Browse articles from all of our Newsletters related to FHFA.

July 21, 2017 - Inside MBS & ABS

Single Security Helps Narrow GSE Pricing Differences, but Challenges Remain. Internal and External Issues?

Since the introduction of the single-security effort, pricing differences between Fannie Mae and Freddie Mac MBS have just about been eliminated, thanks in part to prepayment speeds converging. A paper recently published by the Urban Institute found that back in 2012 and 2013, Freddie’s 3.0, 3.5, and 4.0 percent coupons traded at more than a $0.30 discount to Fannie Mae’s. But, by 2014 and 2015 that number narrowed to about $0.15, and by early 2017 the pricing differences had largely come together. The authors called...

July 20, 2017 - Inside Mortgage Finance

Nevada Supreme Court Gives Fannie, Freddie A Win in HOA Super-Priority Lien Case

In a recent ruling, the Nevada Supreme Court decided that in the case of Nationstar Mortgage, LLC v. SFR Investments Pool 1, LLC, a homeowner’s association priority lien cannot extinguish a first deed of trust in an HOA foreclosure sale. This is a win for Fannie Mae and Freddie Mac. Twenty-two states have super-lien laws that allow HOAs to take priority over first mortgages and foreclose the property to collect unpaid fees of up to six months’ worth. In 2014, the Nevada Supreme Court ruled that an HOA could indeed extinguish a senior mortgage. But Nationstar Mortgage argued...

July 14, 2017 - Inside The GSEs

FHFA Proposes New Federal Home Loan Bank Capital Requirements

The Federal Housing Finance Agency, although late to the game, is proposing new capital requirements for the Federal Home Loan Banks to comply with the Dodd-Frank Act. Other regulators have already implemented the Dodd-Frank Act provisions that shift capital requirements away from ratings. This proposed rule would carry over most of the existing regulation without any major change, but it would revise the credit risk component of the risk-based capital requirement, along with limitations on extensions of unsecured credit. Currently banks calculate credit risk capital charges and unsecured credit limits based on ratings issued by a nationally recognized statistical rating organization. But the proposed rule would require the banks to use their own internal rating methodology.

July 14, 2017 - Inside The GSEs

Industry Seeks More Tangible Activities in GSE DTS Proposals

Industry groups lauded the GSEs’ efforts to increase funding for underserved markets but recommend they add more specific activities focused on increasing loan purchases and speeding up the process. In May, Fannie Mae and Freddie Mac released draft proposals on ways to grow financing for specific underserved markets under the Federal Housing Finance Agency’s duty-to-serve requirements. Those markets include manufactured housing, rural housing and preserving affordable housing for low- and moderate-income households. The National Low Income Housing Coalition said while the plans demonstrate the GSEs’ commitment to increase their impact in underserved markets, they focus largely on scoring and technical compliance.

July 14, 2017 - Inside MBS & ABS

Royal Bank of Scotland Settles with FHFA for $5.5B in 2011 Lawsuit Over Non-agency MBS

Federal Housing Finance Agency lawsuits over pre-crisis non-agency MBS are winding down with one of the last holdouts, Royal Bank of Scotland, reaching a settlement this week for $5.5 billion. In 2011, the agency filed charges against 18 issuers and underwriters alleging securities law violations and fraud regarding non-agency MBS sold to Fannie Mae and Freddie Mac. JP Morgan Chase settled for $4.0 billion, Deutsche Bank for $1.9 billion and Goldman Sachs for $1.2 billion. Most of the cases were settled in 2013 and 2014. The two government-sponsored enterprises purchased...

July 13, 2017 - Inside Mortgage Finance

Groups Want to See More Tangible Activities in Fannie, Freddie Underserved Market Proposals

Some critics say the underserved markets proposals put forth by Fannie Mae and Freddie Mac don’t focus enough on increasing loan purchases. Fannie Mae and Freddie Mac in May issued draft proposals for boosting financing for certain underserved markets under the Federal Housing Finance Agency’s duty-to-serve requirements. The rule focuses on three specific markets: manufactured housing, rural housing and preserving affordable housing for low- and moderate-income households. The National Low Income Housing Coalition said...

