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Inside The GSEs

December 15, 2017

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Freddie Staked Bigger Claim To GSE Business in November

Freddie Mac continued to expand its share of the GSE single-family business in November, following a strong showing the previous month, according to a new Inside The GSEs analysis of mortgage-backed securities data. The two GSEs guaranteed $79.09 billion in new single-family MBS last month, an unexpected 4.5 percent increase from October’s production. Freddie posted the biggest increase, 7.4 percent for the month, while Fannie issuance in November was up a more modest 2.0 percent. That pushed Freddie’s share of the GSE single-family MBS business to 47.0 percent, up from 45.7 percent in October, matching the company’s biggest market share since July 2015. Through the first nine months of 2017, Freddie managed to garner... Read More

GSE Jumpstart Reauthorization Act Could Suspend HTF Contributions

Fannie Mae and Freddie Mac would be barred from making contributions to the Housing Trust Fund if Federal Housing Finance Agency Director Mel Watt decides to forgo sending dividend payments to the Treasury under a bill approved this week by the House Financial Services Committee. The GSE Jumpstart Reauthorization Act of 2017 (H.R. 4560) would also extend an existing prohibition on the Treasury Department from selling its shares in the GSEs without congressional approval. That ban, currently due to sunset at the end of this month, would be extended to Dec. 31, 2018.The bill, introduced on Dec. 6 by Rep. French Hill, R-AR, would suspend Fannie Mae and Freddie Mac... Read More

Hensarling Open to Bipartisan Negotiations on GSE Reform

Resolving the Fannie Mae and Freddie Mac conservatorship dilemma got a significant boost last week when House Financial Services Committee Chairman Jeb Hensarling, R-TX, said he’s open to negotiations on housing-finance reform. During a speech at a National Association of Realtors conference, Hensarling expressed support for a bipartisan approach while outlining his beliefs for a sustained housing-finance reform plan. This represents the first time that the lawmaker publicly said he’s ready to make a deal when it comes to reform. And that includes changing his tune on opposing any type of government guarantee for mortgage-backed securities backed by conventional home loans. Read More

Freddie Mac’s SFR Pilot Aimed at Affordable Housing

Freddie Mac decided to dip its toes into the single- family rental market with a $161 million transaction with CoreVest Finance. The securities are backed by affordable single-family rental properties targeting low-income and working families. The SR01 certificates include 59 loans originated primarily by CoreVest. Freddie has been exploring the growing SFR market for the better part of the year. While Fannie Mae received some backlash for its one large $1 billion transaction earlier this year with Invitation Homes, Freddie’s focus was on the affordable housing market. Most of the 2,355 properties included in this transaction (94 percent) are affordable to families earning less than 100 percent of the area median income. Read More

FHFA Keeps Close Eye on Prepayment Speed Divergence

As the Federal Housing Finance Agency works to prepare the industry for the single security and common securitization platform, officials are keeping a close eye on consistency in prepayment speeds between Fannie Mae and Freddie Mac. The single security and CSP are on target for implementation in 2019, according to a new FHFA progress update released in December. In that report, the FHFA described in more detail the processes it has in place to minimize variance in prepayment speeds between Fannie and Freddie mortgage-backed securities that have the same coupon, maturity and issuance cohort. Read More

FTHB Participation Grows in GSE Low-Downpayment Programs

The GSEs’ low downpayment programs are gaining some traction among first-time homebuyers. According to an analysis by Inside The GSEs, 97 percent loan-to-value mortgages now represent close to 15 percent of first-time homebuyer mortgages sold to the GSEs. The high LTV programs have grown gradually, but steadily, since they were introduced. But they were slow to catch on. By the end of 2015, the high LTV programs represented 5 percent of the FTHB market, which grew to nearly 10 percent at the end of last year. They represented approximately 14 percent of first-timer mortgages in the third quarter of 2017. The top three banks originating these low downpayment loans are... Read More

MIs Continue Push for More Front-End CRTs in GSE Reform Hearing

Private mortgage insurers aren’t backing down on their push for the GSEs to take on more front-end credit-risk transfers. During a recent House Financial Services subcommittee hearing, it was the private sector’s turn to discuss housing-finance reform. While lawmakers and panelists mostly agreed that Fannie Mae and Freddie Mac, or their replacements, should tap multiple forms of credit-risk transfer, they disagreed on the type that future guarantors of mortgage-backed securities should utilize. Front-end transactions involve deeper coverage by private MIs. Advocates argued that with the more common back-end transactions, such as Fannie’s Connecticut Avenue Securities and Freddie’s Structured Agency Credit Risk deals, the GSEs still hold a significant first-loss exposure. Read More

Nonperforming Loan Outcomes Improve in FHFA’s 4th NPL Report

Fannie Mae and Freddie Mac sold more than 82,359 nonperforming loans through June 30, 2017, according to the Federal Housing Finance Agency’s fourth report highlighting nonperforming loan sales and borrower outcomes. And close to half the NPLs sold had been resolved. That number is up from the FHFA’s last report, in which 72,502 NPLs had been sold through December 2016. This represents about 10,000 in NPLs sold during the first six months of the year. The latest report shows that NPL sales through June represented a total unpaid principal balance of $16 billion, and had an average current loan-to-value ratio of 97 percent. The average delinquency of pools sold was 3.3 years. Read More

Group Worries Day 1 Program May Negatively Impact Primary Market

The Mortgage Bankers Association wants to make sure that Fannie Mae and Freddie Mac aren’t infringing on the primary market as they take on new technology-based mortgage initiatives. The MBA noted that the “bright line” between the primary and secondary markets is crucial.For example, the trade group expressed some concern that Fannie’s Day 1 Certainty initiative is the type of program that may have unintended consequences on the primary market. Officials with the MBA told Inside The GSEs that Day 1 Certainty’s roll-out relied on a single vendor for each component, even though the technology was not new. “Several other vendors offered similar products,” the group noted. Read More

GSE Roundup

Tax-Exempt Loans. This week, Freddie Mac announced the external offering of two multifamily pass-through securities backed by tax-exempt loans (TEL Multi PCs). The underlying tax-exempt loans are made by state or local housing agencies and secured by affordable rental housing. It is the first time TEL Multi PCs have been offered by Freddie Mac. They are designed to help source the lowest cost of capital to deliver even more efficient financing for affordable housing through the company’s Tax-Exempt Loan program. The company announced the pricing of two separate single-class securities each backed by one fixed-rate, multifamily tax-exempt loan. Both are... Read More

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