Cart

Inside The GSEs

August 11, 2017

View Archived Issues

GSE Combined Net Income $4.86B, Capital Buffer Concerns Grow

Fannie Mae and Freddie Mac earnings remained strong in the second quarter with the GSEs posting a combined $4.86 billion in net income, but concerns about the soon to be non-existent capital buffer also remain. The GSEs’ $9.85 billion in net income for the first half of the year more than doubled their combined earnings from the same time period in 2016, according to their second quarter earnings statements released last week. While Fannie posted a net income of $3.20 billion, a 15.4 percent quarterly improvement, Freddie witnessed a 24.7 percent decline to $1.66 billion in the second quarter. Read More

FHFA Director Watt Tells NAR Not a Fan of ‘Recap and Release’

Although Federal Housing Finance Agency Director Mel Watt is concerned about the GSE capital buffer falling to zero early next year, it appears he’s unlikely to take administrative action anytime soon to fix the situation. At least that’s the message conveyed in a new letter Watt penned to National Association of Realtors President William Brown. According to the Aug. 9 letter, Watt notes he’s “very concerned” about the issue because it “increases the probability of a draw which could cause an adverse market reaction.” The regulator adds: “However, I am sensitive to the prospect that whatever steps FHFA could take might be misperceived as either an effort... Read More

FHFA Stress Test Shows GSEs Would Need $100B in Bad Times

In the event of a severe global recession, Fannie Mae and Freddie Mac could need a bailout of up to $99.6 billion, according to the Federal Housing Finance Agency’s annual stress test report released this week. The test of severely-adverse scenarios, required by the Dodd-Frank Act for companies with consolidated assets of more than $10 billion, is based on Fannie and Freddie portfolios as of Dec. 31, 2016. The bailout would be needed on an incremental basis and would also depend on the treatment of the GSEs’ tax-deferred assets. Under this hypothetical economic scenario, elevated stress in corporate financial and commercial real estate markets include situations where... Read More

PHH Settles with HUD, FHFA Over Underwriting Issues

  PHH Corp. announced a $75 million settlement with the Department of Justice and the Federal Housing Finance Agency to settle unspecified allegations tied to the underwriting of legacy loans. However, whether Fannie Mae and Freddie Mac loans can be targeted for False Claims Act purposes is still debatable. The DOJ portion of the settlement covers FHA and VA mortgages originated from January 2006 until the end of 2011. … Read More

Watt Cites Minority-Specific Homeownership Challenges

Federal Housing Finance Agency Director Mel Watt said both old and new obstacles have negatively affected African-American homeownership, which has steadily retrogressed. Before the housing crisis, the homeownership rate for African-Americans was close to 50 percent in 2004. However, by 2017 it declined closer to levels last seen in 1994. “We are worse off today than we were 20 years ago,” said Watt, while speaking at the National Association of Real Estate Brokers’ annual convention in New Orleans last week. He pointed out that because home equity has played a major role in African-American assets, the impact of the economic downturn and foreclosure crisis on wealth in Read More

FHLBank Income up 6 Percent, Advances Steady in 2Q17

The Federal Home Loan Bank System saw a 7 percent increase in advances during the second quarter of 2017. The FHLBank’s Office of Finance reported that advances stood at 706.8 billion, at the end of June, up from $660.7 billion reported in the previous quarter. The combined net income for the second quarter was $844 million, up from $812 million the previous quarter. The OF attributes the upswing to an increase in net interest income, partially offset by lower gains on litigation settlements. For the first half of the year net income was $1.66 billion representing a 2.2 percent increase from a year... Read More

Alternative Credit-Scoring Models Delayed Until 2019, Says FHFA

To minimize confusion with the implementation of the single security, the Federal Housing Finance Agency said it doesn’t plan to introduce new credit- scoring models until at least 2019. A number of groups have been pushing the government-sponsored enterprises to look beyond the FICO score, and Fannie and Freddie have been studying the issue. But FHFA Director Mel Watt said any major change would have to wait until the GSEs have completed the complex single-security project. “Based on the overwhelming feedback we have received from the industry, it is clear that it would be a serious mistake to change credit scoring models before mid-2019,” he told the annual convention of the National Association of Real Estate Brokers last week. Read More

