FHFA - Stealth Tax Increase

Washington DC 12/29/11. FHFA Acting Director Edward J. Demarco announced today an increase of “no less than 10 basis points” in the guarantee fees charged by Fannie Mae and Freddie Mac (GSEs). The increase is part of the recently enacted “Temporary Payroll Tax Cut Continuation of 2011”. Effective April 1, 2012 through October 1, 2021, the increase will effect residential mortgage financing.  Guarantee fees are paid to the GSEs and held in reserve.  Going forward the increase will be remitted directly to the US Treasury.

Extending the 10 basis point increase over the FHFA’s current book of business translates into  $5.7 billion in additional transaction costs to be borne by the already challenged housing finance sector.  The 10 basis point increase is not a fee for a service or a product, it is a tax plain and simple - money taken from the private sector and paid to the US Treasury.  

Full text of FHFA Demarco statement.

Robo-signing Repercussions? FHFA takes action...

FHFA Directs Fannie and Freddie to Adopt Uniform 
Improvements to Foreclosure Attorney Networks

Washington, DC –The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to transition away from current foreclosure attorney network programs and move to a system where mortgage servicers select qualified law firms that meet certain minimum, uniform criteria.  

Fannie had essentially black-listed some attorneys in the months following the foreclosure moratorium.  Now Big Daddy FHFA is laying down some new "uniform improvements" to rein in the attorney selection process.  Fannie publishes its updated "Mandatory Retained Attorney List", where on occasion one can observe deletions, suspensions or ineligibility status.

Although details of FHFA's direction for "uniform improvements" has not been released, it would appear that the head office wants to take a stronger hand in that selection process.  Given the GSE's previous cronyism this is probably another step in the right direction

Full Press Release

Good News! from Fannie & Freddie

We don't get much in the way of good news these days from the financial sector.  But in a report out today from the Federal Housing Finance Agency (FHFA) there are some definite glimmers of sunshine.  The report is entitled "Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2009 and 2010", and it reads like its title, wonkish and energy-depletingly bland. 

Before we look at the report a bit of background explanation is required.  

Loan quality is categorized according to key credit risk characteristics.  For decades Fannie and Freddie (GSEs) operated under "plain vanilla" underwriting guidelines.  That meant that from an investment / risk standpoint one GSE loan was pretty much akin to another.  Then in the late 1990s the GSEs transitioned to a Basking-Robbins'-31-flavors approach to underwriting as guidelines were expanded to define a greater variety of acceptable risks, which in turn led to a stratification of loans by product type and risk class.  Here the concept of risk-layering was employed to recognize multiple risk factors as may exist among the variety of loan flavors within the GSEs' loan portfolios.  

The good news today in the referenced report is not in the formulations, or how many basis points are being charged in guarantee fees.  It is to be found in the statistics the report analyzes. 

About 20 pages into the report are found tables listing statistics on the risk characteristics of new loans originated over the past four years.  First, a profile of loans by product type and risk class shows the following positives signs:

• significant increase in 15 year mortgages;
• dramatic improvement in credit score quality;
• substantially higher equity position (lower LTV).  

Next is a chart profiling loans based on layered risk factors:

• No Risk Layering originations are up;
• Cash Out Refis are down;
• Decrease in Subordinate Financing;
• Low-doc and Interest-only loans all but eliminated;
• Increase in HARP refinances.

The increase in HARP, Home Affordable Refinance Program, refinances is a positive in that those loans are replacing higher-cost loans for at-risk borrowers, greatly reducing the likelihood of a future default.

From a consumer standpoint these statistics describe borrowers who are better qualified and increasingly conservative.  Such a trend is good news for the housing market already overstocked with REO and distressed homeowners.  Though the economic challenges of high unemployment and limited business growth continue, perhaps we have were a sign that the overall landscape is leveling a bit from a default perspective.

From the investor perspective more good news.  There is consensus that the Baskin-Robbins-style underwriting of the prior decade played a significant role in the problems at Fannie and Freddie.  Hindsight is 20/20 and we now know that offering only "plain-vanilla" was key to the long-term stability of the GSEs.  

In the 1970s "foreign cars" became increasingly popular as the American car-buyer became increasingly dissatisfied with the poor quality of domestic cars.  Eventually US car-makers got the message, retooled and made improvements.  Now it looks as if a portion of the US financial sector is heeding a similar message.  The indicators contained in the referenced report point to an improvement in overall loan quality, with greater security and reduced risk.   So perhaps just like Ford with its 1980's slogan "Where quality is Job #1", Fannie and Freddie have retooled their production lines.  

