The Federal Housing Finance Agency is still mulling over accepting principal reduction payments from the Treasury Department even as the debate between the factions for and against GSE loan writedowns is quickly dissolving into a partisan food fight. This week, two ranking House Republicans urged FHFA Acting Director Edward DeMarco to stand fast against mounting political pressure directed at him by the Congressional allies of the Obama administration as House Democrats took the gloves off, accusing the Finance Agency of falsely withholding pertinent information about the agency’s principal reduction analysis.
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Dividend payments paid by Freddie Mac to the U.S. Treasury for its continued financial support held down the GSE during the first quarter of 2012 as Freddie would have otherwise posted a profit. Freddie, which posted its first quarter results late this week, actually reported $577 million in net income during the first three months of this year before having to repay $1.8 billion in preferred stock dividends to the government. Under the terms of the GSEs’ purchase agreement, the Treasury is entitled to a dividend of 10 percent per year on a quarterly basis. Freddie’s first quarter dividend payment more than offset the company’s comprehensive income of $1.79 billion, prompting the GSE to seek another $19 million from taxpayers.
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Don’t expect the long-awaited White House plan to wind down Fannie Mae and Freddie Mac “anytime soon,” an Obama administration official told lawmakers last week. Housing and Urban Development Secretary Shaun Donovan told members of the Senate Banking, Housing and Urban Affairs Committee that the administration has made “significant” strides toward bringing private capital back into the housing market without help from Congress. However, the GSE overhaul promised for the first of the year needs more work, he said.
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The GSE executive exodus continued last week with the announcement that the executive who oversees Freddie Mac’s single-family mortgage business has resigned. Anthony Renzi, Freddie’s executive vice president of single-family business, operations and information technology, will leave the company effective May 11, according to a filing with the Securities and Exchange Commission. Renzi, who came to Freddie after being forced out of GMAC Mortgage in April 2010, will join Citigroup Inc. as its new chief operating officer. The company said Paul Mullings, senior vice president of single-family sourcing and securitization, will take over Renzi’s duties on an interim basis.
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The Federal Home Loan Bank Office of Finance announced this week that preliminary combined net income for the FHLBanks jumped 42.3 percent to $733 million in the first quarter of 2012, up from $515 million from the end of the fourth quarter and a whopping 104.7 percent increase from the same period last year. The FHLBank system’s $375 million year-over-year income increase was driven by lower other-than-temporary impairment charges, higher net gains on derivatives, hedged items and financial instruments carried at fair value, and lower assessments, partially offset by lower net interest income, said the Office of Finance.
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Inspired by a law currently on the books and in dispute in Chicago, state lawmakers in Illinois have filed a vacant property registration law requiring mortgage holders to keep up homes in foreclosure or face costly fines. The bill, SB 16, outlines a framework for municipalities to pass vacant property ordinances requiring mortgage holders to register a property that has been vacant for more than 30 days and to re-register the property every six months. The mortgage holder would also be required to secure and maintain the property, with fines ranging from $500 to $1,000 per day if the requirements are not met.
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Fannie Mae announced this week it can change pricing and other terms under purchase agreements and mortgage-backed securities contracts with lenders should the GSE deem it necessary. According to the alert to servicers, Fannie is asserting its right to change pricing terms under standard purchase agreements, master agreements or mortgage securitization contracts. For any contracts and agreements entered into on or after May 1, Fannie said it reserves the right to change pricing “one or more times” during the term. Such changes may include the base guaranty fee, loan-level price adjustments and guaranty-fee adjustments on mortgages delivered under mortgage-backed securities contracts or as whole loans.
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Even as the still-regenerating Home Affordable Refinance Program is already proving itself to be a boon for banks’ bottom lines, participants of an exclusive Inside Mortgage Finance webinar last week said so far there’s little indication borrowers are disadvantaged because there are currently fewer new lenders originating HARP 2.0 as same servicers. Since January, one month after the revised program took effect, lenders have reported intense interest and a more significant uptick in new refinance applications.
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An independent House investigative agency has recommended the ethics case against the current chairman of the House Financial Services Committee be closed. The Office of Congressional Ethics reportedly informed Rep. Spencer Bachus, R-AL, that it found no evidence he violated insider trading rules in his stock trading activities and that it recommended to the House Ethics Committee that the case be dismissed.
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A national consumer advocacy group, whose own investigation of FHA credit overlays spurred a federal probe of nearly two dozen FHA lenders, said it is keeping an eye on Fannie Mae’s and Freddie Mac’s use of loan-level price adjusters as a potential discriminatory lending practice. The National Community Reinvestment Coalition said it’s still waiting to hear from the Department of Housing and Urban Development about the results of multiple investigations HUD launched in December 2010 after NCRC found that 22 lenders set borrower credit scores as high as 640 for FHA loans, even though the FHA guarantees loans with scores as low as 580.
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Senate Democrats are drafting legislation to force Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program for underwater borrowers even farther beyond the newly unveiled HARP 2.0. The draft legislation by Sens. Robert Menendez, D-NJ, and Barbara Boxer, D-CA, unveiled last week during a subcommittee hearing would force the GSEs to waive representations and warranties on new HARP loans regardless of whether the refi lender serviced the previous mortgage.
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