Browse articles from all of our Newsletters related to FHFA.

September 22, 2017 - Inside The GSEs

OIG: Complex Multifamily Market Needs Continued Monitoring

Inspector General recently released a paper about the need for continued oversight of activity in the growing GSE multifamily market. Combined, Fannie Mae and Freddie Mac purchased $112 billion in multifamily mortgages last year. The paper noted that while much of the reform discussion has focused on single-family housing, the GSEs’ role in the multifamily market is a critical aspect of the housing finance system. Market-wide multifamily originations, along with Fannie and Freddie purchases of multifamily mortgages, have grown to record levels in recent years, said the OIG. But multifamily mortgages are more complex to underwrite than single-family loans. “Underwriters of multifamily loans must understand the business and...

September 22, 2017 - Inside The GSEs

Groups Tell Treasury, FHFA: Legislation Not Recap

Fifteen industry trade groups and other organizations sent a letter to Treasury Secretary Steve Mnuchin and GSE regulator Mel Watt late this week, reminding them that Fannie Mae and Freddie Mac should be reformed through legislation and not some type of recapitalization plan where Congress is cut from the equation. “We are increasingly concerned about efforts to derail comprehensive reform,” they write. “We urge both Treasury and Federal Housing Finance Agency to focus on continuing to work with Congress to end conservatorship through comprehensive, bipartisan, legislative reforms.” No specifics are provided regarding the derailment comment. Presently, there are no viable bills before Congress where a consensus on GSE reform might be reached.

September 22, 2017 - Inside The GSEs

GSE Seller Buybacks Edged Higher In Second Quarter, Pipeline Shrank

Mortgage lenders that sell loans to Fannie Mae and Freddie Mac saw a modest increase in the volume of loans they repurchased from the GSEs during the second quarter of 2017, according to a new Inside The GSEs analysis of disclosure reports filed with the Securities and Exchange Commission. During the second quarter, lenders repurchased or made indemnifications on $244.44 million of single-family loans pooled in Fannie and Freddie mortgage-backed securities. That was up 2.5 percent from the first three months of the year. On a year-to-date basis, seller buybacks totaled $483.01 million, a 14.5 percent drop from the first six months of 2016.

September 22, 2017 - Inside MBS & ABS

Government Sues Deutsche Bank Employee for Allegedly Misleading MBS Investors into Buying Faulty Loans

A former Deutsche Bank employee is at the center of a lawsuit brought by the government over the sale of more than $1 billion of non-agency MBS. It’s rare when the government focuses on an individual for mortgage fraud, but the Department of Justice said the bank’s former head of subprime trading allegedly defrauded investors out of hundreds of millions of dollars. The civil complaint was filed in Brooklyn’s federal court against Paul Mangione for knowingly selling bad subprime mortgages financed during the crisis and misleading investors about loan quality. The complaint alleges that he engaged in fraudulent schemes involving the origination practices of Deutsche Bank’s subsidiary, DB Home Lending LLC, which originated the bulk of the loans. The securities were sold...

September 21, 2017 - Inside Mortgage Finance

With GSE ‘Zero Capital Day’ About Three Months Away, Possible Credit Reserves Become a Factor

Unless the Federal Housing Finance Agency acts soon, Fannie Mae and Freddie Mac will see their capital buffers fall to zero on Jan. 1, 2018. Having zero capital may not be a big deal, initially – but a new complication has arrived in the form of hurricanes Harvey and Irma. According to Tim Rood, chairman of The Collingwood Group, the government-sponsored enterprises are not looking at losses “that will cost tens of billions of dollars – but they don’t need to be. The capital buffer is small as it is. And if a credit event happens, it could wipe out the thin layer of capital they have in a hurry.” If Rood – a former Fannie executive – is correct, the GSEs might have...