Returning confidence to investment markets is badly needed. Let's hope that Fannie and Freddie can emulate Ford in this too, that they stabilizeg financially without further government bailout.  

Fannie / Freddie Wrap 3rd Year in Conservatorship

How time flies!  It's hard to believe three whole years have passed since the US Treasury stepped in and took over Fannie and Freddie.  Three years of insolvency, delinquent mortgages, trial mortgage modifications,  robo-signed foreclosure complaints, underwater homeowners and short sales.  Three years of Realtors navigating seismic shifts in the real estate landscape with falling home values, board-ups and growing inventories.  How time flies indeed.

Happy Anniversary!

So it's been three years - the traditional gift for a third anniversary is leather.  Seems like it would be easy to think of a few entities or individuals who deserve getting some good leather, perhaps not of the gift-wrapped variety, but rather in swift delivery across their respective backsides.  But in looking for culprits who really is at fault?  

How about Wall Street and the derivative guys selling toxic assets repackaged as private-label securities.  Or the top-dogs at Fannie and Freddie who orchestrated special insider accommodations and promoted Pollyannaish loan programs in countervention of the tenets of prudent lending.  Or public policy-makers in DC who sought to check off items on their social agenda to-do lists by exploiting influence over the GSEs and financial institutions.  Then there are the mortgage companies, loan originators, appraisers, sales people, builders, developers, all of us "in the loop" who feverishly pumped transaction volume at record pace through the bulging pipeline during the heady days of the late boom.  And oh yeah, lets not forget the borrowers who signed the loan applications and nodded their heads to all those qualification questions about income, source of funds, employment, occupancy and the like.  

That's a lot of leather.  But the fact is there is no single cause for the collapse we are now tunneling our way through.  Top to bottom, everybody donned rose-colored glasses and looked to ride the wave of a seemingly ever-expanding market as far as it would go.

We the People...

Since entering conservatorship in 2008 Fannie and Freddie have received over $153 Billion from the US Treasury.  What's that money buying us?  Wiggle room, I guess.  Allowing time to formulate an orderly dismount from the once-noble experiment in public-/private-sector lending, now become a bucking behemoth, officially in its death throes.   Closing short sales and turning over REO inventory we see the micro-deficits as Treasury dollars are doled out dollop by dollop one transaction at a time.    

The good news is that each sale is one unit closer to working our way through.  It's like the old joke - Q: How do you eat an elephant? A: One bit at a time.  My hat is off to everyone in the real estate community as you adapt and reinvent yourselves to serve the American homeowner. It is important to continue the struggle against a flood of challenges and persevere.  Because private property is foundational to a free society and real estate is its cornerstone.  

New Foreclosures Hit Nine-month High

First-time default notices to US homeowners hit a a nine-month high in August with 78,880 filings, according to RealtyTrac as reported in the Wall Street Journal.  The August news is a disturbing indicator.

"The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems," said RealtyTrac Chief Executive James Saccacio. (see prior blog: Foreclosure Freeze) "It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process."

But there's also some good news, or at least better news.  Total U.S. properties in foreclosure fell 33% in August from a year earlier, marking the 11th consecutive month of year-over-year declines.  

WSJ Article - RealtyTrac: August Foreclosure Filings Down 33% on Year

FHFA News Release: "$200 Billion in Recovery Excessive"

Washington, DC - The FHFA is seeking financial recovery from recently filed lawsuits according to its press release today.  It went on to say, "at this time, it would be premature and potentially misleading to estimate the size of any potential recoveries" and that "press reports that FHFA is seeking nearly $200 billion in damage are excessive." 


Full Press Release

Fed's Sue 17 Banks

Washington, DC -- The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the GSEs), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters.  The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.  


Complaints have been filed against the following lead defendants, in alphabetical order: 

1. Ally Financial Inc. f/k/a GMAC, LLC 
2. Bank of America Corporation 
3. Barclays Bank PLC 
4. Citigroup, Inc. 
5. Countrywide Financial Corporation
6. Credit Suisse Holdings (USA), Inc. 
7. Deutsche Bank AG
8. First Horizon National Corporation 
9. General Electric Company
10. Goldman Sachs & Co.
11. HSBC North America Holdings, Inc.  
12. JPMorgan Chase & Co.
13. Merrill Lynch & Co. / First Franklin Financial Corp.  
14. Morgan Stanley
15. Nomura Holding America Inc.
16. The Royal Bank of Scotland Group PLC 
17. Société Générale  

