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Inside The GSEs

September 25, 2015

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Senate Bill to Reverse GSE Salary Raise Passes Unananimously

Fannie Mae and Freddie Mac CEOs may not see a sizable pay hike after the Senate approved by unanimous consent a bill to reverse the raises for the GSE executives. The “Equity in Government Compensation Act” approved last week would suspend the $4 million compensation packages for Fannie’s Tim Mayopoulos and Freddie’s Don Layton that were approved early this year after the Federal Housing Finance Agency said the CEOs could be paid as much as $7.26 million. Their salary would now each be capped at the $600,000 they earned prior to the pay hike. That’s a lot less than many individuals in upper management at the GSEs. “Giving massive taxpayer-funded pay raises to Fannie Mae and Freddie Mac isn’t just out of touch, it’s... Read More

FHLB Collateral Securing Advances Rose By Double Digits in 2014

The amount of collateral securing advances at the Federal Home Loan Banks increased by 12 percent, to $688 billion, at the end of 2014, according to a newly released report by the Federal Housing Finance Agency. The report provides details of the levels of collateral pledged to the FHLBanks securing advances. Listing was the most used form of collateral as of the end of 2014, and accounted for 49 percent of collateral pledged. This was followed by blanket pledges, a lien on all or specific categories of a member’s assets, which was 39 percent of collateral pledged. Both were up 2 percent from the previous years. The report noted that FHLBanks typically give members greater borrowing capacity when... Read More

Fannie Completes Reinsurance Deal as GSEs Expand Risk Sharing

Fannie Mae completed its latest credit risk-sharing transaction with reinsurers this week. In CIRT-2015-3, Fannie retains risk for the first 50 basis points of loss on a $7 billion pool of loans. If this $35.2 million retention layer were exhausted, reinsurers would cover the next 250 basis points of loss on the pool, up to a maximum coverage of approximately $176.2 million. Coverage is provided based upon actual losses for a term of 10 years. Depending upon the paydown of the insured pool and the amount of insured loans that become seriously delinquent, the aggregate coverage amount may be reduced at the three-year anniversary and each anniversary of the effective date thereafter. Read More

FHLB Membership Proposal Remains in Limbo, ABA Concerned

It has been a full year since the Federal Housing Finance Agency proposed sweeping changes to the Federal Home Loan Bank membership rules and the agency said as recently as this week that the proposal remains under review. With the membership rules up in the air, last week the American Bankers Association penned a letter to the Senate urging that it adopt legislation requiring the FHFA to withdraw the proposal. In September 2014, the FHFA proposed changes that would require members to hold 10 percent of their assets in residential mortgages on an “ongoing” basis and ban captive entities from the definition of insurance companies. The revised asset test was especially controversial among community banks. Read More

Freddie Will Be First to Use CSP, FHFA to Announce Date in 2016

Freddie Mac will be the first to use the Common Securitization Platform but the implementation date won’t be released until sometime in 2016, said the Federal Housing Finance Agency in a recent announcement. David Applegate, CEO of Common Securitization Solutions, the joint venture owned by Freddie and Fannie Mae, recently revealed that a large portion of the work has been completed to reach a major milestone in its progress. Applegate said at last week’s ABS East conference in Miami that CSS has completed about 90 percent of the work required for single-class security issuance by Freddie on the CSP. However, in an update detailing the progress in developing the CSP software, the FHFA stopped short of pinpointing a definite timeline and said... Read More

Trade Groups Argue Against Using Guaranty Fees for Other Funding

About 30 industry trade groups recently called for Congress to refrain from using GSE guaranty fees as a source of funding for highway programs or any other purposes beyond supporting Fannie Mae and Freddie Mac. The letter, addressed to House Speaker John Boehner, R-OH, as well as leaders Nancy Pelosi, D-CA, Mitch McConnell, R-KY, and Harry Reid, D-NV, aims to prevent the government from tapping g-fees to pay for pet projects. G-fees, used by Fannie and Freddie to protect against losses from loans that default, are a “critical risk management tool,” according to the trade groups who say that increasing g-fees for other purposes imposes an unjustified burden on the housing finance system. Read More