September 15, 2017 - Inside MBS & ABS

Freddie Mac G-fee Pricing Taking Cues from Credit-Risk Transfers and the Private Market

Credit-risk transfers can be used to calculate guarantee fees because they’re indicative of what the private market would charge for the risk taken on by a government-sponsored enterprise, according to Freddie Mac. But the mortgage giant explained that g-fees are likely more stable than a system that relies exclusively on credit-risk transfers. Kevin Palmer, Freddie’s senior vice president of single-family credit risk transfers, said in a white paper the significant amount of credit risk being transferred to the private capital markets provides a way to calculate a market-implied g-fee. Since 2013, the GSE has transferred much of the credit risk on $760 billion of MBS it guarantees. Based on the pricing of Freddie’s Structured Agency Credit Risk transactions over the past year, the market-implied g-fee has been...

September 15, 2017 - Inside MBS & ABS

Treasury Discussing GSE Issues with Trade Groups; Multiple Guarantors, Capital Are on the Table

Over the past several weeks, the Treasury Department has been meeting with several industry trade groups about the future of Fannie Mae and Freddie Mac, discussing – among other things – what to do about the impending “zero capital” problem as well as the topic of multiple guarantors. Treasury’s goal, these officials said, is to come up with a workable blueprint on the future of the government-sponsored enterprises and the nation’s housing finance system – changes that might touch Ginnie Mae as well. Late this week there was...

September 14, 2017 - Inside Mortgage Finance

Input on Proposed GSE Housing Goals Mixed, Housing Groups Want to See More Impact

The Mortgage Bankers Association, along with other housing trade groups, wants to make sure that Fannie Mae and Freddie Mac housing goals work in tandem with pending duty-to-serve requirements and multifamily volume caps to promote affordable housing. The MBA was one of about 10 groups that offered commentary on the proposed new housing goals for the government-sponsored enterprises for 2018 through 2020. The current goals expire at the end of the year. The Federal Housing Finance Agency released the proposed goals in June. The MBA said...

September 8, 2017 - Inside The GSEs

Groups Suggest FHFA Study Language Choice Question More

Trade groups continue to rally to prevent the Federal Housing Finance Agency from adding a language-preference question to loan applications. They said the suggestions, designed to assist borrowers with limited English proficiency, require more examination, but they don’t want it to delay implementation of the new Uniform Residential Loan Application.The FHFA extended the deadline for the comment period several times. It closed on Sept. 1. When the input period was extended in August, the FHFA updated the request for input with a presentation that describes the results of testing various language questions on the Uniform Residential...

September 8, 2017 - Inside The GSEs

IG Audit Report Looks to Address Weakness in FHFA Privacy Program

An audit of the Federal Housing Finance Agency’s privacy program led the FHFA Office of Inspector General to make recommendations to address several weaknesses. The program was designed so the FHFA can implement privacy and data protection procedures governing its collection, use, sharing, disclosure, transfer, storage and security of information in an identifiable form related to employees and the public. Kearney & Company performed the audit and found that the FHFA had not effectively met three out of nine privacy requirements and controls.The report made several recommendations to make sure the agency adequately identifies, monitors, and protects the complete inventory of its personally identifying information (PII) holdings and appropriately approves and documents privileged user access.

September 8, 2017 - Inside The GSEs

An HOA Foreclosure Win in NV for Fannie, Freddie Lenders

There is good news for GSE lenders and servicers, as a recent court ruling found that Nevada’s super-priority lien law cannot be used to foreclose on government-owned mortgages. In Berezovsky v. Moniz, the court ruled that the Federal Foreclosure Bar, part of the Housing and Economic Recovery Act of 2008, preempted state law and banned a homeowners association from being able to eliminate a GSE’s interest and foreclose on a property. The court rejected arguments that the Federal Foreclosure Bar did not apply in the Nevada HOA context. Attorneys with Bradley Arant Boult Cummings said, “The Berezovsky decision represents a resounding win for lenders and servicers of Freddie Mac and Fannie Mae loans.”

September 8, 2017 - Inside The GSEs

Justice Department Indicts Former Dallas FHLBank CEO for Fraud

The U.S. Attorney for the District of Texas indicted the former CEO of the Federal Home Loan Bank of Dallas, along with two other former bank employees, for fraud. They were accused of creating fake travel reimbursement requests for lavish trips and embezzlement schemes that began back in 2008. Terrence Smith, at the helm of the bank from 2000 to 2013, and Nancy Parker, chief information officer around the same time, were charged with six counts of making false statements, according to the Department of Justice. And Michael Sims, chief financial officer from 2005 to 2014, was charged with three counts of making false statements.