There are 17 separate suits all relating to mortgage origination and mortgage-backed securitization. Being separate actions the allegations vary from case to case.  Here's a sampling of allegations:

• Loan-to-Value Data Was Materially False
• Owner Occupancy Data Was Materially False
• The Originators of the Underlying Mortgage Loans Systematically Disregarded Their Underwriting Guidelines
• Failure To Conduct Proper Due Diligence
• Defendants Incentivized to Fund Risky Residential Mortgage Loans
• Material Misrepresentations and Omissions in the Offering Materials
• Fraud

Fannie and Freddie want out of the bad deals.  Specifically FHFA is asking the courts for: 

• Rescission and recovery of the consideration paid for the GSE Certificates, with interest thereon; 
• Each the GSE's monetary losses, including any diminution in value of the GSE Certificates, as well as lost principal and lost interest payments thereon; 
• Attorneys’ fees and costs; 
• Prejudgment interest at the maximum legal rate; 
• and in some cases Punitive damages. 

Plaintiffs' Counsel is Quinn Emmanuel Urquhart & Sullivan, LLP and Kasowitz Benson Torres & Friedman LLP


Follow this link to view legal filings: FHA Filings in PLS Cases, September 2, 2011

US / FHFA vs Big Banks

The New York Times reports today that the Federal Housing Finance Agency is poised to bring suit against a dozen major banks for misrepresenting the quality of mortgage securities the banks marketed through Fannie Mae and Freddie Mac. 

Banks included under the proposed suit include Bank of America, JP Morgan Chase, Goldman Sachs, Deutsche Bank, among others.

This potential federal action is in addition to suits previously brought by 50 states attorneys-general as litigation continues to swirl in the beleaguered mortgage sector.  

Read more:

NYT - US is set to Sue a Dozen Big Banks Over Mortgages

Market Watch - US said Ready to Sue Big Banks over Mortgages

Hand In Glove

The convergence of a couple of items in the news...


Washington, DC - The Federal Housing Finance Agency (FHFA), in its capacity as conservator of Fannie Mae and Freddie Mac (the Enterprises), today filed an Appearance and Conditional Objection regarding the proposed settlement between Bank of America and a consortium of 22 investors being considered by a court in New York. 


This pleading was filed to obtain any additional pertinent information developed in the matter.  The conservator is aware of no basis upon which it would raise a substantive objection to the proposed settlement at this time.  News Release


Meanwhile...         [Excerpt: Article by Nelson Schwartz, New York Times]


NYC, NY - On Tuesday, several homeowners filed suit in the Federal District Court in Manhattan seeking to block a proposed $8.5 billion settlement between Bank of America and major mortgage investors including BlackRock, Pimco and the Federal Reserve Bank of New York. The suit claims that the deal fails to address widespread servicing problems and would actually speed up foreclosures.


"There is growing realization that this settlement needs more scrutiny," said Keith Fleischman, the lawyer for the four homeowners in the suit.  "It needs to address the housing crisis itself."   Full Article: Homeowners Seek to Bloc BOA Settlement


Stay tuned.

Fannie Plays Hardball with PMI Insurers

This story began last summer when the US Treasury announced its rules for the Home Affordable Foreclosure Alternatives Program (HAFA).  To speed up the short sale approval process Treasury wanted Fannie and Freddie to have designated authority over servicers and private mortgage insurance (PMI) providers.  In order for that to happen the servicers and PMI providers had to "sign on".  Treasury could hold a big gun to their heads, "if don't sign on you can't do business with Fannie or Freddie".  But they couldn't make delegated authority mandatory.


With its announcement early this week Fannie dropped the hammer on three PMI providers by suspending them as "approved mortgage insurers".  Per Fannie:

On August 22, 2011, Fannie Mae announced the suspension of PMI Mortgage Insurance Co., PMI Insurance Co., and PMI  Mortgage Assurance Co., as approved mortgage insurers. 

The pool of Fannie-approved PMI providers has now shrunk to three national insurers: Genworth, MGIC and United Guaranty.  Will this limited supply chain result in less flexibility in mortgage underwritng?  Competition usually brings about more competitive products and services.  Limiting competition tends to work the other way.


We'll see.


Links:
Fannie Mae Service Announcement
Acceptable Mortgage Insurers

Bottoming - Are We There Yet?