Layton Talks SFR and Home Possible Program Changes

Freddie Mac CEO Donald Layton said the GSE is exploring the single-family rental market, in consultation with the Federal Housing Finance Agency, and touted the affordability aspect of the plan. “We believe it’s appropriate to enter that market with care and where there are additional social benefits, and significant affordable characteristics. So it’ll be on a smaller scale,” he told Inside The GSEs. “We have permission to go for a limited amount of volume to learn about the business.”This is in contrast to Fannie Mae’s entry into the single-family market. Earlier this year Fannie did a $1 billion deal with Invitation Homes as a pilot program. Read More

MBA Says its Reform Plan has Minimal Costs to Consumers

The Mortgage Bankers Association released a paper focused on how the various aspects of its reform proposal could impact consumer costs and concluded any impact would be minimal.The trade group explained that costs under the MBA proposal, which calls for multiple privately owned guarantors, are likely to be similar to costs in today’s mortgage market. “While the precise impact on consumer costs from true housing-finance reform may be difficult to gauge, we know that attempts to shortcut reform through recap and release would lead to much higher costs for consumers,” said the MBA, adding that global investors have been clear that they don’t want to return to a world of implicit guarantees. Read More

Freddie to Release New Single-Security Disclosures in August

In preparation for the launch of the uniform-mortgage backed security in 2019, Freddie Mac will release new single-security-related disclosures for investors beginning on Aug. 28. The UMBS was originally scheduled to launch next year but was delayed to allow more time for development, testing and validation of controls. The disclosures are in conjunction with the single-security initiative, designed to increase liquidity and fungibility in the $3.5 trillion to-be-announced MBS market. Mark Hanson, Freddie’s senior vice president of securitization, called the launch a “successful joint effort among several parties that will enhance the U.S. mortgage industry by modernizing the TBA market for both Freddie Mac and Fannie Mae.” Read More

FHFA Extends Deadline, Again, on Language Preference Question

The Federal Housing Finance Agency reopened and for the second time, extended the deadline for industry participants to offer input on improving access to credit for borrowers that aren’t proficient in English. The original deadline expired July 10, but was extended and closed on July 31. On Aug. 4, the FHFA reopened the request for input and will allow comments on additional information added to the RFI. The new deadline to submit input is Sept. 1. The regulator said it was reopening and extending the input period “to allow interested parties more time to consider additional information on issues facing qualified mortgage borrowers with Limited English Proficiency (LEP) throughout the mortgage life cycle... Read More

FHFA OIG: Counterparty Risk Program Needs More Supervision

The Federal Housing Finance Agency Office of Inspector General said the FHFA’s suspended counterparty program needs better oversight. In a recent audit of counterparty risk, the IG found deficiencies in the FHFA’s Office of General Counsel review of suspended counterparties. Suspended counterparties are businesses that have engaged in misconduct. The suspended counterparty risk management programs were designed to manage counterparty risk through various means that include maintaining eligibility standards, evaluating counterparties’ financial conditions, monitoring exposure to potential losses, and working with counterparties to limit realized losses. Fannie Mae, Freddie Mac and the Federal Home Loan Banks can also chose to cease doing business with counterparties that appear to have unacceptable risks. Read More

GSE Roundup

Fannie’s Fourth Sale of Reperforming Loans: Fannie Mae began marketing its fourth sale of reperforming loans on Aug. 9 as part of the GSE’s ongoing effort to reduce the size of its retained mortgage portfolio.The pool of approximately 11,000 loans, approximately $2.5 billion in unpaid principal balance, is available for purchase by qualified bidders. This sale is being marketed in collaboration with Citigroup Global Markets, Inc. Bids are due on Sept. 6, 2017. Former Fannie Exec Leaves for Flagstar. Flagstar Bank has hired Kristy Fercho, previously senior vice president and customer delivery executive for Fannie Mae, to lead Flagstar's mortgage business. Since 2007, she has served in ... Read More

Latest Imf News

More Imf News

Featured Data

More Featured Data

Featured Reports

More Latest Reports

Featured Poll

As homeowner equity continues to build, more and more lenders are launching home equity lending products. Are you thinking of joining this market?

View Results