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Inside The GSEs

March 3, 2010

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Credit Expenses Replace Fair Value as Culprit

You know things are bad for Fannie Mae and Freddie Mac when the best that can be said about their economic performances is that their losses are coming from a different gaping wound – elevated credit expenses – as opposed to the cause of the hemorrhaging seen in 2008, fair value. With Fannie Mae reporting a fourth quarter loss of $15.2 billion and Freddie Mac announcing a loss of $6.5 billion for the... Read More

OTTI Pushes 4 FHLBanks into the Red in ‘09

Impairment charges due to deteriorating non-agency mortgage-backed securities continued to haunt the Federal Home Loan Bank System last year, pushing four of the Banks – Boston, Chicago, Pittsburgh and Seattle – into the red for the full year, according to preliminary figures released by the FHLBank Office of Finance. However, by the time the fourth quarter came to a close, Boston and Chicago were able... Read More

Lawmakers Hoping to Move Covered Bonds Legislation

Rep. Scott Garrett, R-NJ, is working with colleagues on the House Financial Services Committee as well as Sen. Bob Corker, R-TN, to advance bipartisan legislation in both chambers of Congress that will promote the use of covered bonds in the United States. “There’s a lot of bipartisan support, and I’m optimistic that the time is right” that sometime in this session of Congress that a mark-up of his... Read More

Freddie Struggles With Partners to Enforce Buybacks

Freddie Mac is finding that the inherent tension between the GSEs and their sellers is intensifying as it struggles to enforce the buybacks of loans that went bad when the mortgage market hit the skids amid more push-back and slow-footing from some of its lenders. In its annual Form 10-K filing with the Securities and Exchange Commission, Freddie indicated the buyback issue is becoming increasingly... Read More

Fannie, Freddie Get Tagged Big for MBS Buyouts

The more successful that GSE loan modification efforts are, the bigger the resulting fair value net charges offs for Fannie Mae and Freddie Mac become – particularly for Fannie, which reported a huge leap in such costs during 2009. “The pace of our loan workouts increased in the fourth quarter, particularly modifications. In most cases, we must purchase a loan from our MBS trusts to modify it, at... Read More

Freddie Not Purchasing IOs Anymore, But What Took You So Long?

Freddie Mac announced last week that, as of September, it will stop its support of interest-only mortgage products, which didn’t surprise observers who have seen the GSE’s stake in such products plummet. To them, the real surprise is, what took you so long? “On or about Sept. 1, 2010, the company will cease purchasing and securitizing interest-only mortgages, including Freddie Mac Initial Interest... Read More

Obama Punts on GSEs, But Frank to Press Ahead

The Obama White House says it will spend the next year developing a plan for overhauling the mortgage finance system in the United States, including the form and future of Fannie Mae and Freddie Mac, but that extended delay is not going to keep House Financial Services Committee Chairman Barney Frank, D-MA, from pressing ahead. “I believe the time has come to see to a total reorganization of housing... Read More

Realtors Propose Converting Fannie, Freddie into Nonprofits

The Obama administration may be unwilling to tip its hand on the fate of the housing GSEs, but that’s not keeping industry groups from trying to stoke the restructuring fire a bit. The National Association of Realtors is circulating some talking points on Capitol Hill that revolve around the concept of transitioning Fannie Mae and Freddie Mac into nonprofit organizations. Under the NAR framework... Read More

Paulson Criticizes FHFA, OFHEO Oversight of GSEs

Former Treasury Secretary Henry Paulson’s new book, On The Brink: Inside the Race to Stop the Collapse of the Global Financial System, makes clear that the Bush administration put on a full-court press to rein in Fannie Mae and Freddie Mac before they collapsed, making foreign investors lose confidence in the U.S. and perhaps even causing a run on the dollar. However, the Federal... Read More

Lawmakers Slam, DeMarco Defends GSE Exec Comp

House Financial Services Committee members of both parties were sharply critical last week of the multi-million-dollar pay packages awarded to the CEOs of Fannie and Freddie late last year.“The $6 million pay packages given to each of their CEOs...represents just one example of what happens when the federal government is given the responsibility for regulating compensation,” said Rep. Spencer Bachus... Read More

Key Regulations Forthcoming From FHFA; RBC Still in the Works

Recent comments from Ed DeMarco, acting director at the Federal Housing Finance Agency, and input from other sources indicate the agency has a handful of important regulatory proposals on the verge of issuance. The FHFA expects to release proposed housing goals for the Federal Home Loan Banks soon, after having issued updated goals for Fannie Mae and Freddie Mac last month. On a related note... Read More

FHFA Seeks Minor Revisions to FHLB Advance Regs

The Federal Housing Finance Agency is proposing to amend some of the regulations that refer to Federal Home Loan Bank advances to expand the kind of collateral that can be pledged for advances. “The FHFA is proposing to amend the advances regulations to allow Community Financial Institution members to pledge secured loans for community development activities as eligible collateral for advances... Read More

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