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Inside The GSEs

January 5, 2018

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Fannie Recovered Some Ground in December, Refi Drove 4Q17 Volume

Fannie Mae last month reclaimed some of the market share Freddie Mac snagged in October and November as GSE single-family business volume skidded toward yearend. Fannie issued $43.99 billion of single-family mortgage-backed securities in December, a tidy 4.9 percent increase from the previous month. Freddie’s $30.03 billion in production tumbled 19.2 percent from November. That gave Fannie a 59.4 percent share of the GSE market in December, in line with historical trends. Freddie posted big increases in volume during October and November, pushing its GSE market share to 46.4 percent for the two-month period. Even with the return to more normal... Read More

GSEs Allowed to Retain $3B in Capital, Treasury Draws Pending

Both GSEs are expected to need a draw from the U.S. Treasury, thanks to the passage of the Tax Cuts and Jobs Act that will reduce the corporate tax rate and result in $15.3 billion in one-time charges for the pair. With the tax rate being reduced from 35 percent to 21 percent, the GSEs now have to measure their net deferred tax assets using the new rate. According to recent Securities and Exchange Commission filings, Fannie Mae expects to take a one-time charge of $10.0 billion and Freddie Mac is bracing for a $5.3 billion charge. Read More

GSE Reform Up in the Air for 2018 But Momentum, Optimism Grow

Some observers think that resolving the long-running conservatorship of Fannie Mae and Freddie Mac this year is closer than it has ever been, but they also say political differences present a number of challenges. There has been an uptick in momentum the past few months and the recent deal between the Federal Housing Finance Agency and the Treasury that allows the GSEs to retain $3 billion in capital is an optimistic sign of progress to many. Moreover, the Senate Committee on Banking, Housing, and Urban Affairs is working on a draft of a GSE reform bill, and the House Financial Services Committee has held a handful of hearings on GSE reform issues in the fourth quarter in preparation for drafting legislation. Read More

FHFA Mulling Over Credit Score Alternatives in Request for Input

The Federal Housing Finance Agency is reviewing four possible options to update the credit scoring systems used by Fannie Mae and Freddie Mac. The agency said while the current credit score model is a reasonable predictor of default, it is seeking input on whether an alternative is necessary and what impact it would have on the current credit score requirements. The request for input was issued in late December. Options include requiring a single type of score on every loan, requiring two different scores, allowing lenders to decide which score to use or permitting multiple scores through a waterfall approach. Read More

Corker’s Tax Reform Flip-Flop Backlash Due to GSE Reform?

Sen. Bob Corker’s last-minute decision to vote for the massive GOP tax bill caused a ruckus in the press and social media, but the Senator’s communications director attributed the noise to opponents of his efforts to pass housing-finance reform. The controversy arose when Corker, R-TN, was accused of voting for the tax overhaul only after he saw a provision that would reap him financial gains. Weeks before the final vote, Corker was the only Republican senator set to vote against an earlier version of the bill. Corker is said to have significant holdings in companies that would benefit from a tax break for real estate-related pass-through corporations and partnerships. Read More

GSEs to Review Servicing and Appraisal Process in 2018

Fannie Mae and Freddie Mac plan to tackle issues related to mortgage servicing and the borrower experience as part of their 2018 goals. The Federal Housing Finance Agency released the “scorecard” for the GSEs late last month, which outlines specific priorities the duo are expected to focus on throughout the year. The GSEs are charged with assessing the current mortgage servicing business model and developing specific plans to support servicing liquidity. The FHFA charged the GSEs to “assess the challenges and potential solutions for improving the borrower experience, expanding liquidity, and increasing efficiency of the servicing market.” Read More

Federal Home Loan Bank Eligible Collateral Up 21 Percent

The total book value of the Federal Home Loan Banks’ eligible collateral was up 21 percent in 2016, rising to $2.8 trillion from $2.3 trillion, according to the Federal Housing Finance Agency’s recently released report to Congress highlighting the amounts and types of collateral pledged to the FHLBanks.Advances over the same period rose by 11 percent from $634 million to $705 million. Reported borrowing capacity was $2.1 trillion. Single-family and multifamily residential loans accounted for the majority of the book value of collateral, both eligible (61 percent) and pledged (58 percent). Read More

Affordable Housing Groups Say Reform Proposals Are ‘Harmful’

Fair housing advocates and civil rights groups wrote the Senate Committee on Banking, Housing and Urban Affairs to express concerns about not having a seat at the table as lawmakers draft GSE reform legislation. The groups, which include the Center for Responsible Lending, National Fair Housing Alliance and the NAACP, said current House and Senate proposals would do significant harm by locking out the very borrowers who depend on a future system, resulting in devastation to a recovering market. “Our constituents have a strong stake in the outcome of any legislative proposals in this area, and we are alarmed that we have not been invited to offer... Read More

Shareholder Considers Treasury Payments as Stolen Money Return

With new Fannie Mae and Freddie Mac draws on the Treasury’s line of credit now imminent because of tax cut legislation, one GSE shareholder says the payments should be accounted for as paybacks for money that was unfairly taken. Gary Hindes, a Fannie shareholder, has argued unsuccessfully that the Treasury sweep of GSE profits violates state law in Delaware and Virginia, where Fannie and Freddie are incorporated. Having lost the first round, the case is currently on appeal to the U.S. Court of Appeals for the Third Circuit. In a statement released this week, Hindes blasted the agreement between the GSEs and Treasury. Read More

GSE Roundup

Fannie Affordable Housing Challenge. Fannie Mae launched a $10 million challenge to help address the affordable housing crisis. Through the Sustainable Communities Innovation Challenge, the GSE will commit $10 million over two years to attract promising ideas that will help alleviate affordable housing issues. Fannie expects to receive proposals from across the public, private, and nonprofit sectors. Maria Evans, Fannie’s vice president of sustainable communities’ partnership and innovation, said, “With the Challenge, we are looking for new concepts, designs, and ways of solving our nation’s affordable housing issues from innovators who are working inside and outside of the traditional housing industry. Great ideas can come from anywhere.” The goal is to... Read More

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