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Inside The GSEs

April 1, 2016

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‘Agency Patch’ Yielded $128 Billion In 2015 Fannie/Freddie Business

Fannie Mae and Freddie Mac purchased $127.7 billion of single-family loans last year that failed to meet the baseline qualified-mortgage standard set by the Consumer Financial Protection Bureau, according to a new analysis by Inside The GSEs. Under the agency’s ability to repay rule, the GSEs can ignore the restriction that qualified mortgages must have a debt-to-income ratio of 43 percent or less. This so-called agency “patch” was set up to last for seven years, or until 2021, as long as Fannie and Freddie remain in conservatorship or receivership. In other regards, such as the 30-year limit on maximum loan term and the prohibition on interest-only payments, the GSEs... Read More

Tackling GSE Reform One White Paper at a Time; Observers React

The idea of constructing a national highway system of sorts for the mortgage market by merging the GSEs into one has been making its rounds in the industry this week. And there’s been some dispute as to whether the plan is feasible. Five mortgage industry veterans – including two who worked in the Obama White House – floated the new plan aimed at preserving the government guaranty on conventional mortgage-backed securuties and finally ending the uncertainly plaguing the secondary market. Tim Howard, former Fannie CFO who left the GSE in 2004 and was involved in litigation regarding his tenure there, said the authors “greatly underplay the dangers of making a $10 trillion market... Read More

Congress Opens Doors to the Ranieri/Zandi & Co. GSE Plan

The relatively new “A More Promising Road to GSE Reform” plan from five industry veterans is getting a hearing in Congress – but only informally. According to at least one of the plan’s authors, the white paper has been passed on to key members of the House and Senate committees that oversee Fannie Mae and Freddie Mac, including staffers for Rep. Jeb Hensarling, R-TX, who chairs the House Financial Services Committee. “We’re getting a lot of interest in this,” said Mark Zandi, chief economist for Moody’s Analytics, and one of the white paper’s five authors. (Zandi said he has not met with Hensarling’s staff, though another... Read More

GSE Principal Reduction Faces Possibilities, Challenges

The Federal Housing Finance Agency announced last week that it’s mulling over the idea of allowing principal reductions for underwater homeowners and it expects to make a decision, one way or the other, within the next couple of weeks But some say if implemented, the overall impact will be fairly muted. Back in 2012, the agency decided that limited principal reduction could save Fannie Mae and Freddie Mac money, but the plan didn’t have the support of former Acting Director Ed DeMarco, who said it could encourage voluntary loan defaults. Since that time, FHFA Director Mel Watt revealed in a recent speech last week that he’s been... Read More

GSEs Not Impacted by TRID Rules as Oversight Remains Limited

Although nonconforming mortgage seller/servicers have been faced with numerous headaches in the secondary market because of TRID errors, that’s not the case over in the GSE camp. TRID became effective on Oct. 3 2015 and the GSEs amended their contractual obligations with customers so that they know they are responsible for any losses due to violations of the TRID rule. “They’re basically turning what was a repurchase obligation into an indemnification obligation. They don’t have to be the arbiter of what’s valid or invalid,” said John Levonick, head of compliance at Clayton Holdings, in a recent phone interview. “The whole industry on the... Read More

CA Strengthened Its Position As Top GSE Mortgage Market in 2015

California, the largest mortgage market in the U.S., padded its lead by posting a 39.7 percent increase in GSE business last year, topping the 29.8 percent growth in overall Fannie Mae and Freddie Mac activity, according to a new Inside The GSEs analysis. The Golden State accounted for 22.6 percent of loans sold to the GSEs in 2015 and, not surprisingly, 62.7 percent of conforming-jumbo mortgages. In California, the average Fannie/Freddie loan was $310,185, trailing only Hawaii and the District of Columbia in size. Purchase mortgages accounted for just 29.0 percent of California GSE business last year, roughly a third less than... Read More

MI United Guaranty Files IPO; GSEs Must Approve the Deal. But When?