Enactment of Fannie and Freddie Reform Seen as Unlikely for Now

Don’t expect much movement on legislation to reform the GSEs before the 2016 presidential election. Industry analysts suggest that divisions between Democrats and Republicans along with a housing finance system that is functioning well enough will continue to combine to prevent enactment of GSE reform for some time. At the ABS East conference sponsored by Information Management Network last week in Miami, a variety of industry participants seemed resigned to the fact that Fannie Mae and Freddie Mac will remain under the conservatorship of the Federal Housing Finance Agency for years to come. James Lockhart, vice chairman of WL Ross & Co. and a former director of the FHFA, said the enactment of GSE reform...(Chart, GSE Activity by State) Read More

Freddie's New Green Rebates Encourage Multifamily Efficiency

As energy efficiency plays a growing role in real estate and mortgage credit, Freddie Mac decided to up the ante in its multifamily business and offer a $5,000 green rebate to borrowers. Qualified borrowers with at least 20 units who voluntarily provide an Energy Star score when submitting their loan documents, are eligible. Freddie said it hopes to encourage energy efficiency and affordability in apartment properties and strengthen the market for green investments. Freddie also said rental housing is home to many of the country’s lower-income households who are struggling with housing costs such as rent and utilities. The Environmental Protection Agency estimates that the average commercial building wastes 30 percent of the energy it consumes, often resulting in higher operating costs. Read More

Freddie Reveals 7th NPL Deal, Offered $4.5 Billion So Far

Freddie Mac has offered $4.517 billion in non-performing loans to date and recently released plans to auction $327 million of deeply delinquent non-performing loans in its portfolio. The NPLs are marketed as two geographically diversified pools with bids due from qualified investors by Oct. 6, 2015. The sale is expected to settle in December 2015. JPMorgan Chase Bank is the servicer of the loans. The day after Freddie began marketing that transaction it announced that it sold roughly $1.2 billion of deeply delinquent agency mortgages serviced by Ocwen Loan Servicing, with servicing expected to be transferred after settlement. That sale was part of Freddie's Standard Pool Offerings and the loans have been delinquent for approximately three and a half years, on average. Read More

After Multi-Year Investigation, SEC Drops Case Against Thomas Lund

The Securities and Exchange Commission dropped its civil fraud case against Thomas Lund, former executive vice president of Fannie Mae’s single-family business in the years leading up to conservatorship. The discontinuance of the case was announced this week by Lund’s attorney Michael Levy of Paul Hastings. “Thomas Lund has been vindicated,” he said. “After investigating for three years, litigating for another three years, deposing 50 witnesses and hiring four experts, the SEC concedes that it has not prevailed,” he said, adding that Lund will refrain, for 12 months, from signing things that he never signed in the past and has no intention of signing in the future. Lund will pay the agency $10,000. However, the SEC is classifying the payment as a “gift” to the... Read More

GSE Roundup

FHFA-OIG Indictment in Baltimore Mortgage Fraud Case. Two men were sentenced for providing false information to mortgage lenders to enable buyers to qualify for 18 home mortgage loans in Baltimore that they could not afford. Sixteen of the 18 loans went into default, resulting in foreclosures and losses of about $1.2 million to Fannie Mae and Freddie Mac and certain mortgage lenders. Fitch: Fannie’s Loan Losses Slightly Lower Than Freddie’s for Some Cohorts. In an analysis of Fannie Mae and Freddie Mac loan-level loss data, Fitch Ratings concluded that, while similar, there are differences between loss severities among loans with similar profiles. Fannie disclosed its loan-level loss data in late July to Read More

GSE Activity by State: 6M15

Data detailing the volume of GSE mortgages by state. Read More

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