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Inside The GSEs

May 25, 2018

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More Big Swings in GSE Single-Family MBS Business in April

Freddie Mac posted a big increase in its single-family mortgage-backed securities activity in April, reclaiming some market share from Fannie Mae, according to a new Inside The GSEs analysis of MBS disclosure data. Freddie issued $26.08 billion of single-family securities last month, a hefty 22.9 percent jump from March. [Includes two data charts.] Read More

Watt Frustrated Conservatorship Hindering GSE Future Planning

Federal Housing Finance Agency Director Mel Watt said one of the challenges of being in a decade-long conservatorship is the inability to make strategic decisions on everyday operations. And it doesn’t look like that problem will be solved anytime soon. During a Senate Committee on Banking, Housing and Urban Affairs hearing this week, he said the decision to relocate Fannie Mae’s headquarters is an example of trying to make decisions for the GSEs amid an uncertain future. “Without looking somewhat down the road, FHFA and the enterprises would both lose their momentum and jeopardize day-to-day success. Read More

FHFA Still Monitoring Prepayment Speeds Ahead of UMBS

In an effort to get mortgage-backed securities investors comfortable with the upcoming launch of the uniform MBS, Fannie Mae and Freddie Mac are continuously monitoring their prepayment rates to make sure there’s no divergence between the two, according to the Federal Housing Finance Agency.The FHFA published its inaugural prepayment report this week, increasing transparency ahead of the launch of the UMBS in June 2019. The report will be released on a quarterly basis. With the UMBS, the FHFA wants to ensure that there’s general alignment on the prepayments and noted that consistency is important to the efficiency and liquidity of the secondary mortgage market. Read More

Hensarling Calls for Congress to Investigate Possible GSE Lobbying

House Financial Services Committee Chairman Jeb Hensarling, R-TX, said he plans to examine media reports alleging that Fannie Mae violated restrictions by participating in lobbying efforts. Fannie Mae denied the claims. Last week, Fannie’s general counsel, Brian Brooks, was accused of meeting with members of the executive branch to discuss housing-finance reform. Hensarling said if the report that was published in Bloomberg is accurate, high-ranking Fannie employees have been intentionally violating their government prohibition on lobbying through a series of “secret” meetings to remove the GSE from conservatorship. “If true, this violation is more than an outrage, it is a direct affront on taxpayers and the current structure of the federally-backed conservatorship that has allowed Fannie Mae to operate for the last decade,” said Hensarling. Read More

Community Lenders Want Action Taken to Stop MI Volume Discounts

Community mortgage lenders want the Federal Housing Finance Agency to put an end to pricing disparities caused by mortgage insurers offering discounts to Fannie Mae and Freddie Mac lenders based on their size or volume. And they recommend doing so in the same manner the agency solved pricing disparities over guarantee fees. The Community Home Lenders Association wrote the FHFA last week requesting that Director Mel Watt investigate the practice that the trade group says has become more prevalent. CHLA said it puts small lenders and their borrowers at a disadvantage. As a result, some individual CHLA members are even boycotting private MIs that engage in volume discounts. Read More

FHFA Report to Congress Seeks Counterparty Oversight

The Federal Housing Finance Agency seeks oversight of counterparties that provide services to Fannie Mae, Freddie Mac and the Federal Home Loan Banks, according to its 2017 annual report to Congress published this week. In addition to reporting examination activity, the FHFA offers legislative recommendations. The agency discussed the regulated entities’ heavy involvement with third parties who provide “critical services” supporting the secondary mortgage market. The agency said this includes nonbank mortgage servicers for Fannie Mae and Freddie Mac. And while oversight of these counterparties is important to the safety and soundness of the GSEs, the FHFA argued that oversight can only happen now through contractual provisions. Read More

FHFA Language Access Plan Addresses Some Concerns

The GSEs recently released their plans to improve the mortgage process for borrowers who have a limited proficiency of English and some point to disclosures as being a critical element of the plan. The Federal Housing Finance Agency has asked Fannie Mae and Freddie Mac to identify language barrier obstacles for potential borrowers, and come up with possible solutions. The agency’s plan established milestones with start dates this year through 2020. Fannie and Freddie are spending the first half of 2018 defining roles and responsibilities for both a resource clearinghouse and a language access working group consisting of housing representatives to work with consumer groups that support LEP consumers. Read More

New Fannie Mae, Freddie Mac Shareholder Lawsuits Filed

GSE shareholder litigation activity continues into mid-year with two new cases being filed in the past week. Joshua Angel, a corporate restructuring lawyer and owner of junior preferred stock, filed a lawsuit this week to sue Fannie Mae, Freddie Mac and their respective board of director members who were serving on Aug. 17, 2012, when the Treasury sweep was formalized. Angel seeks to recover damages from the defendants for his pro-rated share of the $10 billion dividend entitlement loss he and other junior preferred shareholders have incurred to date. Read More

NY Fed Says Reform Should Follow Danish Mortgage Finance System

Housing-finance reform may want to take some cues from the mortgage-finance system in Denmark, according to the Federal Reserve Bank of New York in a new report comparing and contrasting the two systems. In fact, the creditor-friendliness of the Danish system means that relatively more price risk is borne by the homeowner. One of the bases for NY Fed’s recommendation is that, unlike in the U.S., the Danish system remained stable and solvent during the 2007-2009 financial crisis. And, despite falling home prices, the Danish system didn’t require government intervention or funding. The authors chose that system because they said it’s most similar to the model in the U.S. Read More

FHFA Seeks Industry Feedback on Collecting Information on AMCs

The Federal Housing Finance Agency is seeking feedback regarding the level of paperwork burden placed on it when it comes to making sure that appraisal management companies meet the minimum reporting and record keeping requirements. A 2015 regulation made it mandatory that states with appraisal management companies, intermediaries between appraisers and lenders, establish a minimum registration and supervision program. And within that requirement, states are to review and approve or deny any application for registration.The FHFA noted that this burden is divided equally among the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, the Board and the FHFA. Read More

GSE Roundup

Treasury Official Sees Major Impact from Single Security. A key Treasury Department official suggested that issuers of non-agency MBS may someday participate in the common securitization platform being developed by Fannie Mae and Freddie Mac. Craig Phillips, counselor to the Treasury, said the industry has made a lot of progress toward the launch of the single security that is scheduled for June 2019. “Industry preparedness is about an eight or nine on a scale of 10,” he said during remarks at this week's secondary market conference sponsored by the Mortgage Bankers Association in New York. Phillips characterized the... Read More

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