July 7, 2017 - Inside MBS & ABS

Another GSE Shareholder Case Filed; Recently Filed Cases Challenge Agency’s Structure

More Fannie Mae and Freddie Mac shareholders are arguing that the structure of the Federal Housing Finance Agency is unconstitutional and are calling for courts to vacate the third amendment that sweeps the profits of the mortgage giants into the Treasury Department. Within the past month, two new cases have been introduced in Michigan and Minnesota, likely piggybacking on last year’s decision in which the single-director structure of the Consumer Financial Protection Bureau was found to be unconstitutional. Several shareholders of the government-sponsored enterprises filed...

July 7, 2017 - Inside MBS & ABS

Impact of End-of-Quarter Dip in Interest Rates On Fannie/Freddie Hedges Yet to Be Revealed

At the end of July, Fannie Mae and Freddie Mac will report second quarter results that might be marred – at least a little bit – by non-cash hedging charges caused by lower interest rates. When June ended, the benchmark 10-year Treasury bond carried a yield of 2.30 percent, 10 basis points lower than at March 31. Lower rates usually translate into hedging markdowns, but since the decline was so small it’s unlikely that either government-sponsored enterprise will record a net accounting loss for the period. In general, the two don’t discuss...

July 6, 2017 - Inside Mortgage Finance

FHFA Proposes Modest Changes to Low-Income Single-Family, Multifamily Purchase Goals

The Federal Housing Finance Agency proposed minor revisions to its single-family and multifamily housing goals for 2018 through 2020 to push Fannie Mae and Freddie Mac to continue helping low-income borrowers. The FHFA acknowledged that Fannie and Freddie are challenged when it comes to making credit available for the low-income market. Both government-sponsored enterprises have fallen short of the market in the low-income and very low-income purchase goal almost every year since 2013, the regulator noted. Most of the single-family goals would remain...[Includes one data table]

June 30, 2017 - Inside The GSEs

NAR Suggests GSE Capital Building Plan to FHFA Director Watt

The National Association of Realtors recommended that the Federal Housing Finance Agency create what it called a “mortgage market liquidity fund” as a way to allow Fannie Mae and Freddie Mac to rebuild capital. In a letter that went out this week to Federal Housing Finance Agency Director Mel Watt and copied to the Treasury, the trade group expressed concerns about the dwindling capital buffer that’s scheduled to hit zero by Jan. 1, 2018. If Fannie and/or Freddie posts a loss, they will need to tap a line of credit with Treasury. And with no capital reserves, NAR said that the taxpayers will feel the impact while access to credit and homeownership will be stifled.

June 30, 2017 - Inside The GSEs

FHFA Suggests New Housing Goals for Low-Income Purchases

The Federal Housing Finance Agency proposed new single-family and multifamily housing goals for the GSEs to take on over the next two years. The current goals expire at the end of the year, so the new benchmarks are for 2018 through 2020. One of the more noticeable changes was that the FHFA wants Fannie Mae and Freddie Mac to increase the amount of low-income refinances they purchase. Currently, the GSEs’ goal for the amount of low-income refinances is 21 percent of purchases, but that number jumps to 27 percent under the purchase goal. While uncertainty surrounding interest rates remains a factor, the FHFA noted that the low-income...

June 30, 2017 - Inside MBS & ABS

FHFA Quietly Holds a Forum on SFR. More Financing Deals Down the Road from Fannie and Freddie?