House Prices Fall 0.6% in 2011 Q2 

Washington, DC – The Federal Housing Finance Agency (FHFA) announced U.S. house prices were 0.6 percent lower in the second quarter than in the first quarter of 2011, per the house price index (HPI).   The HPI is calculated using home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages.


Not exactly what homeowners and those of us in the real estate biz are looking to hear.  Is this price slide a double dip?  Seems we're hearing the term used more often, unofficially.   Probably not so much a double-dip, as it is a double-whammy.  


Home prices have been hit from both the supply-side and the demand-side.  Supply is over-stocked with foreclosure inventory.  And the demand-side is hurt by high unemployment, mortgages being harder to get and consumer confidence being low.  There's no question that housing recovery in this market remains a slow process.     

The FHFA went on to say, "Over the past four quarters, seasonally adjusted prices fell 5.9 percent. The quarterly decrease came despite an increase in FHFA’s seasonally adjusted monthly house price index for June of 0.9 percent.  The June HPI was 18.8 percent below its April 2007 peak."

Link: FHFA 8/24/11 Press Release

FHFA / HUD Seek REO HELP!!!

Washington, DC  --   The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), has announced  a Request  For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac  (the Enterprises), and the Federal Housing Administration (FHA).


The RFI’s objective is to help address current and future REO inventory.  It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.

The Enterprises will continue to market individual REO properties for sale while FHFA and the Enterprises seek other solutions.


"The RFI calls for approaches that achieve the following objectives:

• reduce the REO portfolios of the Enterprises and FHA in a cost-effective manner;
• reduce  average loan loss severities to the Enterprises and FHA relative to individual distressed property sales;
• address property repair and  rehabilitation needs;
• respond to economic and real estate conditions in specific geographies;
• assist in neighborhood and home price stabilization efforts; and
• suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition.

FHFA, Treasury and HUD anticipate respondents may best address these objectives through REO to rental structures, but respondents are encouraged to propose strategies they believe best accomplish the RFI’s objectives.  Proposed strategies, transactions, and venture structures may also include:

• programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”);
• strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO;
• a mechanism for private owners of REO inventory to eventually participate in the transactions; and
• support for affordable housing.

Link to RFI

Fannie / Freddie to Align Guidelines for Delinquent Mortgages

Updated Framework to Include Servicer Incentives and Penalties

Washington, DC – Federal Housing Finance Agency Acting Director Edward J. DeMarco has directed Fannie Mae and Freddie Mac (the Enterprises) to align their guidelines for servicing delinquent mortgages they own or guarantee. In a nutshell the changes will:

·         establish uniform servicing requirements

·         provide monetary incentives for servicers

·         require servicers to contact borrowers as soon as they become delinquent

·         place servicer’s focus solely on remediating the delinquency

·         prevent foreclosure process from commencing if borrower and servicer are engaged in a good-faith effort to resolve the delinquency

·         require servicer to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure

·         offer financial incentives to encourage servicers to continue to help borrowers pursue a foreclosure alternative.

Fannie Mae and Freddie Mac will each issue detailed guidelines to their servicers in the second and third quarters of 2011.   “Once fully implemented by the servicing industry, the Enterprises’ aligned policies should give homeowners a greater understanding of the process and faster resolution by requiring earlier contact, more frequent communication, and prompt decisions,” said DeMarco. 

Full Press Release

Craig Roberts, President of Pennsylvania First Settlement Services LP, is a Certified Land Title Professional (CLTP), past-President of the Pennsylvania Land Title Association, and is a licensed title agent and real estate broker in the Commonwealth of Pennsylvania.

Pennsylvania First Settlement Services is a full-service title insurance agency serving the greater Pocono area of northeastern Pennsylvania.  Its services include title searches, title insurance, real estate settlements, foreclosure research, documents services and short sale assistance.  www.pafirstsettlement.com

Housing Prices Drift Lower

From January to February prices fell 1.6 percent on a seasonally adjusted basis, according to the monthly House Price Index published by the Federal Housing Finance Agency.  The previously reported 0.3 percent decrease in January was revised to a 1.0 percent decrease.  For the 12 months ending in February, U.S. prices fell 5.7 percent.  The U.S. index is  18.6 percent below its April 2007 peak and roughly the same as the February 2004 index level.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.  For the nine Census Divisions, seasonally adjusted monthly price changes from  January  to February  ranged from  -3.7 percent in the Mountain  Division  to  -0.6 percent in the  East  South Central Division.

 FHFA Press Release

Craig Roberts, President of Pennsylvania First Settlement Services LP, is a Certified Land Title Professional (CLTP), past-President of the Pennsylvania Land Title Association, and is a licensed title agent and real estate broker in the Commonwealth of Pennsylvania.

