior lawmakers said they remain “bullish” on moving legislation to the Senate floor sooner rather than later in 2014. Speaking at a Bipartisan Policy Center event, Committee Chairman Sen. Tim Johnson, D-SD, blamed “a couple of curveballs,” including the 16-day government shutdown, for falling short of his and Idaho Republican Mike Crapo’s self-imposed deadline announced in September. He also noted his panel held 12 hearings on housing reform this year, including the final one last week. Read More

FHFA Individual Defendants Can’t Use SEC Rule to Escape Liability

In between the Federal Housing Finance Agency’s announcement of a new guaranty fee increase and the Senate’s confirmation of a new FHFA director, a Manhattan federal judge last week quietly issued a ruling that permits the agency to proceed with its residential mortgage-backed securites lawsuits. In the summer of 2011, the FHFA filed suit against 18 big banks in connection with flawed mortgage securities Fannie Mae and Freddie Mac purchased between 2005 and 2007. A number of defendants in the case, including a host of individuals, argued in an appeal filed in August that due to a 2005 change in Rule 430B of the Securities Act of 1933, they should not be held liable in the case. Read More

Agencies, Fannie Tweak Appraisal Requirements, Access to Data

Fannie Mae last week issued an update to its lenders describing the new process that the GSE has implemented to identify and monitor individual appraisers. According to Lender Letter LL-2013-10, Fannie reviews appraisal reports for patterns of discrepancies and inconsistencies. Using the appraisal data that it collects through the Uniform Collateral Data Portal, Fannie said it has developed a process that identifies appraisers whose work displays more egregious issues. Read More

Enterprise Endnotes

Fannie, Freddie Suspend Holiday Evictions. In what has become an annual tradition, Fannie Mae and Freddie Mac each announced last week that all foreclosure-related evictions of single-family and two-to-four unit properties are suspended until after the New Year.“At this time of year, we want to bring some relief to families who confronted financial difficulties and went through foreclosure,” said Chris Bowden, Freddie’s senior vice president of REO. The GSEs are also encouraging struggling homeowners to contact their servicers for help to avoid foreclosure. “We encourage any homeowner who is having difficulty making their mortgage payment to reach out for help right away,” added Fannie Chief Operating Officer Terry Edwards. Read More

Fannie, Freddie Refi Deliveries Continued to Decline in November

A continued decline in GSE refinance activity helped contribute to an overall dip in the volume of single-family mortgages securitized by Fannie Mae and Freddie Mac in November, according to a new Inside The GSEs analysis. Fannie and Freddie issued $58.7 billion in single-family mortgage-backed securities in November, a 13.4 percent decline from October and a 6.2 percent decrease for the first 11 months of 2013. Read More

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