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Inside The GSEs

July 3, 2015

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GSE Business Surged in 2Q15, Nonbanks Keep Growing

Nonbank seller-servicers continued to claim a larger share of Fannie Mae and Freddie Mac business during the booming second quarter of 2015, according to a new Inside The GSEs analysis.The two GSEs securitized $232.4 billion of single-family mortgages during the second quarter, up 22.3 percent from the first three months of the year. Freddie posted a bigger gain, 28.5 percent, than did Fannie (up 18.0 percent). Nonbank sellers accounted for 46.5 percent of loans securitized by the GSEs during the second quarter. They delivered $107.9 billion to Fannie and Freddie mortgage-backed securities during the period, up 24.7 percent from the first quarter. Among nonbank sellers, the biggest gain was posted by smaller and mid-sized mortgage companies, which accounted for 27.6 percent of GSE second-quarter business. Read More

Fannie and Freddie CEOs May See Multi-MIllion Dollar Pay Hike

A pay raise windfall is coming for the CEOs of Fannie Mae and Freddie Mac as the Federal Housing Finance Agency revealed this week the removal of a pay cap and approval of a raise that could reach $4 million each in annual total compensation. The GSE executives, Timothy Mayopoulos of Fannie and Donald Layton of Freddie, each earn approximately $600,000 without bonuses. This amount was part of a salary cap initiated by the FHFA in 2012 in response to concerns voiced by lawmakers. The compensation increase announcements were disclosed in separate filings made by Fannie and Freddie with the Securities and Exchange Commission. Read More

G-Fee Report Highlights Gap Between 30- and 15-Year Loans

Guaranty fees as a whole have more than doubled since 2009, from 22 basis points to a record high of 58 bps in 2014, said the Federal Housing Finance Agency in a report released this week analyzing the fees. The 58 bps includes 15 bps of upfront loan-level pricing adjustments and 43 bps as part of an “ongoing fee.”Fees also jumped year-over-year as they were at 51 basis points in 2013. Two FHFA-directed increases in 2012 are the primary drivers for the sizeable increase from 2011, when the average fee was 26 bps, then rose in 2014. Higher fees have been met with strong resistance from originators... Read More

New York Times Pushes for Access to FHFA Testimony

The New York Times Company filed a motion this week and is intervening in a case to have access to testimony pertaining to Edward DeMarco, former acting director of the Federal Housing Finance Agency, stating the government has failed to show good cause for sealing the documents. DeMacro, along with Mario Ugoletti, are both witnesses in the Fairholmes Funds v. The United States case and each testified in May. Ugoletti was a senior official with the Department of Treasury during the government bailout of the GSEs and is now special advisor to FHFA Director Mel Watt. The plaintiff in the case, Fairholme Funds, moved to have the “Protected Information” designation... Read More

Access to Credit Gradually Expanding, More Needed

Access to mortgage credit is expanding, according to panelists at a real estate conference in Miami last week, albeit slowly, and some agree alternative scoring models are needed. Franklin Codel, executive vice president with Wells Fargo, said the company has expanded its credit parameters on FHA, Fannie Mae and Freddie Mac loans. “About 10 percent, maybe a little bit more, of the lending we’re doing today, a year and a half or two years ago would have been either an exception or outside our policy. We have expanded our credit box at Wells Fargo, and I think a lot of other lenders have done the same thing.” Read More

Fannie Mae to Introduce New Loan Delivery System, Makes DU Free

Fannie Mae has done away with its Desktop Underwriter fee to encourage more lenders to take advantage of the tool. The GSE also has plans to introduce a new loan delivery interface in late 2015.Fannie said the new loan platform will provide lenders with “a more intuitive and easier-to-navigate user interface, enhanced reporting capabilities, and improved delivery edit messaging.” Fannie plans to provide guidance to customers on the new system in the coming weeks but said it’s being designed to help lenders deliver loans more efficiently and with greater transparency. Len Israel, president of mortgage banking with Flagstar Bank, said “Flagstar would welcome any new delivery system Fannie may have on tap to streamline processes without sacrificing quality.” Read More

Investors Author Conservatorship Report, Argues Fuzzy Math

Two activist investors have authored a report highlighting the debate surrounding the facts and numbers that led to Fannie Mae and Freddie Mac being placed into conservatorship in 2008. In the 27-page report, Adam Spittler and Mike Ciklin argue that the Treasury unfairly justified GSE conservatorship via “tricky accounting” methods. In the second quarter of 2008, the report said Fannie reported a net loss of $2.8 billion. But they noted some discrepancies. “As per our analysis, we must add back the non- cash Loan Loss Reserve of $5.5 billion. After this adjustment, Fannie Mae shows a cash net income figure of $3.2 billion. This is poor evidence of a ‘failing business model,’” said the report. Read More

FHFA’s Quarterly Review of the GSEs Points to Profitability

The Federal Housing Finance Agency released its performance review of first-quarter earnings for the GSEs this week and it stands to reason that Fannie Mae and Freddie Mac could post strong earnings for the second quarter. Here’s why: loan production was decent, which means guaranty fee income should be as well. But the real gain could come from rising interest rates. When rates fell during the first quarter, Fannie and Freddie booked $4.2 billion losses from the markdown on the value of derivative securities they use to hedge. Rates increased in the second quarter, which means the question now becomes: how much of a gain will the two book? Fannie Mae and Freddie Mac reported continued profitability in the first quarter of 2015... Read More

GSE Loans Protected by New Super-Priority Lien Ruling in Nevada

The GSEs benefited from the Consumer Financial Protection Bureau’s free pass on the debt-to-income ratio requirements of the qualified-mortgage rule, resulting in a $132.9 billion increase in business.A new Inside Mortgage Finance analysis of mortgage-backed securities data illustrates that from the beginning of 2014 through the end of the first quarter of 2015, approximately 16.3 percent of the loans securitized by Fannie Mae and Freddie Mac had DTI ratios exceeding 43 percent. In the non-agency world, a qualified mortgage has to have a DTI ratio of 43 percent or less. While the government-insured market has its own QM rules that effectively ignore DTI, a loan eligible for sale to the GSEs is considered... Read More

GSEs Get $133 Billion Business Increase Thanks to QM ‘Patch’

The GSEs benefited from the Consumer Financial Protection Bureau’s free pass on the debt-to-income ratio requirements of the qualified-mortgage rule, resulting in a $132.9 billion increase in business.A new Inside Mortgage Finance analysis of mortgage-backed securities data illustrates that from the beginning of 2014 through the end of the first quarter of 2015, approximately 16.3 percent of the loans securitized by Fannie Mae and Freddie Mac had DTI ratios exceeding 43 percent. In the non-agency world, a qualified mortgage has to have a DTI ratio of 43 percent or less. While the government-insured market has its own QM rules that effectively ignore DTI, a loan eligible for sale to the GSEs is considered a qualified mortgage if it meets all the QM criteria – such as no interest-only payments – other than the DTI cap. Read More

FHFA OK’s FHLB Non-Members To Service Acquired Mortgages

Non-members of the Federal Home Loan Banks are able to service mortgages under the Acquired Member Asset program, according to a recent regulatory interpretation issued by the Federal Housing Finance Agency. FHLBanks have been challenged with finding eligible members to take over the servicing of AMA loans from private financial institutions that want to transfer the servicing rights for various reasons. Some members want to do so because they can no longer service the loan, and others are unwilling to continue servicing the loan, said the FHFA. As a result, a number of banks have been considering or have already allowed the sale of servicing rights to institutions that are neither members of any bank, or affiliates of bank system members. Read More

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