FHFA's 2013 Conservatorship Scorecard for the GSEs

Edward J. Demarco, the Acting Director of the Federal Housing Finance Agency (FHFA), has recently released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac.  This "Scorecard" is literally rating their performances on things like "the quality, thoroughness, creativity, effectiveness, and timeliness of their work products." They are also graded on how well they cooperate and collaborate with FHFA, each other, and the industry.

The three keywords that they must focus on are "Build, Contract, and Maintain." These were brought up in 2012 as the three goals of the FHFA's Strategic Plan for the GSEs.

"Build" refers to their goal to "build a new securitization infrastructure platform for the secondary mortgage market."

They must also "Contract the Enterprises dominant presence in the marketplace while simplifying and shrinking certain operations by lines of business."

And finally, they must "Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages."

"Despite some signs of normalization in the housing market, our nation finds itself in the uncomfortable position of having over 90 percent of new mortgage originations supported by the federal government," said DeMarco. "That support is provided directly through government loan programs like the Federal Housing Administration (FHA), and through the financial support that the Treasury Department provides to maintain the solvency of Fannie Mae and Freddie Mac."

In the works is a new "joint company" headed up by the FHFA to focus on securitizing home loans. This is hoped to lead to decreased government involvement in the mortgage market. It would also mean that the FHFA is forcing Fannie Mae and Freddie Mac to abandon their current separate systems and construct a single infrastructure to support the mortgage market. This new entity will be the previously mentioned "joint company". It will be more structured and it will be owned by Fannie Mae and Freddie Mac.

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BofA and GSE's Ongoing Battle

Bank of America has been in the news for quite some time now. They were accused of selling mortgages to people who did not actually qualify. The government sponsored entities, Fannie Mae and Freddie Mac, want BofA to buy back all of the mortgages. This has been a debate for a while and it hasn't made much progress. A settlement would be good news for shareholders as it would alleviate some of the pressure from BofA's stocks. The GSE's have been more strict regarding the bank's policies for mortgages now since the bank accounts for 58% of the GSE's total mortgage repurchase requests. Our sources say that the bank and the GSE's talks have become more productive in the past few weeks and are closing in on an agreement.

Earlier this week a proposal to reduce the mortgages of underwater homes in the U.S. was rejected. FHFA denied the request to allow the GSE's to lower the principal on mortgages where homeowners owe more than the house is actually worth.

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FHFA's Foreclosure Prevention and Refinance Report

According to the FHFA's Q4 2011 Foreclosure Prevention and Refinance Report, Fannie Mae and Freddie Mac have completed more than 2.1 million foreclosure prevention actions to help keep borrowers in their homes. This includes 1.1 million permanent loan modifications. Additionally, fewer than 20% of these loans that were modified in the four quarts ended March 31, 2011 had missed two or more payments which is an improvement from previous years.

The FHFA has also released an interactive Fannie Mae and Freddie Mac State Borrower Assistance Map that allows you to see how many loans are owned or guaranteed by the GSEs, and how many of which are delinquent, in foreclosure or refinanced per state. There are more statistics involved as well in this report. Click here to view more.

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Fannie Mae Requests More Bailout Money

We have discussed Fannie Mae several times. You know that it is a GSE that is under the conservatorship of the FHFA. You know that it is constantly in the news for various reasons. Today, Fannie Mae is in the news because it has requested a large sum of money. Reportedly, Fannie has lost $2.4 billion during the fourth quarter of 2011. Its revenue is sitting at $4.5 billion. Because of its deficit, Fannie Mae is seeking aid from the government in the form of $4.6 billion.

We also reported that there are many efforts underway regarding shutting down Fannie Mae and Freddie Mac. The government no longer wants to support them, but rather have them be a more privately-owned enterprise. As of now, taxpayers have spent $150 billion trying to maintain the GSEs. A new estimate is saying that figure could be upwards of $260 billion by the end of 2014 just to keep the companies afloat. You can see why the government wants to bail on them: Fannie alone is proving to be one of the most expensive single-company bailouts in history. So far Fannie has taken a whopping $116 billion from the U.S. Department of Treasury.

Fannie isn't the only one, though. Freddie Mac has requested its fair share of bailout money. In November, a request was made for $6 billion in financial assistance after it reportedly lost that much during the third quarter of 2011.

What do you think is the best solution? Is the government doing the right thing by bailing them out so often despite it coming straight from the taxpayers' pocket? Should the government just tell them to take their losses?  Leave your thoughts below!

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Government Seeks to Shut Down Fannie and Freddie

The FHFA, who oversees GSEs Fannie Mae and Freddie Mac as a conservator, has a plan to shrink their involvement in the housing market over time. They want to create a new market for mortgage-backed securities; something more privately-owned rather than government-backed. Fannie and Freddie have had a major part in keeping the housing finance market going during the country's recession and economic hardship. They currently represent 75% of all new home loans, which equals to nearly $100 billion a month in mortgages.

However, President Obama and Congress seek to shut down Fannie and Freddie so they can ultimately reduce the role that the government plays in the mortgage market. There is not yet an official plan on how to squeeze out the GSEs without causing further damage to the housing market, but the goal is to transition in a new structure of how the housing finance market works.

