Browse articles from all of our Newsletters related to Treasury.

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...

August 11, 2017 - Inside MBS & ABS

LIBOR is Being Phased Out, Leading to Adjustments In the Mortgage Market. A Big Deal or Ho-Hum?

The clock is ticking on the phrase-out of the London Interbank Offered Rate, or LIBOR, a benchmark the mortgage market has relied on for the past few decades. Now comes the debate: is it something to worry about or no big deal? A new report from Bank of America Merrill Lynch suggests that when it comes to MBS at least, the changes will be felt, depending on the sector. “Certain agency MBS cash flows will be impacted directly,” BAML notes. “For example, underlying cash flows on LIBOR-indexed hybrid ARMs may change if an alternate index is chosen.” The researchers noted...

August 4, 2017 - Inside FHA/VA Lending

USMI Urges CFPB to Include Fed Agencies in ATR/QM Assessment

The private mortgage insurance industry urged the Consumer Financial Protection Bureau this week to consider including the qualified-mortgage standards of the FHA, VA and the U.S. Department of Agriculture in its assessment of the ability-to-repay/QM rule. In a comment letter, industry trade group U.S. Mortgage Insurers said it would be impossible to perform a full assessment of the ATR/QM rule without considering the different federal agency QM rules. If it does not expand the scope of its assessment, the CFPB should at least consider the impact the rules have on consumers in relation to the agency QM rules. In May, the CFPB notified stakeholders of its plan to evaluate the effectiveness of the ATR/QM rule in terms of its benefits and costs. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which established new standards for mortgage lending, including requiring lenders to assess consumers’ ability to repay. The statute also established a class of “qualified mortgage” loans that cannot have certain risky product features and are presumed to comply with the ATR requirement.

August 3, 2017 - Inside Mortgage Finance

Fannie and Freddie Turn in Solid Earnings For 2Q17, G-Fee Income Continues Climbing

Fannie Mae and Freddie Mac generated a combined $4.86 billion in net income during the second quarter of 2017, down a modest 2.4 percent from the first three months of the year, according to an Inside Mortgage Finance analysis of earnings reports released this week. The two government-sponsored enterprises have racked up $9.85 billion in net income through the first six months of the year, more than double their combined earnings for the same period in 2016. In the first quarter of last year, interest rate volatility yielded significant accounting losses on their hedges, which suppressed net income at Fannie and produced a net loss at Freddie. Freddie officials said...

July 28, 2017 - Inside The GSEs

More Government Documents Unsealed in Shareholder Case

New documents were recently unsealed in Fairholme Funds vs. United States that give GSE shareholders more hope in proving the Treasury sweep was designed with an ulterior motive in mind. “The release of these documents is a very positive development in the case against Fannie [Mae] and Freddie [Mac]. These documents fatally undermine the government’s claim,” said Pete Patterson, a partner with the Cooper & Kirk law firm representing the plaintiffs. Officials from Treasury have repeatedly said that the sweep was designed to prevent the two mortgage giants from collapsing. But the latest batch of 33 confidential emails and memos released under court order appears to illustrate otherwise.

July 28, 2017 - Inside MBS & ABS

Fed Holds Rates Steady, Signals It Will Begin Unloading Massive Portfolio Sometime ‘Soon’

With inflation weakening and continuing to lag behind the Federal Reserve Open Market Committee’s 2 percent target, the Fed this week surprised no one and unanimously decided to leave the federal funds target rate unchanged at 1.00 percent to 1.25 percent. The U.S. central bank also indicated it will likely begin to gradually unload its enormous balance sheet “relatively soon,” which market participants and observers read as sometime this fall – probably with an announcement in September, with run-off set to begin in October. In terms of its portfolio, the FOMC said...

July 28, 2017 - Inside MBS & ABS

New Documents Released in GSE Shareholder Lawsuit: 33 Government Memos and Emails

Fannie Mae and Freddie Mac shareholders claimed that recently unsealed government documents support their contention that the main goal of the Treasury Department’s quarterly sweep of the government-sponsored enterprises’ earnings was to keep the two GSEs in conservatorship. Officials from Treasury have consistently said that the sweep was designed to prevent the two mortgage giants from collapsing. But the latest batch of 33 confidential emails and memos released under court order in the case of Fairholme Funds vs. United States seems to illustrate otherwise. The documents were unsealed...

July 21, 2017 - Inside FHA/VA Lending

RHS Spells out Review Procedures For Approved Lenders, Servicers

The U.S. Department of Agriculture’s Rural Housing Service has clarified procedures for reevaluating approved lenders’ and servicers’ eligibility under the RHS Single Family Housing Guaranteed Loan Program. The guidance also provides procedures for updating lender information. The RHS intends to review and document lender eligibility in accordance with regulation and program requirements to protect government assets and minimize taxpayer losses. Office of Management and Budget regulations require federal agencies to reevaluate and record lender and servicer eligibility every two years. “For the [USDA single family loan guarantee program], it requires making sure that lenders and servicers participating in federal credit programs meet all applicable financial and program requirements,” wrote Richard Davis, acting RHS administrator. To meet the requirements, lenders must ...

July 14, 2017 - Inside The GSEs

Newly Filed Shareholder Cases Challenge FHFA’s Structure

GSE shareholders are continuing to argue that the structure of the Federal Housing Finance Agency is unconstitutional. The topic has come up ever since a 2016 ruling found that the similarly structured Consumer Financial Protection Bureau is not constitutional. Two new cases filed within the past month in Michigan and Minnesota are asking the courts to vacate the Treasury sweep of GSE profits altogether. In late June, three GSE shareholders filed a fresh lawsuit in the U.S. District Court for the District of Minnesota. The three plaintiffs, Atif Bhatti, Tyler Whitney and Michael Carmody, also want the court to strike the...

July 14, 2017 - Inside MBS & ABS

Morningstar: Proposed REMIC Structure May Boost Liquidity, Lessen Counterparty Risk

The proposal to restructure the credit-risk transfer debt-note programs at Fannie Mae and Freddie Mac to make them more attractive to real estate investment trusts likely won’t have a negative impact on the credit risk and quality of those deals, Morningstar said in a new report. The proposed changes to Fannie’s Connecticut Avenue Securities and Freddie’s Structured Agency Credit Risk programs would characterize them as real estate mortgage investment conduits. This would allow REITs and some overseas investors to participate more broadly in the programs. Currently, the structure of the government-sponsored enterprises’ popular CRT programs doesn’t meet...

July 14, 2017 - Inside MBS & ABS

Small Lenders Clamor for a Voice In Housing-Finance Reform Debate

As talks intensify on how to get Fannie Mae and Freddie Mac out of limbo, smaller lenders are clamoring to make sure they have a say in how housing-finance reform plays out. Nearly all sides agree that small lenders should continue to have access to the secondary market; how that’s accomplished is a different matter. The Main Street GSE Reform Coalition – an umbrella group made up of small-lender and community-advocacy groups – wants the government-sponsored enterprises to begin rebuilding capital buffers by suspending their dividend payments to the Treasury Department. It also wants...

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...


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