The Federal Housing Finance Agency this week held a one-day workshop on the single-family rental market, a sector in which Fannie Mae and Freddie Mac could become bigger players depending on how much their regulator allows them to do. According to industry officials, both government-sponsored enterprises have proposals pending with the agency for financing single-family rental operators. The FHFA, Fannie and Freddie all declined to comment on what’s in those proposals. According to an agenda of the meeting provided to Inside MBS & ABS, speakers at the workshop included...

June 29, 2017 - Inside Mortgage Finance

Will the FHLBanks Get Caught Up in Housing-Finance Reform? Rumors Swirl About Further Consolidation

To date, the focus of housing-finance reform has been on Fannie Mae and Freddie Mac, but they aren’t the only government-sponsored enterprises in the current system. The Federal Home Loan Banks wobbled through the crisis without needing a bailout and have been profitable ever since. There’s increasing chatter in Washington circles that the FHLBanks should be addressed in reform too. One key question is the matter of consolidation. There are 11 FHLBanks, each operating with its own management team, highly paid directors and staffs that could be combined. According to former Chicago FHLBank President Alex Pollock, “Discussions of merging the FHLBs are...

June 23, 2017 - Inside MBS & ABS

Warner Expects GSE Reform Before Overhaul Of Dodd-Frank Act, Discusses Lessons Learned

Sen. Mark Warner, D-VA, suggested the widespread view that Congress won’t get around to resolving the conservatorships of Fannie Mae and Freddie Mac may be too pessimistic. Speaking at a Mortgage Bankers Association conference in Washington, DC, this week, Warner said, “This may surprise some folks, but I think the stars may align where you could actually see housing-finance reform happen in front of some of the Dodd-Frank reform.” Warner, who co-authored a reform bill four years ago, said...

June 22, 2017 - Inside Mortgage Finance

New House Legislation Would Allow REITs With Captive Insurers to Stay in the FHLBank System

Reps. Randy Hultgren, R-IL, and Gwen Moore, D-WI, want to restore Federal Home Loan Bank membership for captive insurance lenders that joined the system prior to the Federal Housing Finance Agency’s rulemaking that restricted membership of firms that would otherwise be ineligible. H.R. 289, the Housing Opportunity Mortgage Expansion (HOME) Act, would allow FHLBank members that were booted from the system to rejoin it, as well as the retention of those whose departure is pending, if they can demonstrate a commitment to residential mortgage activities. Most of the affected companies are real estate investment trusts. The sponsors explained...

June 16, 2017 - Inside The GSEs

OIG Report Highlights Open Cases Of Matters Requiring Attention

In its ongoing oversight of the Federal Housing Finance Agency since 2010, the FHFA Office of Inspector General has made more than 350 recommendations to the agency to improve efficiency and reduce waste and abuse.The FHFA OIG published a list of the open recommendations that it has suggested to the FHFA through June 1. The topics range from the need for better oversight of the Fannie Mae headquarters to issues surrounding the supervision and accreditation of examiners. All but one of the matters requiring attention (MRAs) centered on responsibilities delegated to the FHFA since conservatorship.

June 16, 2017 - Inside The GSEs

FHFA Rule Lets Non-Federally Insured CUs into FHLB System

The Federal Housing Finance Agency adopted a final rule this week that lets non-federally insured credit unions become Federal Home Loan Bank members as of July 5, 2017. Until recently, state-chartered credit unions that weren’t federally insured by the National Credit Union Administration were ineligible for membership in the FHLBank system, unless they qualified as community development financial institutions. But in December 2015, Congress enacted the Fixing America’s Surface Transportation (FAST) Act, which included amending the FHLBank Act to permit non-federally insured credit unions (NFICUs) to become FHLBank members as long as certain requirements are met. NCUA provides the same insurance coverage on deposits as the Federal Deposit Insurance Corp. that insures bank deposits.