Pennsylvania First Settlement Services is a full-service title insurance agency serving the greater Pocono area of northeastern Pennsylvania.  Its services include title searches, title insurance, real estate settlements, foreclosure research, documents services and short sale assistance.  www.pafirstsettlement.com

Short Sale HUDs

Realtors, let us help you get the job done! PA 1st's Short Sale Assist service gets you the information you need, quickly, reliably, digitally.


Send us your request and we'll get back to you within 2-4 hours with a Preliminary Settlement Statement to submit for Short Sale approval.


PA First - experienced Short Sale experts, ready to serve you.

Pennsylvania First Settlement Services is a full-service title insurance agency serving the greater Pocono area of northeastern Pennsylvania.  Its services include title searches, title insurance, real estate settlements, foreclosure research, documents services and short sale assistance.  www.pafirstsettlement.com

Not There Yet - Monthly House Price Index Declined 0.3 Percent

[FEDERAL HOUSING FINANCE AGENCY - NEWS RELEASE - 3/22/11]

WASHINGTON, DC – U.S. house prices declined 0.3 percent on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3 percent decrease in December was revised downward to a 1.0 percent decrease. For the 12 months ending in January, U.S. prices fell 3.9 percent. The U.S. index is 16.5 percent below its April 2007 peak and roughly the same as the May 2004 index level. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from December to January ranged from -1.3 percent in the Mountain and South Atlantic Divisions to +1.6 percent in the West South Central Division. Monthly index values and appreciation rate estimates for recent periods are provided in the table and graphs on the following pages. Click here for complete historical data. For detailed information concerning the monthly HPI, please see the HPI Frequently Asked Questions (FAQ). The next release will be on April 21, 2011 and will include monthly HPI data for February 2011. ###

The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.  These government-sponsored enterprises provide more than $5.9 trillion in funding for the U.S. mortgage markets and financial institutions.

Craig Roberts, President of Pennsylvania First Settlement Services LP, is a Certified Land Title Professional (CLTP), past-President of the Pennsylvania Land Title Association, and is a licensed title agent and real estate broker in the Commonwealth of Pennsylvania.

Pennsylvania First Settlement Services is a full-service title insurance agency serving the greater Pocono area of northeastern Pennsylvania.  Its services include title searches, title insurance, real estate settlements, foreclosure research, documents services and short sale assistance.  www.pafirstsettlement.com

Much Ado about... Very Little

The February 2011 Housing Scorecard published by HUD & US Treasury tells the story.  The Obama Administration’s numbers reveal little help is being provided by the much ballyhooed Making Home Affordable federal programs currently in operation to assist distressed homeowners.  Pages of charts and statistics dress it up.  But the truth is of the over 10 million underwater home loans, only 1 in 17 homeowners have found help through HAMP permanent mortgage modifications.

What about those remaining homeowners not helped by HAMP?   Or looking at it statistically, those 16 in 17 that Making Home Affordable didn’t help?   That’s where Realtors come into the picture.  Keep working hard to make those short sales happen.  America’s homeowners need your dedicated service to forestall the avalanche of foreclosures.  Thank you for your service.

Cordially,

Craig Roberts, CLTP

PA First Settlement Services

HUD Press Release

February 2011 Housing Scorecard

“REFORMING AMERICA'S HOUSING FINANCE MARKET”

HUD recently issued a press release outlining the Obama Administration’s plan to reform US housing finance.  According to HUD the plan, entitled “Reforming America’s Housing Finance Market”, its stated objectives are the winding down Fannie Mae and Freddie Mac and help to bring private capital back to the market. 

The Administration’s plan proposes to achieve these objectives by phasing in the following changes:

• Increase Pricing at Fannie Mae and Freddie Mac
• Reduce Conforming Loan Limits
• Increase Down Payment Requirement to 10 Percent
• Return FHA to its Traditional Role

This economic approach seeks to widen the margin in which private capital companies can compete for mortgage business by tightening lending requirements and increasing costs on government loans.

The proposal signals a desire on the part of the federal government to limit public-sector risk and to increase regulation.  However, it is too early in the legislative process to reliably predict the extent to which any of these changes will be implemented.    

In coming weeks you can expect to hear more on housing finance reform as mortgage and real estate sectors perform their analyses of the proposal.

Stay tuned…   CR

Resources:

HUD Press Release

The Plan: "Reforming America's Housing Finance Market"