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Inside The GSEs

July 31, 2015

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House Committee Votes to Cap GSE Salaries

A bill seeking to block the proposed pay raises for Fannie Mae and Freddie Mac CEOs was passed with bipartisan support this week by the House Financial Services Committee. As controversial talks of pay raises for Fannie and Freddie CEOs intensified, Rep. Ed Royce, R-CA, continued to push his legislation to cap the salaries with H.R. 2243, the Equity in Government Compensation Act of 2015. Royce was adamant and said Congress needs to put a stop to the “planned multi-million dollar paydays” at the GSEs. The CEOs could have gotten up to $4 million each in annual total compensation. Earlier this month, the Federal Housing Finance Agency authorized the removal of a pay cap. Read More

GSE 'Jumbo' Share Rising in 2015 With Heavy Refi Volume

Fannie Mae and Freddie Mac are getting more business in the so-called conforming-jumbo market this year, according to a new Inside The GSEs analysis of mortgage-backed securities data.Through the first six months of 2015, the two GSEs securitized $39.44 billion of home loans that exceed $417,000, the maximum loan amount in areas that are not designated high-cost markets. That figure, including only mortgages for one-unit properties, was up 112.5 percent from the first half of 2014, about double the 55.8 percent growth rate in total Fannie/Freddie business over that period. Conforming-jumbo loans accounted for 9.6 percent of total GSE business on single-unit properties in the first half of this year, compared to 7.1 percent for the first six months of 2014. Read More

Progress for GSE Shareholders, Discovery Documents Released

The U.S. Court of Federal Claims Court ordered the U.S. Treasury to release all discovery documents pertaining to the conservatorship of Fannie Mae and Freddie Mac last week in connection with the Fairholme Funds v. The United States case. In a move forcing the U.S. Treasury to release all discovery documents pertaining to the GSE conservatorship, a court ruling last week is a rare legal victory for Fannie Mae and Freddie Mac investors. Attorneys for Fairholme believe that the government is deliberately stonewalling, making it more difficult to get a true understanding of the events and decisions leading up to the third amendment sweep. Read More

CSP, CSS Advisory Group Talks Market Transition at First Meeting

The amount of lead time the market will need to make changes to prepare for the single security was one of the concerns discussed at the first advisory group meeting for the single security/common securitization platform.Members, comprised of trade group officials as well as representatives from Fannie Mae, Freddie Mac and Common Securitization Solutions, convened for the first time in mid-July at the CSS office in Bethesda, MD.Operational and technology impacts were discussed, according to notes summarizing the meeting, and most participants agreed that a quick fluid transaction would be best, with conversion to the new security taking place as soon as possible. Most members agreed that the transition could be completed within three or four months but said system changes could take longer. Read More

Housing Price Index Comments Show Support, Suggestions

Industry groups commenting on the Federal Housing Finance Agency’s adjustments to the conforming loan limit by July 27 were primarily supportive with the exception of one trade organization. Trade group commenters include American Bankers Association, CoreLogic, the Mortgage Bankers Association, the Urban Institute’s Housing Finance Policy Center, the National Association of Federal Credit Unions and the National Association of Realtors. The FHFA plans to use the “expanded data” house price index published by the agency since 2011 to make adjustments to the baseline conforming loan limit. David Stevens, president and CEO of the MBA said the FHFA’s review regarding alternative indexes is thorough. Read More

Freddie Launches New RMBS-Like CRT, May Attract More REITs

Freddie Mac launched a new credit risk-transfer offering late last week that’s structured more like a non-agency mortgage backed security. One analyst said it could prompt more participation from real estate investment trusts. The $300 million offering, the Freddie Mac Whole Loan Security, features a $278 million senior class guaranteed by the GSE and a $23 million subordinate actual-loss security. WLS 2015 SC01 is backed by super-conforming loans originated in the fourth quarter of 2014 and early 2015. The GSE said by shifting some of its credit risk from the underlying mortgages to subordinate investors, the new offering compliments its Structured Agency Credit Risk and Agency Credit Insurance offerings. Read More

