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Inside The GSEs

June 5, 2015

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Refi Ebbs as Fannie Mae and Freddie Mac Business Slows

Fannie Mae and Freddie Mac issued $74.10 billion of single-family mortgage-backed securities during May, down 8.0 percent from April, a new Inside the GSEs analysis reveals. The purchase-mortgage market picked up some last month, but not enough to offset a sharp 15.7 percent drop in the volume of refinance loans securitized by the GSEs. Purchase-mortgage business was up 7.2 percent from April and reached a combined $28.25 billion – the highest monthly volume since the end of last year’s homebuying season in October. For the first five months of 2015, purchase-mortgage activity totaled $105.15 billion, up 19.0 percent from the same period last year. Most of the big gain in overall GSE business has come from refinancing, which is up 94.4 percent on a...(charts included) Read More

Housing Finance Reform Talks Focus on Credit, Private Capital

The U.S. Department of Housing and Urban Development Secretary Julian Castro and Rep. Ed Royce, R-CA, agree that housing reform needs to happen, but while Royce emphasized the need to get private capital back in the system, Castro focused on the issue of credit access. Royce and Castro were speakers during a June 3 housing finance forum in Washington sponsored by the National Journal. Castro said part of the challenge for Democrats and Republicans in both Houses is the issue of access to credit. “How do you ensure that in the system there’s a good amount of access of credit to people of moderate means just like people of strong means,” said Castro. Read More

Freddie Drops Loan Prospector Fee to Eliminate Barriers

In a move to level the playing field and increase liquidity in the market, Freddie Mac has done away with the $20 fee to use Loan Prospector, the oldest of its suite of lender tools, effective this week. In a letter that went out to Freddie customers last month, the GSE noted it was “eliminating financial barriers to our tools.” Christina Boyle, Freddie’s senior vice president of single-family sales, said since the LP underwriting tool was introduced in 1997 the GSEs have added additional tools, especially within the last couple of years, and plan to introduce more in the future. “The only tool that had a cost associated with it was Loan Prospector and it was sort of a... Read More

First FHLB Merger in 80 Year History Complete

The Federal Home Loan Bank of Des Moines and Federal Home Loan Bank of Seattle completed their merger June 1, the first time in 80 years that two regional banks have combined forces. The combined banks will operate under the Federal Home Loan Bank of Des Moines name and as a result of the voluntary merger, it will become the largest bank in the FHLB system geographically and membership wise, serving close to 1,500 institutions in 13 states and three U.S. Pacific territories. While the FHLB Des Moines had 1,156 members and $95.5 billion in assets as of Dec. 31, 2014, the FHLB Seattle had 316 members and had $35.1 billion in assets as of the end of 2014. Read More

Individual Shareholders in Iowa Challenge GSE Profit Sweep

For the first time, individual shareholders have brought a suit against the Federal Housing Finance Agency alleging that the Treasury profit sweep was illegal and accused the agency of violating the Housing and Economic Recovery Act. The May lawsuit was filed in the U.S. District Court for Northern Iowa by three individual shareholders who owned stock in Fannie Mae and Freddie Mac prior to the Third Amendment.Thomas Saxton owns shares in the Z series of Freddie preferred stock and he owns shares of Freddie common stock with Ida Saxton.The pair own common stock both jointly and individually and acquired their shares in 2008. The third plaintiff is Bradely Payner, who owns shares of Fannie common stock. Read More

Redwood Loan Limits Raised for FHLB Jumbo Loan Program

After a pilot jumbo mortgage loan program between the Federal Home Loan Bank of Chicago and Redwood Trust kicked off this quarter and expanded into a full roll-out beginning June 1, it was announced this week that the loan limit will just about double. The new single-family loan limit for the Mortgage Partnership Finance Direct program will increase from the current $729,750 to $1.5 million in the third quarter. The MPF Direct loan limit was raised primarily to help members that operate in urban or other areas where home prices are higher than the national average, said John Stocchetti, an executive vice president at the FHLB Chicago and group head of the MPF program. Read More

Genworth CEO Talks PMIERs, Working with the GSEs

With just six months lefts to meet the new private mortgage insurer eligibility requirements, Genworth U.S. Mortgage Insurance is making moves to ensure it will be in compliance by the end of the year. “We did disclose a gap of $500 to $700 million, but at the same time we said we will fulfill that gap with a combination of reinsurance and cash. We are working at a very aggressive pace to make sure that we meet that standard sooner than later,” said Rohit Gupta, Genworth’s president and CEO. In addition to reinsurance and working on payment plans, Rohit said last month the company sold 14 percent of its Australian mortgage insurance business on the Australian... Read More

FHFA Exploring Possibility of Deeper MI Coverage

As mortgage insurers rally around the call for expanded risk sharing, the Federal Housing Finance Agency confirmed this week that it’s exploring the possibility of pilot testing risk-sharing through deeper mortgage insurance coverage. The U.S. Mortgage Insurers trade group said that deeper MI coverage would reduce risks to taxpayers while allowing the GSEs to lower their fees. “And with lower GSE fees, this approach would reduce costs to borrowers. In addition, MI can be used to provide front-end risk sharing on loans with down payments greater than 20 percent,” it said. A prudently underwritten 5 percent down payment loan with MI actually reduces taxpayer exposure below a comparable 20 percent down payment loan without MI, according... Read More

GAO Report Shows More CDFI Membership Needed in the FHLBs

Community development financial institutions are feeling left out in the cold when it comes to joining the Federal Home Loan Bank system due to stricter collateral requirements. These nondepository CDFIs, which provide credit and financial services to underserved communities, represented less than six percent of FHLB members as of the end of the year, according to the U.S. Government Accountability Office. This translates to 30 members out of the 522 CDFIs nationwide.Treasury-certified non depository CDFIs were permitted to become members in 2008, allowing CDFIs to use their current loan portfolio to raise cash and originate new loans. The GAO performed an analysis of CDFI membership rates after being asked to review the FHLBanks’ implementation of the Housing and Economic Recovery Act provisions. Read More

Freddie's Recent Transaction Makes 4th GSE NPL in 2015

Freddie Mac’s recent sale of $201 million in delinquent mortgages to Lone Star Funds was the fourth non-performing loan transaction this year by a GSE. Lone Star purchased the 1,052 non-performing loans serviced by Ocwen as a single pool in late May. The loans have an aggregate unpaid principal balance of $201 million and have been delinquent for approximately three years on average. Earlier this year, Freddie executed two sales of NPLs at $392 million and then its largest ever at $985 million. And shortly after, Fannie Mae jumped into the game auctioning $786 million of delinquent loans. Although there’s been a notable increase in NPL sales by the GSEs, Fred Small, an analyst at Compass Point, said... Read More

GSE Roundup

Nevada Addresses ‘Super Lien’ Concerns. Nevada’s governor signed legislation last week addressing concerns raised by the FHFA regarding homeowners’ association liens. In September, the Nevada Supreme Court determined that an HOA super lien has priority lien status, which can trump the GSEs’ first lien status during foreclosure. Senate Bill 306 in Nevada aimed to address some of those issues by establishing a new limited right of redemption for lien holders after an HOA foreclosure sale, among other provisions. The FHFA has repeatedly noted it has an obligation to protect the GSEs’ rights, and will aggressively do so by bringing or supporting actions to contest HOA foreclosures that purport to extinguish GSE property interests in a manner Read More

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