September 1, 2017 - Inside Nonconforming Markets

GSEs Shed More Nonprime Holdings in 2Q

The government-sponsored enterprises’ holdings of vintage nonprime mortgages declined somewhat more quickly than usual in the second quarter of 2017, according to an analysis by Inside Nonconforming Markets. Fannie Mae and Freddie Mac held a combined $123.73 billion of nonprime purchased/guaranteed mortgages and mortgage-backed securities at the end of June, down 7.6 percent from March. Compared with June 2016, their holdings were down by 23.2 percent. The GSEs’ nonprime holdings are...[Includes one data table]

August 25, 2017 - Inside The GSEs

FHFA OIG Releases Paper on GSE Capital Requirement Shortfall

The Federal Housing Finance Agency Office of Inspector General recently released a white paper highlighting the GSEs’ pre-conservatorship statutory capital requirements and their current shortfalls. With the 2008 conservatorship, capital requirements for Fannie Mae and Freddie Mac were suspended so the paper mostly emphasizes the lack of capital for housing-finance and GSE reform debate purposes. “Because of heightened public interest in the role of the enterprise, if any, in the future structure of the housing finance system, FHFA-OIG prepared this white paper to explain the current statutory and regulatory capital requirements for the enterprises,” it explained.

August 25, 2017 - Inside The GSEs

Industry Execs Have GSE Subordinate Debt Debate

The Treasury Department should not bail out the GSEs’ subordinated debt again, according to Alex Pollock, senior fellow at the R Street Institute. He criticized the Treasury’s decision to pay off $13.5 billion in subordinate debt at the start of the conservatorship nine years ago and said that it created a lack of market discipline. “Instead of experiencing losses to which subordinated lenders can be exposed when the borrower fails, they got every penny of scheduled payments on time,” he said, calling the structural reason for bailing out the subordinated debt an “unusual occurrence.” The former head of the Federal Home Loan Bank of Chicago noted that the role of subordinated debt is...

August 25, 2017 - Inside The GSEs

FHFA OIG Concerned About Quality Control Review on Examinations

The Federal Housing Finance Agency Office of Inspector General said there’s a gap in the FHFA’s quality control review process in monitoring examination activities, which results in potentially false expectations that a problem has been resolved. The OIG said there are instances when the FHFA doesn’t perform a quality control review of examination conclusions. In other words, examiners don’t issue correspondence that notifies the GSE of the results of the ongoing monitoring activity. Based on the OIG’s review of documents and discussions with examination officials, the regulator determined that the reports of examination issued for the 2015 supervisory cycle contained conclusions derived from ongoing monitoring activities that had...

August 25, 2017 - Inside The GSEs

High-LTV Refi Program Set to Replace HARP in 2018

The Federal Housing Finance Agency recently announced that Fannie Mae and Freddie Mac loans originated on or after Oct. 1, 2017, are eligible for their new refinance programs aimed at borrowers with underwater loans. The FHFA expects applications for the new high loan-to-value streamlined refinance program, originally announced last August, to be available in late 2018. To be eligible for Fannie’s High LTV Refinance Option and Freddie’s Enhanced Relief Refinance program, borrowers must benefit from a reduced monthly payment, lower interest rate, shorter amortization term or by switching from an adjustable-rate mortgage to a fixed-rate loan. One of the benefits of the newer programs, which...

August 25, 2017 - Inside The GSEs

GSEs Automate Appraisal Process For Qualifying Purchase Loans

Fannie Mae and Freddie Mac have both extended the option to skip the traditional appraisal process in lieu of automated appraisals to purchase loans. Several months ago, the GSEs announced they would offer appraisal waivers on some refinance loans to borrowers who have at least 20 percent equity in their homes. But last week, Freddie said a traditional appraisal also would not be necessary on every purchase loan. The changes take place Sept. 1. A few days later Fannie announced appraisal -free mortgages on some purchase loan applications. Both GSEs emphasize that the appraisal waivers are only permitted when there’s enough data on the property.

