Despite little vocal, organized opposition, expected industry group support and bipartisan praise, industry observers on Capitol Hill say it is far from a given that the White House will follow through and nominate Moody’s Analytics’ Chief Economist Mark Zandi to a five-year term as the director of the Federal Housing Finance Agency. The buzz has died down considerably since the White House leaked Zandi’s name early last week in the latest trial balloon of potential nominees to replace Edward DeMarco, who has led the FHFA in an acting capacity since September 2009. However, there’s a growing feeling of certainty within the industry that if President Obama does in fact follow through and sends a name to the Senate for confirmation, it would be Zandi.
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Over the past year, Fannie Mae has sought to impose higher net worth requirements on seller/servicers but has been rebuffed – at least temporarily – by its regulator, the Federal Housing Finance Agency, industry sources familiar with the matter told Inside The GSEs. These same sources argue that the FHFA is definitely open to the idea of hiking the current net worth minimum of $2.5 million, but it wants to make sure that any change applies equally to originators that sell to both Fannie and Freddie. “Right now this is a process,” cautioned one observer. “It’s not an event. There’s no timeframe on this yet.”
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Fannie Mae is moving closer to hiring IBM as a technology vendor to handle certain data processing chores for the GSE, according to two former Fannie officials. However, as Inside The GSEs went to press, details about what exactly IBM might do for the secondary market giant was unclear.“It’s a huge contract, involving many employees and facilities,” said one source. “It’s broad-based.” But it’s also unclear whether the contract has anything to do with the single MBS platform, a project being overseen by Fannie’s regulator, the Federal Housing Finance Agency.
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Fannie Mae’s plan to unload, potentially, billions of dollars of non-performing residential loans has been delayed and may be killed, according to industry officials who’ve been tracking the project. “It’s going nowhere, but it’s not like there’s a requirement for them to say so publicly,” said one advisor who is a vendor to Fannie. The GSE, to date, has declined to discuss the issue – along with its regulator, the Federal Housing Finance Agency. Fannie has been working on an NPL sale for close to a year, and even hired an investment banker, Milestone Advisors LLC, to guide it through the auction process. Initially, it had hoped to offer a package of $250 million of delinquent home mortgages for sale to the highest bidder.
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Look for Fannie Mae’s and Freddie Mac’s regulator to press forward with its policy proposal to develop a set of aligned standards for force-placed insurance, the head of the Federal Housing Finance Agency told lawmakers last week. Testifying before the Senate Banking, Housing and Urban Affairs Committee, FHFA Acting Director Edward DeMarco said the agency plans to pursue a “broader approach” to force-placed insurance. “Our goal is to establish a set of standards that could be adopted by a broader set of mortgage market participants, similar to what was done with the Servicing Alignment Initiative,” said DeMarco. “This broadened approach will also enable greater regulatory coordination in an effort to consider the various issues associated with lender-placed insurance.”
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The Federal Housing Finance Agency’s recent extension of the Home Affordable Refinance Program has “significantly lessened” the already slim prospects of any so-called HARP 3.0 legislation advancing through Congress, say analysts. The Responsible Homeowner Refinancing Act of 2013, by Sens. Robert Menendez, D-NJ, and Barbara Boxer, D-CA, had already been struggling to gain traction in Congress amid the steady volume of HARP refis in recent months and Republican resistance to expanding current HARP eligibility requirements. HARP had been scheduled to expire at the end of this year before the FHFA’s directive to Fannie Mae and Freddie Mac earlier this month to extend the refi program through Dec. 31, 2015.
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The Inspector General of the Federal Housing Finance Agency told senators last week that the FHFA still doesn’t have enough examiners, in his opinion, to sufficiently regulate the GSEs, while the Finance Agency head noted that the FHFA has added more than 200 staffers since 2008, with just a bit more hiring planned. Testifying before the Senate Banking, Housing and Urban Affairs Committee, FHFA IG Steve Linick said that the Finance Agency is making progress on a number of fronts, including GSE assets and implementing the OIG’s audit and evaluation recommendations. However, following a 2011 OIG report which identified “shortfalls” in the FHFA’s examination coverage due to examiner shortages, the FHFA has made progress by “reorganizing the examination function and hiring new staff [but] it is not clear that the FHFA has achieved adequate resources.”
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The Federal Housing Finance Agency is soliciting comments from the public on how its regulations may be “more effective and less burdensome.” The FHFA’s call for comments in a April 19 publication of the Federal Register is in keeping with a 2011 executive order that calls for each independent regulatory agency, including the FHFA, to analyze its existing regulations and “modify, streamline, expand or repeal them,” as well as to make public a plan to periodically review its “existing significant regulations” to make the agency’s regulatory program “more effective or less burdensome” in achieving regulatory objectives.
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Both Fannie Mae and Freddie Mac held onto their ample shares of mortgage-backed securities with a slight bump during the first quarter of 2013, according to a new Inside The GSEs analysis. The two GSEs issued a combined $355.8 billion in MBS during the first quarter, a 0.9 percent increase from the fourth quarter of 2012. Compared to the first three months of last year, Fannie and Freddie saw a 16.6 percent increase in MBS issuance. Between the two companies, Fannie and Freddie registered an abundant 76.0 percent share of new MBS during the period that ended March 31, 2013, up from 75.8 percent the two companies held during the fourth quarter of 2012 but lower than the 78.0 percent both GSEs held during the first quarter of 2012.
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The Federal Home Loan Bank of Cincinnati says a unit of Lehman Brothers Holdings is not entitled to a multimillion dollar payday because the FHLBank did not short change the firm when it closed out swaps and options transactions ahead of Lehman’s 2008 bankruptcy. Last week, Lehman filed a breach of contract lawsuit in Manhattan federal court connected to 87 derivative transactions or interest-rate swaps with the FHLBank that fell apart when Lehman entered bankruptcy on Sept. 15, 2008, at the height of the financial crisis.According to its lawsuit, Lehman says the Cincinnati Bank violated its agreement by paying only $13.7 million when the transactions were terminated due to the firm’s Chapter 11 filing.
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The Federal Housing Finance Agency announced the appointment of a long-time staffer to oversee the FHFA’s supervision of the 12 Federal Home Loan Banks. Fred Graham, most recently the FHFA’s acting deputy director of the Division of Supervision Policy and Support, immediately assumed his new responsibilities as the agency’s deputy director of the Division of the Federal Home Loan Bank Regulation following the FHFA’s announcement earlier this month.
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One week after UBS Americas failed in its bid to shutter a lawsuit brought by the Federal Housing Finance Agency in connection with non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac, the federal judge overseeing the case has ordered UBS to hand over internal documents to the FHFA the company argued were privileged. U.S. District Court Judge Denise Cote ruled last week that parts of memoranda from UBS’ outside counsel to the company which contained factual summaries of meetings held with third-party mortgage originators are not protected by attorney-client privilege and must be disclosed to the FHFA. “Even if it is true, as UBS argues, that the memoranda at issue were created for the ‘predominant purpose’ of rendering legal advice, that does not relieve UBS of the obligation to show that the entirety of each document is privileged,” wrote Judge Cote in her ruling.
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Freddie Mac is getting the word out early that it is phasing out its software for managing delinquent home loans with plans to discontinue the service altogether next year. The company has already stopped registering new customers for EarlyIndicator, Freddie’s Windows-based program used to predict loan delinquency. "To provide users with time to transition, we are letting them know we are retiring EarlyIndicator one year in advance,” Freddie said in its announcement earlier this month.
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