June 16, 2017 - Inside The GSEs

Treasury Suggests Eliminating GSE Patch, Fannie to Raise DTI

The Treasury Department said the so-called GSE patch gives Fannie Mae and Freddie Mac an unfair advantage in the mortgage market, and it recommended eliminating this exception to the qualified-mortgage rule. In a financial regulations report released this week, the Treasury detailed a host of executive actions and regulatory changes that it believes can immediately stimulate economic growth, increase capital access and protect taxpayers. Adjusting and clarifying the ability-to-repay/qualified mortgage rule and phasing out the GSE patch are among those changes listed. The GSE patch, created under Dodd-Frank, allows GSE eligible loans to qualify for QM status, even if the DTI exceeds the standard 43 percent ratio.

June 16, 2017 - Inside Mortgage Trends

First-Time Buyers, Millennials Drive Home Sales

First-time homebuyers have fueled a surge in home sales in the last two years, and the trend is continuing into 2017, according to a new report on the first-time homebuyer market from Genworth Mortgage Insurance. The report focused on mortgage origination data from more than 20 million first-time homebuyers over the past 24 years, with some interesting findings. Approximately 85 percent of the overall increase in home sales over the past two years was...

June 16, 2017 - Inside MBS & ABS

FHFA to Seek Authority from Congress to Examine Nonbank Servicers, Other Service Providers to GSEs

The Federal Housing Finance Agency is backing recommendations for additional authority that would allow it to examine third parties that do business with Fannie Mae and Freddie Mac. In its 2016 Annual Report to Congress released this week, the FHFA said it concurs with recommendations made by both the Government Accountability Office and the Financial Stability Oversight Council that Congress grant the agency authority to oversee the entities that provide critical services to the government-sponsored enterprises. While counterparty oversight is critical to the safety and soundness of the GSEs, it is...

June 16, 2017 - Inside MBS & ABS

Fannie Mae General Counsel Rumored for a Top Post At Treasury. What Does That Mean for GSE Reform?

Fannie Mae General Counsel Brian Brooks is rumored to be up for a top post at the Treasury Department, a development that if consummated would add yet another seasoned industry veteran familiar with the government-sponsored enterprises to the agency. What that might mean for “administrative” reform of Fannie Mae and Freddie Mac is another question. As Inside MBS & ABS went to press this week, Brooks – who joined Fannie from OneWest Bank in November 2014 – had not been...

June 15, 2017 - Inside Mortgage Finance

Treasury Seeks to Eliminate GSE Patch, Or Something Like That, Citing Fairness Concerns

The Treasury Department this week proposed eliminating the special qualified-mortgage provision that allows Fannie Mae and Freddie Mac to acquire loans with debt-to-income ratios that exceed the normal 43 percent limit for QM loans. The special treatment for the government-sponsored enterprises, known as the GSE patch, “creates an unfair advantage for government-supported mortgages without providing additional consumer protection … and inhibits consumer choices by restricting private sector flexibility and participation,” the agency said in a report on financial service regulatory reform. The report urged...

June 9, 2017 - Inside MBS & ABS

Fannie/Freddie Shareholder Cases Still Linger In Court, New Case in Michigan Introduced

A number of lawsuits involving Fannie Mae and Freddie Mac shareholders remain unresolved and a new one just hit the court system last week. Three shareholders filed a lawsuit in the U.S. District Court for the Western District of Michigan arguing that the court should vacate the third amendment to the preferred stock purchase agreement and declare the structure of the Federal Housing Finance Agency unconstitutional. The plaintiffs also asked...

June 9, 2017 - Inside MBS & ABS

House of Representatives Passes CHOICE Act But Legislation Likely Faces a Dead End in Senate

The House of Representatives late this week passed H.R. 10, the Financial CHOICE Act, which would undo a number of changes to the secondary market and to the regulatory landscape that were ushered in by the Dodd-Frank Act. As previously reported, among these are the elimination of the Dodd-Frank risk-retention requirements for ABS other than residential mortgages. Another provision would enable the president to remove the director of the Federal Housing Finance Agency before the end of the director’s appointed term, with or without cause. It also would make...


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