FHLB MPF Program Issues First Ginnie Mae Security

The Federal Home Loan Bank of Chicago, which operates the Mortgage Partnership Finance Direct Program for nine FHLBanks, began issuing Ginnie Mae securities last week. Its first issuance was a $5 million security backed by mortgages originated by community lenders through the MPF Government MBS product. With the MPF Government MBS product, the MPF program buys fixed-rate mortgage loans originated by FHLBank members that are insured or guaranteed by government agencies. Matt Feldman, president of the Chicago FHLBank, called it “an important milestone for the MPF Program,” adding that Ginnie Mae securities are among the most liquid financial instruments in the world. He said the new product will allow FHLBank members to offer competitive FHA, VA and government guaranteed Native American and rural housing mortgages. Read More

FHFA Gives Guidance to Direct FHLBs Core Mission

The Federal Housing Finance Agency recently established guidelines for the Federal Home Loan Banks to use when developing their individual strategic business plans.These guidelines were created to help determine if the 11 institutions are successfully achieving their core mission of making advances and establishing limits on its maximum holdings of acquired member assets.The FHLBanks are also charged with supporting their banks’ housing finance and community lending mission in less direct ways including advance commitments, housing finance agency debt instruments and investment in certain small business investment company securities and more.In assessing each of the banks’ core mission achievement the FHFA said it will calculate the ratio of its Primary Mission Assets relative to Consolidated Obligations at the... Read More

Ellie Mae's Integration Makes It Easier to Do Fannie Business

Software company Ellie Mae recently teamed up with Fannie Mae to incorporate Fannie’s risk management tools into its system to make it easier for lenders to do business with the GSE. This will help ensure that the loans meet Fannie’s sale eligibility requirements. Although Ellie Mae has its own system, Encompass LOS, the company decided to incorporate Fannie’s risk management tools, like Desktop Underwriter, Collateral Underwriter and Early Check software, into Encompass. The California-based company said it hopes the integration will enhance transparency and avoid any potential last-minute surprises since the system will examine loans beginning from eligibility all the way to loan delivery. Read More

Fannie Plans for Actual Loss Transaction with New Dataset

In preparation for more risk sharing, including its first actual-loss transaction, Fannie Mae released an updated, more detailed single-family loan performance dataset last week to provide more transparency to the market. The GSE plans to move away from fixed severity deals to an actual-loss framework for its Connecticut Avenue Securities risk-sharing deals as early as the fourth quarter of 2015.The enhanced dataset will include credit performance up to and including property disposition, including credit event dates, costs incurred and Fannie’s recovery proceeds. Until now, Fannie risk-sharing transactions used pre-set loss severity schedules to determine investor loss exposure.Laurel Davis, vice president for credit risk transfer at Fannie, said the GSE is providing access to the data now in order to give the market... Read More

FHFA-OIG Report Shows Need for Better Qualified Examiners

The Federal Housing Finance Agency Office of Inspector General released a report this week that found that the housing finance examiner program is not on track to produce commissioned examiners qualified enough to lead major risk sections of GSE examinations. “We found evidence indicating that the housing finance examiner program was not on track to meet its central objective,” said the report. In fact, only one of the 66 enrolled examiners had shown paperwork proving that he successfully completed the required on-the- job training assignments during 2014 and early 2015. “Further, FHFA records indicated that a considerable of minority enrolled examiners, more than 20 percent, completed no more than one fo the required 16 course,” said the report. Read More

GSE Roundup

Fannie’s New Headquarters. Fannie Mae will begin occupying its new state-of-the-art headquarters in Washington, DC in 2017, replacing the site of the Washington Post building. Renderings filed with the DC’s Board of Zoning Adjustment illustrate window-filled twin buildings connected by several bridges and notes that it will have about 1.2 million square feet spread out among 12 stories and retail on the bottom. Freddie Mac SVP Receives Award. Christina Boyle, a Freddie senior vice president, was named a 2015 “Power Player” by MReport, honoring women in housing finance. GSE Q2 Earnings Release Date. Freddie Mac announced that it will release its second-quarter 2015 financial results on Tuesday morning, Aug. 4. Freddie Prices Second Q Certificate. Freddie Mac priced its second Q Certificates... Read More

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