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Inside The GSEs

June 13, 2014

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Expert: Rehabilitated GSEs Better Than Senate’s Misguided Fix

Fannie Mae and Freddie Mac can be rehabilitated and returned to the private sector, with or without Congressional action, an expert noted this week, adding his voice to the growing chorus of those calling to retain the GSEs. Speaking at a GSE forum sponsored by Investors Unite, Joshua Rosner, managing director at Graham Fisher & Co., said that GSE reform “shouldn’t reinvent a wheel that has driven the secondary market successfully for generations.” Read More

Redwood Inks Three-Year Jumbo Purchase Agreement with FHLBs

Redwood Trust late this week unveiled a three-year agreement with the Federal Home Loan Bank of Chicago whereby the real estate investment trust will purchase residential “high balance” loans from any member of the entire FHLBank system. The loans will be originated by members of the FHLBank system. Those lenders will then sell the mortgages to the Chicago FHLBank as part of the Mortgage Partnership Finance Program, which will then upstream the product to Redwood. The loans will have balances above the Fannie Mae/Freddie Mac loan limit of $625,500. Read More

Experts Differ on Fannie, Freddie Conservatorship Exit Strategies

It would either require an act of Congress or a commitment from Fannie Mae’s and Freddie Mac’s regulator to bring the two GSEs out of government conservatorship, depending on which expert you believe, and perhaps who is heading the Treasury Department. Investment banker Jim Millstein is once again pushing for a plan to deal with the future of Fannie and Freddie, saying the two GSEs should be allowed to rebuild capital. In a recent report, Millstein – who at the Treasury Department oversaw the restructuring of bailed-out insurer American International Group – says if the two firms are allowed to recapitalize, they could create a cash cushion that can be placed in front of Treasury’s existing backstop. Read More

Massachusetts Sues FHFA, GSEs Over State Foreclosure Law

Massachusetts Attorney General Martha Coakley last week filed suit against Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency, alleging that the GSEs are violating state law by failing to let non-profits buy foreclosed homes to sell them back to their former homeowners. In 2012, Massachusetts lawmakers passed An Act to Prevent Unnecessary and Unreasonable Foreclosures, which prohibits creditors from blocking or placing conditions on home sales to non-profits that intend to resell those properties back to their former owners. The AG’s complaint, filed in Suffolk Superior Court, says the GSEs failed to comply with the Bay State law by “blocking foreclosure buyback programs” designed to help residents keep their homes. Read More

Lawyers for GSE Shareholders Move To Vacate ‘Illegal” Profit Sweep

Attorneys for Fannie Mae and Freddie Mac junior shareholders have doubled down in their assertions that the government had no authority to initiate a “net-worth sweep” of nearly all GSE profits. They say a federal court should not only decline Uncle Sam’s recent motion to dismiss but also “vacate the illegal sweep amendment.” In a joint rebuttal motion filed last week in the U.S. District Court for the District of Columbia, attorneys for Perry Capital and Fairholme Funds note that in attempt to evade judicial scrutiny, the Treasury Department and the Federal Housing Finance Agency raise “a host of frivolous and irrelevant challenges” to the plaintiffs’ legal standing while ignoring investors” core assertion that the 2012 sweep was illegal. Read More

House Bill Amendment Would Block GSE Trust Fund Payments

A noted GSE hawk successfully pushed through a legislative amendment that would block Fannie Mae and Freddie Mac from paying into the National Housing Trust Fund “at a time when they still owe money to the American people.” The amendment by Rep. Ed Royce, R-CA, to H.R. 4745, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act of 2015, would prohibit the GSEs from using funds for the NHTF, which was established under the Housing and Economic Recovery Act of 2008. Read More

Urban Institute: GSE Denial Rates Higher for Weaker Credit Profiles

A new analysis by the Urban Institute released last week found that GSE denial rates for weaker credit profile applicants, including many minority applicants, were much higher than denial rates for all applicants. The UI’s analysis of Home Mortgage Disclosure Act data found at least 16 percent of applicants were denied Fannie Mae or Freddie Mac loans for purchase of an owner-occupied property in 2012. However, when compared to CoreLogic’s data, the UI also found the denial rate for low credit GSE applicants was at least 54 percent. Read More

Bill Would Mandate FHFA Deny Credits to Anti-Affordable Housing

Rep. Carolyn B. Maloney, D-NY, last week reintroduced legislation that would “sharply curtail” the ability of Fannie Mae and Freddie Mac to invest in future transactions that reduce the availability of affordable housing both in New York and nationwide. Maloney’s legislation, the Responsible GSE Affordable Housing Investment Act of 2014, initially introduced in 2010, would require the Federal Housing Finance Agency to deny affordable housing goals credits when a project’s debt is disproportionate to its income. Read More

Enterprise Endnotes

Cantor Loss Unlikely to Advance Hensarling, PATH Act Opportunity? House Republican Majority Leader Eric Cantor’s defeat this week by his GOP primary Tea Party challenger Dave Brat is already shaking up the House leadership with implications for key lawmakers affecting the GSE reform debate.Cantor, R-VA, will close out his term at the end of this year but has announced he will give up his post as House majority leader effective July 31. Republican leadership could hold elections to replace Cantor as early as next week. Cantor has endorsed Majority Whip Kevin McCarthy, R-CA, to succeed him as majority leader. Read More

FHFA Seeks Public Input on Proposed GSE Guaranty Fee Hikes

After months of anticipation, the Federal Housing Finance Agency last week issued an official call for public comment, particularly from the mortgage industry, on how Fannie Mae’s and Freddie Mac’s conservator should calculate both guaranty fees and loan-level price adjustments. The FHFA’s “request for input” specifically seeks guidance regarding the optimum level of g-fees and their implications for mortgage credit availability, but the agency does not provide any specific proposals as some had expected. One of the first things that FHFA Director Mel Watt did when he assumed office in January was delay implementation of a planned GSE g-fee increase set into motion by his predecessor, Acting Director Edward DeMarco. Read More

GSE MBS Business Activity Plunge Year-Over-Year in May

Fannie Mae and Freddie Mac issued $44.8 billion in single-family mortgage-backed securities during the month of May, a slight 1.3 percent dip from April, but it reversed the brief rebound following a year-long streak of declines, according to an Inside The GSEs analysis. However, May’s MBS issuance was down a much steeper 62.4 percent from the same period a year ago. Top-ranked Wells Fargo’s Fannie and Freddie securitization, at $5.97 billion, dropped by 4.9 percent on a monthly basis and by 73.6 percent year-to-date. Read More

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