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Inside The GSEs

September 30, 2016

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GSE 'Patch' and High-Cost Limits Account for 25% of GSE Business

Roughly a quarter of the single-family business that passed through Fannie Mae and Freddie Mac during the first half of 2016 resulted from special treatment bestowed on the GSEs following the housing market collapse. The biggest factor is the so-called GSE patch, which exempts Fannie and Freddie from underwriting restrictions on “qualified mortgages” that are part of the ability-to-repay rule promulgated by the Consumer Financial Protection Bureau. For mortgages to get QM status, the debt-to-income ratio has to be 43 percent or less. However, the CFPB rule waives that requirement for Fannie and Freddie as long as they remain in conservatorship, up to a point. Read More

FHFA Concerned About G-Fee Pricing Aimed at Market Share

The Federal Housing Finance Agency ordered Fannie Mae and Freddie Mac to require minimum guaranty fees on their mortgage-backed securities because of concerns about buying market share through pricing. The GSEs were required to charge the same “minimum” guaranty fee for single-family guaranty commitments issued on or after Aug. 1. For 30-year mortgages, the minimum fee is 44 basis points, and it’s 30 bps for 15-year loans, according to documents obtained by Inside MBS & ABS, an affiliated newsletter, under the Freedom of Information Act. The minimum g-fees apply only to Fannie and Freddie swap business and not their cash windows. Inside MBS & ABS estimated that roughly 60 percent of single-family MBS issuance is through swaps. Read More

Fannie Initiates First Widespread Use of Trended Credit Data

Fannie Mae’s implementation of its updated loan origination tool, Desktop Underwriter 10.0, this week, represents the first widespread use of trended credit data in the mortgage industry and mortgage bankers are optimistic. It was one of the most anticipated changes in the rollout and was designed to give lenders a better understanding of a potential borrower’s creditworthiness... Read More

IG Report says FHFA Lacks Proper Follow-Up on 'High Priority' Risk

The Federal Housing Finance Agency’s risk assessments were not a proper follow-up to targeted risk, according to the FHFA’s Office of the Inspector General. The IG noted that between 2012 and 2015, the examiners’ assessments often had little to do with the high-priority risk they are supposed to be supervising. … Read More

3Q16 Originations May Translate to Strong Fannie, Freddie Earnings

The third quarter is about to end and most GSE watchers can agree on one thing: Fannie Mae and Freddie Mac should turn in stellar earnings for the period. According to preliminary estimates from Inside The GSEs, all lenders could wind up funding $570 billion in 3Q, compared to $510 billion and $380 billion in 2Q and 1Q, respectively. The higher production figures should translate into a jump in guaranty fee income, which will feed the coffers of the GSEs. The “wild card” in their performance will be the yield on the 10-year Treasury, which was slated to close 3Q16 at 1.57 percent, 9 basis points higher than June 30. Read More

Freddie Launches MI Pilot, Fannie to Follow, PMIs Not Excited

Freddie Mac introduced a front-end credit risk-transfer pilot program this week, but industry observers say it doesn’t include some of the features that many private mortgage insurers and mortgage bankers have been looking for. Guarantee fees will not be lowered because of the deep MI pilot and lowering them is something that the Mortgage Bankers Association has been advocating. Moreover, it’s not the deep-cover primary insurance that private MIs were hoping to write. The GSE is purchasing additional coverage beyond the primary MI contract from a group of four MI firms on 30-year fixed-rate mortgages with loan-to-value ratios of 80 to 95 percent. The coverage is then placed immediately as loans are sold to the GSE. Read More

Frustrated Judge Orders Treasury, FHFA to Produce Additional Docs

Federal Claims Court Judge Margaret Sweeney appears to be annoyed with the government’s executive privilege pleas and ordered the U.S. Treasury Department and Federal Housing Finance Agency to turn over another heap of documents in a prominent GSE shareholder case. Some see this as a possible legal coup for Fannie Mae and Freddie Mac shareholders in the Fairholme Funds Inc. v. United States, et al. net worth sweep case. The agencies have attempted to keep the documents, containing various memos, emails, presentations and other communications, tucked away under executive privilege. But last week, Sweeney, once again, made it mandatory that the government agencies produce more documents, close to 60 this time, for the plaintiff’s attorneys. Read More

FHFA Proposes Revised Indemnification Policy

The Federal Housing Finance Agency recently redrafted the proposed indemnification payments rule to make it easier to understand. The proposed rule looks to replace a provision concerning indemnification payments by regulated entities in conservatorship with one that clearly states that the regulation does not apply to such entities. This issue has been brewing since 2008 when the FHFA published an interim final rule on severance agreements and indemnification payments. It then re-proposed the proposed amendment on indemnification payments in 2009. Now the agency said it wants to clarify the fact that it does not consider indemnification payments to be subject to FHFA rules and procedures related to compensation. Read More

Industry Groups Worry About Possible CSP Control Transfer

Several special interest groups are worried that the common securitization platform could become part of a backdoor effort to “piecemeal” GSE reform via possible provisions to transfer CSP control to the private sector. The Community Home Lenders Association, Community Mortgage Lenders of America, and six other trade and civil rights groups penned a letter to Congress last week urging the House to not adopt individual provisions as riders to an FY 2017 funding bill or other “must-pass” legislation that they say could bias the final outcomes of an ultimate comprehensive GSE reform bill. Provisions to transfer control of the CSP to the private sector, and most likely the largest private financial institutions have not... Read More

Fannie and Freddie Execs Talk CSP Misperceptions, Alignment

Representatives from Fannie Mae and Freddie Mac discussed misperceptions about the common securitization platform and the goal of aligning policies of the two GSEs at last week’s ABS East conference in Miami. Mark Hanson, Freddie’s senior vice president of securitization, said the importance of the CSP is that it’s “shareable,” during one of the panel sessions.“That opens up a lot of thinking and potential for down the road. But in it being shareable there are some requirements that come with all that,” he said. Hanson added, “A lot of what’s required and a lot of what’s taken so much time in all this is to get alignment between Freddie and Fannie. Read More

Low Downpayment Spin-Off Pilot Loosens Eligibility Requirements

In an attempt to cater to more diverse communities and likely drum up more business for its low downpayment program, Freddie Mac unveiled a new mortgage pilot with two lenders last week that loosens eligibility requirements. The program, Your Path, is different in that it is based on certain borrower characteristics and trends. It was launched with two nonbank lenders that specialize in serving the Hispanic community and low-income borrowers. It was announced during the national convention of the National Association of Hispanic Real Estate Professionals. New American Funding, headquartered in Dallas, and Las Vegas-based Alterra Home Loans are building on Freddie’s low downpayment Home Possible mortgage platform to create the pilot. Read More

GSE Roundup

Fannie Mae Names Small Pool Winning Bidder. The Community Loan Fund of New Jersey, Inc., an affiliate of New Jersey Community Capital, a non-profit community development financial institution, is the winning bidder of Fannie Mae’s fifth Community Impact Pool of non-performing loans. The transaction is expected to close on Nov. 22, 2016, and includes 120 loans secured by properties located in the Miami area with an unpaid principal balance of approximately $20.3 million. In collaboration with Wells Fargo Securities, LLC and The Williams Capital Group, L.P., Fannie Mae began marketing this Community Impact Pool to potential bidders on Aug. 10, 2016. Read More

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