Posts Tagged ‘ Federal Housing Finance Agency (FHFA) ’

FHFA Calls Eminent Domain ‘Threat’ to GSEs, May Consider Legal Action

FHFA Calls Eminent Domain ‘Threat’ to GSEs, May Consider Legal Action

08/08/2013BY: ESTHER CHO

As local governments consider the use of eminent domain to seize underwater mortgages, they may have to deal with the Federal Housing Finance Agency (FHFA) before moving forward with the plan.

In a statement Thursday, FHFA stated it may “initiate legal challenges” to local or state actions that authorize the use of eminent domain to restructure mortgage contracts impacting Fannie Mae and Freddie Mac.

Another action the GSEs’ regulator might take is limit or stop business activity in jurisdictions that authorize the use of eminent domain to restructure mortgages.

According to the statement, the conclusion was based on the law and input received. In an analysis of the input, Alfred M. Pollard, FHFA general counsel, wrote “there is rational basis to conclude that the use of eminent domain by localities to restructure loans for borrowers that are ‘underwater’ on their mortgages presents a clear threat to the safe and sound operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.”

Pollard also stated the use of eminent domain “would run contrary to the goals set forth by Congress for the operation of conservatorships by FHFA.”

The statement follows reports that Freddie Mac might take legal action to stop Richmond, California, from using eminent domain to seize underwater mortgages. Recently, officials in the city approved adoption of the controversial approach, but the city was hit with a lawsuit Wednesday from an institutional investor group, according to a report from Reuters.

Mortgage Resolution Partners is the firm that has been actively approaching different cities to propose the use of eminent domain as a solution to address underwater mortgages. As part of the plan, MRP would provide the funds to refinance the mortgages, then take a government-approved flat fee per mortgage, according to the firm’s website.


GSEs Announce New Mortgage Insurance Requirements

GSEs Announce New Mortgage Insurance Requirements


Moving forward on another of its performance goals for 2013, the Federal Housing Finance Agency (FHFA) announced Monday that Fannie Mae and Freddie Mac have completed a major overhaul of mortgage insurance master policy requirements.

Earlier in the year, FHFA laid out its 2013 Conservatorship Scorecard, which—among other things—calls for the GSEs to develop aligned requirements for master policies. Through an ongoing effort, FHFA says both enterprises have worked with the mortgage insurance industry “to address and update gaps in the existing master policy framework.”

“Updating the mortgage insurance master policy requirements is a significant accomplishment for Fannie Mae and Freddie Mac,” said FHFA acting director Ed DeMarco. “The new standards update and clarify the responsibilities of insurers, originators, and servicers, and they enhance the insurance protection provided to Fannie Mae and Freddie Mac, which ultimately benefits taxpayers.”

The new requirements include a number of provisions intended to facilitate faster and more consistent claims processing, establishing specific timeframes, and creating standards for the circumstances under which coverage must be maintained and when it may be revoked.

Also included are requirements for master policies to support recently developed loss mitigation strategies and guidelines to promote information sharing among mortgage insurers, servicers, and the GSEs.

FHFA anticipates the master policies will go into effect in 2014 pending review and approval by state insurance regulators. Both enterprises will provide guidance to lenders and servicers in the coming weeks regarding specific effective dates.

For their parts, Fannie Mae and Freddie Mac both put their support behind the new master policies.

“The updated master policy for mortgage insurance announced today builds on the market reforms of the past five years, and we were happy to work with FHFA to bring about this latest step toward greater operational efficiency and transparency in the mortgage market,” said Paige Wisdom, EVP and chief enterprise risk officer at Freddie Mac. “We look forward to working with our servicers and the nation’s mortgage insurers as they adopt the new master policy.”

“Mortgage insurers are an important part of the mortgage finance system and these changes help lay the foundation for a stronger system going forward,” added Andrew Bon Salle, EVP of single-family underwriting, pricing, and capital markets at Fannie Mae. “These updates will help us better manage our credit risk, which we believe will ultimately benefit Fannie Mae, mortgage insurers, homeowners and taxpayers.”

New Head of FHFA Expected

New Head of FHFA Expected

11/25/2013 BY: CARRIE BAY

Analysts expect to see a new face at the helm of the agency overseeing Fannie Mae and Freddie Mac now that Democrats in the Senate have changed the rules, eliminating the use of the filibuster to block presidential appointments.

The Senate majority’s instatement of the so-called nuclear option “has cleared the path for Mel Watt’s confirmation” as director of the Federal Housing Finance Agency (FHFA), according to secondary market analysts at Barclays.

Under the chamber’s new rules, the president’s nominees for all positions except Supreme Court judge can be approved with a simple majority vote, rather than the previous requirement of 60 “yay” votes.

Rep. Mel Watt (D-North Carolina) received 56 votes in favor of his confirmation on October 31st, just 4 votes shy of the number needed under the old rules but enough to be confirmed under the new simple-majority requirement.

“[H]e has the required votes and should be confirmed as the new FHFA director. In our view, this raises the level of policy risk,” Barclays said, “as we would generally expect him to be more supportive of the administration’s policies. … [K]ey areas of concern would be principal forgiveness for the GSEs and potential expansion of the HARP [Home Affordable Refinance Program] eligibility date.”

Watt and the administration have previously expressed support for using principal forgiveness as part of the Home Affordable Modification Program (HAMP) waterfall for GSE loans, Barclays notes. While Acting Director Edward DeMarco has resisted its implementation to date on the argument that the taxpayer benefits would be too small, under Watt’s direction, Barclays expects the FHFA to “take a fresh look at the administration’s proposal and be more amenable to implement it.”

