With roughly $900 billion of mortgage servicing rights changing hands since October (or about to), and more on the way, Fannie Mae and Freddie Mac will be busy in the months ahead approving the transfer of MSRs.Much of the MSR product being sold by Bank of America in its recent deal with Nationstar Mortgage and Walter Investment Management Corp. is tied to loans guaranteed by Fannie, Freddie and Ginnie Mae.Servicing advisors whove worked with the GSEs note that their approval on a servicing sale is hardly a routine matter, especially if the product has high delinquencies, which is the case with some of the BofA receivables.
Home Loan Servicing Solutions an affiliate of Ocwen Financial made some significant moves recently with an acquisition of rights to receive servicing fees on $34.6 billion in unpaid principal balance handled by Ocwen. And the company is set to issue a $750.0 million securitization backed by servicer advances. Near the end of December, HLSS announced that it acquired rights to receive servicing fees on nonprime mortgages. Ocwen will continue to service the mortgages, receive a monthly base fee ...
Its no secret that Fannie Mae and Freddie Mac are back in the black when it comes to earnings, but in the quarters ahead the two are likely to perform even better as delinquencies and foreclosures continue to wane, and they move to recapture some of their massive loss reserves. But another factor could bolster their earnings as well: large legal settlements with the nations megabanks, which will go straight to their bottom line, according to an analysis done by Inside The GSEs. As part of Fannies buyback settlement with Bank of America (see related story on page 1), Fannie will receive some $3.6 billion in cash from the bank, plus BofA is repurchasing almost $7 billion in legacy loans.
Interest rates on adjustable-rate mortgages fell to their lowest level ever early this year, but consumers continue to prefer fixed-rate products. Freddie Mac reported that the average initial rate for one-year ARMs offered in early January was just 2.56 percent, the lowest ever recorded in its 29-year-old survey. Fewer than half the participating lenders offer one-year ARMs, but initial rates on the more common three-year and five-year hybrids were 2.72 percent and ... [Includes one data chart]
Fannie Mae and Freddie Mac combined did more business in single-family mortgage-backed securities issuance in 2012 than in any year since 2003, with a growing share of their business coming from small and mid-sized lenders, according to an Inside The GSEs analysis. The two GSEs pumped out a staggering $1.266 trillion in new single-family MBS in 2012, a 48.1 percent increase over their total production in 2011. It marked the biggest annual output by Fannie and Freddie since the all-time record of $1.912 trillion nine years earlier.
The Federal Housing Finance Agency should review the concerns of industry trade groups about Fannie Maes plans to reduce the cost of lender force-placed insurance and then facilitate a collaborative resolution thats open and transparent, industry groups contend. In a letter to the FHFA earlier this month, the American Bankers Association warned that Fannies March 2012 request for proposal inviting insurance companies to compete for the GSEs lender-placed insurance business directly as a way to ensure a significant reduction in insurance costs is rife with unintended consequences to the industry. The proposal, if adopted, effectively would allow Fannie Mae to pick winners and losers among insurers, would be potentially inconsistent with state insurance requirements and would dramatically alter existing servicing operations, contracts and costs, noted the ABA. Such a proposed major reform of the mortgage servicing market should be considered in the sunshine.
Over the past few weeks mortgage consultants have been discussing a potentially lucrative request for proposal issued several months ago that requires outside vendors to aid the Federal Housing Finance Agency in carrying out its Strategic Plan for taking the GSEs to the next stage in their evolution. But according to these consultants, interviewed by Inside The GSEs, the fate of this RFP has gone dark with the agency declining to discuss the contract or anything tied to it. An agency spokeswoman told IGSEs that not all agency RFPs are public. A check by IGSEs found that the regulator/conservator of Fannie Mae and Freddie Mac posted just one RFP last year, a project that requires education and training services for whats called an executive leadership training program. The reason the strategic plan RFP has created some buzz in the industry is that it may involve asking a vendor how it might go about merging Fannie and Freddie. However, a copy of the RFP in question obtained by IGSEs mentions nothing about a merger of the two, and is worded so generally that it might entail just about any duties.
Analysts at Keefe, Bruyette & Woods noted in a recent report they expect both Fannie Mae and Freddie Mac to sell their real estate-owned properties more meaningfully if the GSEs can do so at levels that are in line with current carrying values on the companies balance sheets. At the end of the third quarter, Fannie held approximately 107,000 REO properties, worth an estimated $16.1 billion, assuming a purchase price of $150,000 per property. Freddie held some 51,000 REOs, equivalent to $7.6 billion assuming the same purchase price. KBW observed that there is room for improvement in how Fannie and Freddie move their REOs. We believe that the GSEs will be unwilling for political reasons to take meaningful upfront losses to sell REO properties, even if it makes longer-term sense from an economic perspective, said KBW.
With the official opening of the 113th Congress and the Obama administrations second term to commence next week, the two key congressional committees overseeing mortgage and housing issues are reorganizing their membership rolls. But it remains to be seen whether lawmakers will be any more successful at advancing legislative GSE reform than during the previous two-year session. As expected, Rep. Jeb Hensarling, R-TX, has assumed the gavel of the House Financial Services Committee, replacing the term-limited former chairman Spencer Bachus, R-AL, who will remain on the committee as chairman emeritus. Rep. Gary Miller, R-CA, will serve as vice chairman of the committee, while Rep. Lynn Westmoreland, R-GA, will serve in the newly created position of committee whip.
The federal judge in charge of overseeing the multiple lawsuits filed by the Federal Housing Finance Agency against non-agency mortgage-backed securities issuers for allegedly misrepresenting deals that were sold to Fannie Mae and Freddie Mac rebuffed yet another motion by one of the banks to shut down the legal action. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of Manhattan rejected a motion to reconsider her December decision allowing the FHFA to proceed on behalf of the GSEs with most of its fraud claims against Ally Financial. On Dec. 19, the judge denied most of Allys motion to dismiss, including the defendants request that the court strike the demand for punitive damages, finding there were sufficient factual allegations in the FHFAs complaint to move forward with its fraud complaint.