August 24, 2017 - Inside Mortgage Finance

GSEs’ New High LTV Refinance Programs Good for Loans Originated After October, HARP Extended

Loans originated on or after Oct. 1, 2017, are eligible for new high loan-to-value streamlined refinance programs being rolled out by Fannie Mae and Freddie Mac. And one analyst said despite more investor exposure to defaults, he views the programs as a good move in the event home prices begin to trend downward. A year after the Federal Housing Finance Agency’s initial announcement about the streamlined refi program, the regulator set the eligibility date and provided more program details last week. “The eligibility date was...

August 18, 2017 - Inside FHA/VA Lending

Industry Experts Favor Unified GSE, FHA/VA Servicing Policies

Simplifying and aligning the default servicing policies of the conventional conforming and the government-backed mortgage markets would better serve the mortgage industry and homeowners, according to industry experts. In a recent discussion on how regulatory burden and high servicing costs might impede lending, members of the Mortgage Servicing Collaborative agreed on the need for streamlined and harmonized federal, state and agency policies and rules on servicing. Increased regulatory requirements have caused mortgage-servicing costs to skyrocket in recent years, experts said. Even though the quality of servicing has improved, the new regulations are complex and costly, they noted. Multiple pressures placed upon servicers have suppressed mortgage lending, making it harder for borrowers with tainted credit to obtain a mortgage, according to the ...

August 18, 2017 - Inside MBS & ABS

GSE Shareholders Grow Weary of Drawn Out Discovery Process in Fairholme Case

Attorneys for Fairholme Funds filed another motion this week requesting to view about 1,500 government documents in a lawsuit challenging the government’s net-worth sweep of profits at Fannie Mae and Freddie Mac. And late last week, the government produced three more documents that were originally classified as “privileged.” In the new motion, the Fairholme attorneys asked the Federal Claims Court to use the “quick peek” procedure for more than 1,000 documents dating back to May 2012. These are among the many documents the plaintiffs say the government is still withholding under the deliberative process and bank examination privileges. It’s...

August 18, 2017 - Inside MBS & ABS

Merger of SFR Operators Invitation Homes and Starwood Could Spell More Opportunities for Fannie and Freddie

The proposed $4.3 billion merger of single-family rental operators Invitation Homes and Starwood Waypoint Homes will create a corporate landlord with 82,000 homes – and a behemoth of a potential client for Fannie Mae and possibly Freddie Mac. Earlier this year, Fannie agreed to provide Invitation Homes with $1 billion in financing. The deal broke new ground for the government-sponsored enterprise, but it also raised questions about whether a government-owned entity that received billions in taxpayer assistance should be lending money to a company (Invitation Homes) grubstaked by Wall Street. Since the Invitation-Fannie arrangement was unveiled, no other significant SFR financing vehicles involving a GSE has...

August 18, 2017 - Inside MBS & ABS

Portfolios Shrink at Fannie and Freddie as GSE Share of MBS Market Hits 3 Percent in 9th Year of Conservatorship

The Home Affordable Refinance Program was arguably one of the most successful initiatives aimed at delivering consumer relief in the wake of the housing meltdown. It’s proving hard to kill. The Federal Housing Finance Agency this week extended HARP for another year, until the end of 2018. It was slated to sunset at the end of this year. The program has been extended several times since it was authorized back in 2009. The extra year is...

August 17, 2017 - Inside Mortgage Finance

Watt Hints That He May Not Alter the Dividend Payment. A Complication: the GSE Lawsuits?

The issue of whether the Federal Housing Finance Agency will alter the dividend payments Fannie Mae and Freddie Mac pay the Treasury Department became a bit more complicated this month when agency Director Mel Watt hinted in correspondence he’s unlikely to make a change. But despite such a sentiment being expressed in a letter to the National Association of Realtors, there continues to be a school of thought among certain lobbyists and trade group officials that a change is coming. “I still think...


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