Fannie Mae and Freddie Mac reported continued profitability in the first quarter of 2015 with net earnings of $1.9 billion and $524 million respectively. Both GSEs have been profitable for at least 13 consecutive quarters, but Fannie's earnings were down from the $5.3 billion in the first quarter of last year. Fannie said one factor was a $1.9 billion derivative loss in the first quarter, which is a jump from the $1.2 billion derivative loss in the first quarter of 2014. Freddie reported $2.4 billion in losses from derivatives and noted in its earnings statement that $1.8 billion of the charges were related to fair value changes. “The company’s use of derivatives reduces exposure to interest-rate risk on an economic basis; however, this can....
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New life-of-loan representation and warranty- exclusion guidelines issued by the GSEs in November, appeared to have little impact on banks’ lending policies so far, according to a recent Federal Reserve Board survey.The rep-and-warrant changes were intended to reduce uncertainty and increase transparency in addressing lenders’ concerns about when they might be asked to repurchase a loan. The concerns were based on repurchase risk and other market factors that can cause an increase in credit overlays. “Addressing these concerns by providing tighter definitions and clarity should encourage sellers to serve a broader range of qualified borrowers,” said Dave Lowman, Freddie’s executive vice president of single -family business, when the changes were announced in November.
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Refinance activity continued to dominate the flow business at Fannie Mae and Freddie Mac in April, but 2015 is shaping up as a decent year for purchase mortgages as well. The two GSEs securitized $26.34 billion of purchase mortgages in April, a 24.3 percent increase from the previous month. That’s still well below the level produced in the second half of 2014, when monthly production averaged $31.79 billion. But Fannie and Freddie securitized $96.86 billion of purchase mortgages during the first four months of 2015, a 20.0 percent increase from the same period last year. The refinance business has done most of the heavy lifting this year. Refi loan securitization was up 88.7 percent on a year-to-date basis and accounted for....(includes data charts)
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Having been in conservatorship for what is approaching close to seven years now, industry insiders are offering up their opinion on what’s next for Fannie Mae and Freddie Mac as the GSEs remain uncertain about their future. A recent editorial piece that ran in The Hill suggests a seven-step plan that will lead them out of conservatorship. “Making a Fannie and Freddie We Could Live With” is the title of the article authored by Mark Calabria, director of financial regulation at the Cato Institute, and Alex Pollock, a fellow at the American Enterprise Institute. The authors said that “nobody wants the old Fannie and Freddie back; nobody wants them to stay on indefinitely in conservatorship.”
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A 2011 document from the Treasury Department that was leaked last week has raised questions over whether or not all required documents pertaining to a dismissed suit against the Treasury were turned in.The suit stems from GSE shareholders suing over the Third Amendment profit sweep, which requires Fannie Mae and Freddie Mac to turn over the bulk of their profits to the Treasury. The Jan. 4, 2011, memo, leaked to Insider Sources, is from Undersecretary for Domestic Finance Jeffrey Goldstein and has the subject line “Housing Refinance Reform Plan.” The memo to former Treasury Secretary Timothy Geithner outlined a number of issues to reform the two, including privatization and proposals to wind down the GSEs.
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A bill to redirect all 2016 funds from the Housing and Urban Development’s National Housing Trust Fund, which currently receives money from Fannie Mae and Freddie Mac to HUD’s HOME Investment Partnerships Program, was approved by a House subcommittee last week. Affordable housing advocates question the bill approved by the House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies. In essence, the bill was designed to cover a shortfall in the HOME program funding. Sheila Crowley, president of the National Low Income Housing Coalition, said the bill “expresses a callous disregard for the plight of millions of Americans who labor in the low wage workforce and still cannot find modest housing they can afford to rent.”
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After the Federal Housing Finance Agency’s April warning against super-priority lien foreclosures, Moody’s Investors Service said the action is beneficial to future GSE risk-transfer deals where investors bear actual losses, including Freddie Mac’s latest STACR securitization. “The newest Freddie Mac deal, STACR 2015-DNA1, will benefit from lower losses owing to the Federal law defense to homeowner associations’ super lien foreclosures because investors bear losses commensurate with the actual, not formulaic, loss severities,” said Moody’s. Last week, the FHFA reiterated its original statement issued in December, alerting homeowners, financial institutions and state authorities on concerns about states creating super-priority liens. The warning noted that federal law prohibits state courts from involuntarily terminating GSE liens while they are operating in conservatorship, regardless of state laws that permit
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The results of the Federal Housing Finance Agency’s annual stress test on the GSEs show that the duo could have up to a $157 billion shortfall in the event of another economic downturn. The test, conducted as part of a Dodd-Frank Act requirement, shows three hypothetical economic scenarios and gives information on a possible range of future financial results. The GSEs used their respective internal models to project their financial results based on the assumptions provided by the Federal Reserve and the FHFA. One of those scenarios is a “severely adverse” scenario showing how Fannie Mae and Freddie Mac would perform if home prices declined about 25 percent and the unemployment rate peaked at more than 10 percent.
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In efforts to encourage and promote diversity, the Federal Home Loan Banks and the Office of Finance were directed to include demographic data pertaining to their boards of directors in its annual minority and women inclusion reports submitted to the Federal Housing Finance Authority. “FHFA’s minority and women inclusion regulations reflect the importance the agency places on diversity and inclusion,” said Sharron Levine, associate director at FHFA’s Office of Minority & Women Inclusion. “The amendments to the regulation focus attention on the Federal Home Loan Banks’ responsibility to promote diversity in nominating or soliciting nominees for positions on their respective boards of directors.” The banks and Office of Finance must now be more specific and include descriptions of their outreach activities and....
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The Federal Housing Finance Authority announced on May 7 that it is easing loan limits on certain types of multifamily mortgages to exclude them from imposed $30 billion financing caps set on the GSEs earlier in the year. While the $30 billion cap on new multifamily lending won’t change, the FHFA is revising the excluded category to “facilitate continued liquidity in the multifamily finance market which has increased substantially since the initial cap was set.” With continuing growth in the multifamily market, analysts said there is a growing concern that the GSEs may hit the cap by the third quarter. Industry insiders also said that one of the goals is to ease the concern of both a possible tightening....
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REITs Continue to Join FHLBs. American Capital is the latest captive insurer mortgage real estate investment trust to join a FHLB. It announced in April that it joined the FHLB of Des Moines. A spokesman for the FHFA said that there has been no movement as of yet on the proposed ban to prevent REITS from gaining membership. Freddie Mac Announced Standard Pool Offering. Last week Freddie announced an upcoming auction of a $233 million standard pool offering of delinquent loans. The loans are offered as a single pool of geographically diverse deeply delinquent non-performing loans that are currently being serviced by Ocwen. Bids....
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