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Inside The GSEs

November 17, 2017

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Freddie Swiped Some Market Share From Fannie in October MBS

Freddie Mac had one of its best months of the year in terms of new single-family business during October, notching a significant gain in its share of the GSE mortgage-backed securities market.In October, Freddie issued $34.61 billion of single-family MBS, a hefty 23.9 percent increase from the previous month. Meanwhile, Fannie Mae saw a sharp 11.5 percent drop in MBS production from September to October. Freddie’s share of new GSE MBS issuance surged to 45.7 percent last month, its highest level since November of last year, when it spiked to 45.9 percent – and then abruptly fell to just 36.1 percent the following month. Read More

FHFA Approves GSE Re-Entry into LIHTC Market, With Limitations

After being absent for about 10 years, Fannie Mae and Freddie Mac will re-enter the low-income housing tax credit market to support affordable rental housing, the Federal Housing Finance Agency announced late this week. But the GSEs’ market share will be capped so they’re not in direct competition with the private market, and their investments must meet certain requirements. Fannie and Freddie will have an annual investment limit of $500 million, which translates to less than a 5 percent market share for each, according to the FHFA. Moreover, any investments more than $300 million during any year must be in areas that have been identified by the FHFA as markets that have difficulty attracting investors. Read More

Tax Reform Plan Puts GSEs a Step Closer to Potential Treasury Draw

With the Senate and the House having both recently released their tax proposals, it’s the House plan to cut corporate taxes in 2018 that would impact the GSEs by threatening their deferred tax assets. A corporate tax cut would likely force Fannie Mae and Freddie Mac to take draws from the U.S. Treasury. This is especially true in light of the fact that by Jan. 1, 2018, neither GSE will be allowed to hold a capital buffer to absorb any losses. A cut to corporate taxes means a write down of some Fannie/Freddie DTAs, including mortgage-related assets, allowances for bad loans, derivatives-related basis differences and deferred fees, which are all currently held at a higher tax rate. Read More

HFSC Hearings Offer Hope that GSE Reform Is a Priority

With several recent hearings on sustainable housing finance under its belt, the House Financial Services Committee appears to be exploring GSE reform in depth, but no word yet on when and what that may look like. The HFSC’s Subcommittee on Insurance and Housing held three hearings over a three-week period with the latest taking place last week. A financial services committee staffer wouldn’t confirm whether a piece of legislation is being worked on, but she said that committee Chair Jeb Hensarling, R-TX, believes housing finance reform is a priority for the committee this Congress. Read More

Fannie Exploring Construction Lending to Help Affordability

Fannie Mae is looking to give homebuyers access to easier and more affordable construction loans through a potential new pilot program. As the housing supply shortage continues and affordability remains a critical barrier for first-time homebuyers, Fannie envisions the program as a path for homebuyers to get affordable housing. Not many details have been released and there’s no set timeframe because the program is just in the beginning stages of consideration. But if the GSE gets the green light from the Federal Housing Finance Agency, Fannie will be able to buy the loans as soon as construction begins instead of before the house is finished. Read More

Fannie, Freddie Make Strides to Strengthen eMortgage Adoption

Fannie Mae and Freddie Mac released a report this week on efforts to improve the origination of eMortgage transactions including more education and policy alignment on the topic. Those efforts have resulted in the growth of the number of warehouse banks that fund eNotes.The report was a follow-up to a joint industry outreach survey the GSEs conducted last year on perceived barriers to the industry adopting eMortgages. Stakeholder readiness and process complexity were found to be the most common barriers among the lenders, IT companies, warehouse banks, servicers and title/settlement providers surveyed. Survey participants said there was a lack of support for funding eNotes by warehouse banks, a source many mortgage lenders rely on. Read More

Fannie’s Servicing Marketplace Set to Open in December

Fannie Mae’s Servicing Marketplace that connects servicers and sellers during transfers, is expected to be up and running shortly after Thanksgiving. In a recent servicing guide update, the GSE noted that certain loans delivered under whole loan servicing released commitments taken on or after Dec. 4, 2017, will be bifurcated if sellers participate in its servicing execution tool or the Servicing Marketplace.The mortgage giant designed the application to simplify and bring new concurrent transfers of servicing options to customers. Fannie noted that it also hopes to provide certainty of sale, execution, and process efficiency. Lenders must be approved to participate in the servicing marketplace. Read More

OIG Lists 2018 Management, Performance Challenges for FHFA

The Federal Housing Finance Agency Office of the Inspector General said the FHFA needs to focus on improving its oversight of the GSEs and Federal Home Loan Banks in several key areas. In fact, the FHFA faces four “serious” management and performance challenges that carried over from prior years, according to a recently published OIG memo to FHFA Director Mel Watt. The OIG is troubled by the agency’s supervision of the GSEs and said it needs to improve oversight of matters delegated to Fannie Mae and Freddie Mac, as well as make its internal review process for non-delegated matters stronger. Read More

Fed Reserve Council Suggests GSE Reform Include Home Counseling

The Federal Reserve Board’s Community Advisory Council and the Board of Governors said the current mortgage finance system doesn’t provide fair access to large segments of the population.They also noted that there’s a critical need to resolve the ongoing conservatorship. Members of the two groups held their semiannual joint meeting earlier this month and discussed the need to reform the housing finance market so that low to -moderate income borrowers aren’t left out.The council talked about the need to disaggregate economic data to understand the disparities that exist in mortgage lending, especially among minority groups. Read More

GSE Roundup

Fannie Prices $1.2B CAS Deal. Fannie priced its seventh credit risk-sharing transaction of 2017 under its Connecticut Avenue Securities program. CAS Series 2017-C07, a $1.161 billion note offering, is scheduled to settle on Nov. 21, 2017, and is the final deal of the year. It was met with strong investor demand, including new investors, according to Laurel Davis, Fannie’s vice president of credit risk transfer. “Investors continue to provide us with positive feedback on the transparency we provide as part of our CAS program, including our response to recent hurricane events and the information we make available in Data Dynamics, our analytical tool for investors. We expect to continue regular benchmark issuance of CAS notes in 2018, subject as always to market conditions.” Read More

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