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Inside The GSEs

January 22, 2016

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GSEs See More Diversity, Bigger Nonbank Share in Servicing

Nonbanks gained more ground in Fannie/Freddie mortgage servicing during the fourth quarter of 2015, according to a new Inside The GSEs analysis of agency mortgage-backed securities disclosures.Non-depository institutions provided the servicing for some $1.327 trillion of Fannie and Freddie single-family MBS outstanding as of the end of last year. That was up 3.8 percent from the third quarter and represented a hefty 10.1 percent gain from the end of 2014. Banks, thrifts and credit unions were still the dominant GSE servicers, accounting for 67.9 percent of the market at the end of December 2015. But their $2.803 trillion of Fannie/Freddie servicing was down 1.2 percent from... Read More

FHFA Final Rule Bans 'Captives,' Leaving REITs, FHLBs Not Happy

The final rule issued last week banning captive insurance companies from joining the Federal Home Loan Banks ruffled feathers in the mortgage industry and has some pointing to Congress for future guidance on the issue. FHLBank members that joined the system by way of their captive insurers before the Federal Housing Finance Agency’s proposed rule issued in September 2014 have five years to relinquish their membership. Many are real estate investment trusts that would otherwise be ineligible for membership if it weren’t for finding a loophole in the system. Captive insurance members that obtained membership after the FHFA announced the proposed rule have a year to exit the system and unwind their advances. Read More

Redwood Trust Quits Fannie, Freddie Loan Acquisitions

Redwood Trust, which a few years back branched out into buying GSE loans, announced this week that it was throwing in the towel on that business, cutting 25 percent of its workforce in the process.Although it will no longer buy Fannie Mae and Freddie Mac mortgages from correspondent originators, it will remain a buyer of jumbo product. As one source close to the company noted: Redwood “just couldn’t make the math work” in that line of business. At Sept. 30, the publicly traded real estate investment trust employed 221 full-time workers. The layoff will claim roughly 54 jobs, most of them in Denver where its GSE acquisition initiative was based. Read More

Trade Groups: NSEMB May Violate Privacy with Extensive Questioning

Trade groups concerned about privacy violations in the proposed collection of data in the National Survey of Existing Mortgage Borrowers voiced their concerns to the Federal Housing Finance Agency last week. The FHFA has been seeking comments on the proposed voluntary survey of borrowers who have a first mortgage loan secured by a single-family home. Everything from the borrower’s name and address to financial records, mortgage and credit card information and race and household composition will be addressed in the approximately 80-question survey. While the 10 trade groups, including the American Bankers Association, Housing Policy Council, Independent Bankers of America and Mortgage Bankers Association, agree with... Read More

IG Says FHFA's Risk Assesments of Fannie, Freddie Are Ineffective

Although Fannie Mae and Freddie Mac share the same types of risks, the lack of reliable data provided in risk assessments makes it impossible to compare and monitor risk exposures between the two, according to the Federal Housing Finance Agency’s Office of the Inspector General. The OIG said that the GSEs’ regulator, the FHFA, has come up short in measuring the risks associated with Fannie Mae and Freddie Mac. The FHFA typically uses a risk-based framework to determine whether or not the GSEs are meeting their goals. In the semi-annual OIG report issued earlier this month, it said that the FHFA’s... Read More

Fannie and Freddie Introduce Appraisal Sharing Feature

Fannie Mae and Freddie Mac have implemented a new appraisal sharing feature in the Uniform Collateral Data Portal to help correspondent lenders. When it launches Feb. 7, correspondent lenders will be able to share appraisal information with their aggregators within the portal so they can get real-time results for their correspondents’ appraisals. The GSEs said this ensures that they will have the most up-to-date appraisal information when selling a loan to aggregators.The correspondent will be able to share individual appraisals with specific aggregators and delve into more details when they retrieve the appraisal. The aggregator can access the status, funding and submission summary report for the correspondent-shared appraisals. Read More