United Guaranty, the market leader in private mortgage insurance – and a key partner of the GSEs – made it official this week, filing for an initial public offering of common stock in a transaction valued at $100 million. UG’s parent company American International Group will retain ownership of 80.1 percent of the firm, with the public getting the balance. As the company notes in its IPO documents, Fannie Mae and Freddie Mac must approve the spin-off. But when that will happen remains unclear. No specifics are addressed in the S-1 filing with the Securities and Exchange Commission and a spokesman for UG declined to comment on the matter. Read More

NPL Debate Intensifies, Chairmen Want Increase in Private Market

A letter from 45 Congressmen that circulated in early March urging the Federal Housing Finance Agency and the Department of Housing and Urban Development to reform their nonperforming loan programs prompted two committee chairs to ask the agencies to reject the changes. They said the proposals are only “advancing political agendas.” Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee and Richard Shelby, R-AL, chairman on Banking, Housing and Urban Affairs Committee, penned a letter to the FHFA and HUD on March 21 stating that many of the changes suggested by housing advocates and Congress would negatively impact the program’s fundamental purpose. Read More

FHFA OIG Finds Scorecard-Based Compensation Process Insufficient

The Federal Housing Finance Agency’s oversight of GSE compensation based on scorecard performance was found to be “insufficiently robust,” according to the FHFA’s Office of Inspector General, but the agency disagreed. A recently released report found that the agency accepted the GSEs’ annual at-risk compensation proposals without any verification or challenge for accuracy. The OIG said while in 2011 the FHFA said it had adopted internal controls to test and verify procedures to improve the oversight of compensation for Fannie Mae and Freddie Mac executives; it learned that the FHFA discontinued that system in 2012 after adopting a new GSE executive compensation structure. Read More

Civil Rights Advocates Laud National Housing Trust Payment

Housing advocates and civil rights groups laud the GSEs’ first payment, $180 million, to the National Housing Trust Fund in years. It’s part of Fannie Mae’s and Freddie Mac’s efforts to support underserved markets through affordable housing, which organizations have long been calling for. But many are also worried about what the future holds for the GSEs. Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights calls it “another significant measure taken by FHFA Director Mel Watt to shore up the commitments made to communities of color that expand affordable and sustainable housing finance.” He added that strengthening... Read More

OIG Releases Five Reports, Examines GSE Board Oversight

The Federal Housing Finance Agency’s Office of Inspector General released five reports this week examining everything from corporate governance to examiner issues. The two reports released on March 31 focused on the board’s of Fannie Mae and Freddie Mac. The OIG found that the there are “serious deficiencies” in the GSEs boards when it comes to managing Fannie Mae’s and Freddie Mac’s remediation efforts. The report said the board could become “no more than a bystander to management’s efforts to remediate matters requiring attention.” One of the reports also noted that while the board has made progress in overseeing cyber risk, much more needs to be done. Read More

FHFA Seeks Comments on Borrower Questionnaire for NMDB

Comments are being vetted regarding a proposed survey to collect information from borrowers in the second quarter of 2016 that will be used in a report highlighting the GSEs’ mortgage activities. The Federal Housing Finance Agency’s American Survey of Existing Borrowers, formerly referred to as the National Survey of Existing Mortgage Borrowers, has drawn a some criticism from trade groups concerned about privacy violations. The survey questionnaire, a component of the larger National Mortgage Database project, will include about 90 questions designed to gather information from borrows about their mortgage experience and possible challenges. The NMDB is a multi-year joint effort between the FHFA and the Consumer Financial Protection Bureau. Read More

FHFA Mulls Chattel Lending Pilot, MH Advocates Continue Push

As manufactured housing advocates continue to push for chattel lending, the Federal Housing Finance Agency is weighing whether it will allow the loans that are based on financing the home itself rather than the real estate property. The topic made a strong showing in the FHFA’s recent request for comment in which questions about serving the manufactured housing industry were included under its duty-to-serve proposed rule. One of the questions specifically focused on whether a pilot program should be developed that would allow chattel loans. Many commenters said Fannie Mac and Freddie Mac should increase their support for the manufactured housing industry and that includes creating a market for chattel lending. Read More

GSE Roundup

Fannie Launches Marketing Center. Fannie Mae’s new Marketing Center, introduced this week, is a free online tool providing lenders and other housing professionals access to a variety of customizable marketing materials including HomeReady mortgage, HARP, and more. Freddie’s Second ACIS CTR of 2016: Freddie Mac announced its latest ACIS credit risk transaction, which is its second for 2016. This new transaction provides credit loss protection up to a combined maximum limit of approximately $336 million of losses on single-family loans. White House GSE Advisor Steps Down. White House senior policy advisor on housing and GSE issues Michael Stegman is expected to step down from his post sometime this week, according to industry sources. Read More

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