This all relates to the story we reported on earlier about the FHFA's acting director Edward DeMarco's new plan. It involves building a new infrastructure for the mortgage market, shrinking Fannie's and Freddie's presence in the market, and doing whatever it takes to reduce the amount of foreclosures. It is not possible to simply bring an end to Fannie and Freddie, however. Doing so without implementing a new structure would drive up interest rates and limit the availability of loans.

A year ago, a plan was proposed to slowly shut down the GSEs over a span of 5-10 years. It suggested doing this in one of three ways: providing limited government guarantees of some mortgages, providing an emergency backstop role but only during a recession, or completely pulling the federal government away from the mortgage market. A decision regarding these options has not been made.

Fannie and Freddie have relied on bailout money in recent years, and it is hindering the country's economic recovery. The housing market will continue to have issues until these government-backed mortgage-finance companies are replaced with a private-market solution. Once this is accomplished, the government hopes that efforts to repair the damage to homeowners and the housing market will boost in effectiveness.

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FHFA's Next Step Regarding GSE Conservatorship

In February 2010, the FHFA's Acting Director Edward J. DeMarco wrote a letter to Congress regarding conservatorships of the GSEs Fannie Mae and Freddie Mac. Recently, he has also released the next phase of his plan that builds on what he wrote in that letter 2 years ago. It is meant to update and extend the goals of these conservatorships.

First of all, what is a conservatorship? The FHFA is the conservator, or an organization that has legal control over another entity, which would in this case be the GSEs. Fannie Mae and Freddie Mac have received $180 billion in taxpayer support since they have been placed into conservatorship in September 2008.

DeMarco's plan will establish objectives that the FHFA is to take in order to meet its obligations as a conservator. It consists of three strategic goals. First of all, the FHFA will build a brand new infrastructure for the secondary mortgage market that will be consistent with existing policy. Second, they hope to contract the GSEs' dominant presence in the marketplace by simplifying and shrinking their operations. And lastly, they will work to maintain foreclosure prevention activities and credit availability for mortgages, both new and refinanced. The end goal is to come to a resolution for the conservatorships and to review the housing finance system.

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FHFA's "Pilot Phase" for REO Initiative

Here is some more information about the Federal Housing Finance Agency's new REO Initiative regarding turning REO's into rentals. They are starting off simple with a "pilot phase" that is excepted to include 500 to 1000 homes provided by Fannie Mae. The GSEs have more than one million foreclosure properties in their possession.

The purpose of this pilot phase is to examine:

• Investor interest in various types of assets
• How investors can maximize the participation of experienced local firms and organizations that can provide the types of services and support needed for stabilization in the community
• The types of structures and financing that would improve returns to the sellers as well as the value of the homes
• The process that qualifies these investors and how they participate in sales transactions

There is no indication of a timetable for beginning bulk REO sales yet. The FHFA is hoping that this pilot phase will prove beneficial to investors, homeowners, GSEs and also to the economic status of the housing market and the country as a whole. Their focus is on the nation's hardest-hit areas first. They'd also like to improve REO sales for homeowners and small investors that will enhance the existing retail sales strategies of the GSEs.

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Reported $25 Billion Deal Reached between Banks and AGs

As we mentioned yesterday, this $25 billion deal between the five largest banks in American and U.S. State Attorneys General nationwide will make it easier for those facing foreclosure to restructure their loans. The final draft of this agreement has been submitted for review.

This settlement would apply to privately-held mortgages that were issued between 2008-2011. It does not, however, apply to loans held by GSEs Fannie Mae or Freddie Mac. This means that nearly 750,000 homeowners could get the principal amount of their mortgages written down by $20,000.

Under the terms of this deal, $17 billion would be used toward reducing the principal that homeowners owe on their mortgages. Also, $5 billion would be placed in a reserve account for various state and federal programs. Part of that money would cover checks that will be sent to nearly 750,000 homeowners that were affected by deceptive foreclosure practices, amounting to $1,800 each. The final $3 billion would be dedicated toward the refinancing of homes nationwide at 5.25 percent. This proposal is expected to be adopted within a few weeks.

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CEO of Fannie Mae Resigning

The Chief Executive Officer of Fannie Mae, Michael J. Williams has just announced his departure from the Government Sponsored Enterprise (GSE). He first took on this role of CEO in 2009 when Fannie Mae was placed under the Federal Housing Finance Agency (FHFA).  Williams will remain in this position until the board of directors chooses a new CEO and director to take his place.

“As CEO, I have focused the company on providing the necessary funding to support sustainable homeownership and quality affordable housing; creating the solutions needed to stabilize the market and help homeowners in distress; and building a strong new leadership team that can move the company and the industry forward,” said Williams. “For the past three years, we have executed on this important mission, while making fundamental changes to prepare housing finance for a better future. I decided the time is right to turn over the reins to a new leader. As I told our employees today, I am extremely proud of what we have achieved together, and I am confident that they will continue to make a positive difference.”

Williams has accomplished much during his years at Fannie Mae. He started in 1991 leading the eCommerce and eBusiness divisions, including the development of the Desktop Underwriter product. He has also helped  to enable approximately six million households to refinance into a lower cost mortgage, 1.7 million homeowners to purchase a home, and provided financing for nearly one million units of quality, affordable rental housing.

The question is: how will his departure effect Fannie Mae and its operations? And in turn, homeowners and lenders?


Source: http://nationalmortgageprofessional.com/news27890/michael-williams-resign-ceo-fannie-mae

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