AEI: GSEs Should Be Designated Systemically Important

Fannie Mae and Freddie Mac “unquestionably qualify” as systemically important financial institutions, according to the American Enterprise Institute. In a recent letter, AEI’s Alex Pollock and Thomas Stanton wrote that while the Financial Stability Oversight Council designated three nonbanks as SIFIs, it failed to do so for Fannie and Freddie. They argue that the GSEs qualify under both the statutory and FSOC definitions, and under any “objective assessment of their financial importance.” The AEI wants to make sure that the protective capital and regulatory standards applying to SIFIs can be applied to Fannie and Freddie. “Indeed, the failure of the GSEs revealed only some of the problems caused by lack of accurate information (and consequent pricing) with... Read More

Shareholders Adamant Treasury Sweep is Illegal in DE, VA

After the Federal Housing Finance Agency filed a motion in November to dismiss a case introduced by two GSE shareholders over the summer, the shareholders have opposed the motion to dismiss and are demanding a jury trial. The original complaint stated that with Fannie chartered under Delaware law and Freddie under Virginia’s jurisdiction, the preferred stock of a corporation cannot be given a cumulative dividend right equal to all the net worth of the corporation “in perpetuity.” In a nutshell, shareholders David Jacobs and Gary Hindes argue that the net worth sweep in which Treasury takes the bulk of the GSEs’ profits is illegal under state law. Read More

Alternative to HARP Program on the Horizon for GSEs in 2017

As the Home Affordable Refinance Program ushers in its last year, the Federal Housing Finance Agency has charged Fannie and Freddie with developing an alternative to the popular refinance program created in 2009 to help underwater borrowers. Originally set to end in December 2013, the HARP program has been extended twice and will be put to rest on Dec. 31, 2016. At that time, the FHFA said the GSEs should have a high loan-to-value ratio refinance program in place and ready to kick off in January 2017. The FHFA’s 2016 scorecard for the GSEs directed Fannie and Freddie to “finalize post-crisis loss mitigation options for borrowers, including loan modifications, and develop an implementation plan and timeline.” Read More

REITs Want in on Fannie, Freddie Credit Risk Transfers

Democrats and Republicans in Congress want to know what it will take to expand real estate investment trust participation in GSE credit risk transfers. They wrote the Securities and Exchange Commission last week asking it to help alleviate the regulatory challenges REITs face when it comes to participating in credit risk transfers. “Specifically, we are requesting your expertise in unlocking a meaningful amount of capital in the form of mortgage real estate investment trusts to participate in these transactions,” said the letter from the 13 congressman.They cited the FHFA’s goal to grow the credit risk-sharing program with an expanded investor base and said that mortgage REITs would be a likely candidate if the obstacles were removed. Read More

GSEs Continue to Seek Nonprofit Nonperforming Loan Buyers

Fannie Mae and Freddie Mac have been targeting a portion of their nonperforming loans to nonprofit organizations, but reaching those groups can be a challenge. So far, each has sold one pool to two different nonprofit groups in New Jersey. Freddie Mac announced its very first NPL sale to a nonprofit buyer back in late December. It sold $18.4 million in loans to the Community Loan Fund of New Jersey, a non-profit, private and minority and women-owned business. There were 103 loans in the Florida-based pool with an average balance of $178,300 and they were about 33 months delinquent on average. The transaction is expected to settle in February. Read More

GSE Roundup

FHFA FHLB Classification Guidance. The Federal Housing Finance Agency put out guidance this week on the classification of investment securities at the Federal Home Loan Banks. It is adopting the 2013 Uniform Agreement for FHLBank supervisory purposes. Where FHFA’s rule and guidance and the 2013 Uniform Agreement may conflict, the FHFA said its rules and guidance will apply. The agreement included FHLBanks using sound and conservative assumptions as they pertain to upgrades and it provides classification approach examples that provide boundaries for upgrading classified securities. Freddie Prices $1 Billion STACR Offering. As the first out of eight Structured Agency Credit Risk offerings planned through October 2016, Freddie Mac... Read More

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