In addition, with Watt’s confirmation, Barclays says the administration may renew its push to expand the HARPcut-off date by a year. An extension of the HARP eligibility date would significantly increase the pool of HARP-eligible loans from the 2009 and 2010 vintages carrying interest rates above the 4.5 to 5 percent range, according to Barclays’ analysts.

“We estimate that these cohorts would likely see as much as a 50 percent increase in borrower eligibility,” they said.

While the immediate attention upon Watt’s confirmation will be on potential changes to HARP or decisions surrounding principal forgiveness and will likely spark some near-term uncertainty, analysts with FBR Capital Markets & Co. believe Watt will be “very beneficial to mortgage credit availability.”

“As director, we expect him to focus on removing barriers for well-qualified homeowners from receiving mortgage credit on loans securitized by Fannie and Freddie, and he is unlikely to lower loan limits, increase g-fees [guarantee fees], or implement new limits on multifamily lending,” according to FBR.

Though his confirmation will probably further complicate housing finance reform, it makes it more likely there will be a continued government backstop, FBR said, adding, “We view this confirmation as positive for mortgage originators, homebuilders, and mortgage insurers and as a negative for private-label securitizers and REITS [real estate investment trusts].”

“It should be noted there is some chance his confirmation will not take place until after the Thanksgiving recess, but that is not a reflection of his lacking the necessary votes,” Barclays said.

Report: Recovery Hampered Until Lawmakers Focus on Housing Policy

Report: Recovery Hampered Until Lawmakers Focus on Housing Policy

11/15/2013 BY: ASHLEY R. HARRIS

According to some, there are many issues with the U.S. government, but housing policy ranks highest. A new report published by the Opportunity AgendaNational Fair Housing Alliance, and the National Association of Real Estate Brokers (NAREB) claims that the U.S. housing policy is broken, denying millions of would-be homeowners the credit and financing they need to achieve the American Dream. This broken system can be repaired with immediate executive and administrative action in Washington, D.C., sidestepping a glacially slow and highly partisan Congress, according to the authors of the study.

The report includes ten administrative actions that the Federal Housing Finance Agency (FHFA) should take. These actions would require no legislative support and still achieve housing finance reform, according to the organization.

“Credit worthy American families, currently barred from the conventional market unnecessarily, should not be forced to wait for a legislative process that could take years,” said Jim Carr, author of the policy report and fellow at the Opportunity Agenda, a national organization that works to expand opportunity in housing and homeownership.

An in-depth look at the new roles of the GSEs should also be a key focus of the government as the recovery continues. According to the report, the elimination of Fannie Mae and Freddie Mac is at the core of almost every major proposal aimed at revamping the mortgage finance system. Yet, housing finance reform that requires the wholesale replacement of the government-sponsored enterprises (GSEs), will take many years to approve and to establish. The report suggests a five-year time horizon is a reasonable estimate even under the best circumstances.

“The recent news that Freddie Mac will repay the government next month more than it received in bailout funds drives home the point that the need for FHFA as a conservator is over. Both Fannie Mae and Freddie Mac are generating huge earnings and FHFA’s primary role now should be to rebuild the housing finance market,” Carr said.

What sustainable recovery boils down to is for a concerted effort from regulators to enforce the fair housing laws.

“We do not need legislative action for regulators to effectively enforce the nations’ fair housing laws or expand

access to credit for qualified borrowers,” said Lisa Rice, VP of the National Fair Housing Alliance. “If the GSEs were allowed to effectively serve all borrowers who are willing and more than able to pay their mortgage obligations, our economy would be improving at a greater pace.”

“It is clear that we cannot maintain the status quo. This report contains significant steps that can be taken now to change the status quo and help improve our economy,” she said.

Among the report’s suggested administrative actions are providing a liquid and reliable source of credit for housing in all geographies, including urban, suburban, and rural locations, to all credit-worthy borrowers. Equally important goals include ensuring that the nation’s fair housing and equal credit opportunity laws are strictly followed and that adequate reserves are set aside to protect taxpayers from future bailouts.

“Conventional home lending for people of color has collapsed since the onset of the housing crisis. The result is a near credit shutdown making it more than difficult for African American and Latino borrowers to obtain mortgage financing,” said Donnell Spivey, president of NAREB, a real estate trade association focused on fairness in all aspects of sustainable homeownership for African Americans, in particular, and other minorities, in general.

“The time for thinking about and debating housing finance reform is over. Now is the time to take every action possible to open the housing finance market for all Americans, not just a few,” Spivey added.

“Our nation’s housing crisis severely deteriorated the wealth of Latino families as well as devastated many of the neighborhoods they live in, and five years later, many of these families are still waiting for mortgage relief,” said Enrique Lopezlira, senior policy advisor at National Council of La Raza (NCLR). “However, through administrative actions these families can get the relief they need and deserve. Creditworthy Latinos and other communities of color should not have to wait for new legislation to make sure they have access to mortgage credit.”

Earlier this month, partisan opponents in the Senate blocked the nomination of Rep. Mel Watt to become the new head of the Federal Housing Finance Agency (FHFA), which regulates the government-backed mortgage finance firms and has broad power to make meaningful policy changes. At the moment, the acting head of FHFA is Ed DeMarco, and Watt supporters say DeMarco continues to pursue a range of policies that are neither in the best interest of homeowners nor the housing market, including refusal to permit principal adjustments to loans backed by Fannie Mae and Freddie Mac, rigid underwriting requirements, and unnecessarily high guarantee fees.

“The confirmation of Mel Watt as Director of the FHFA would represent a major step toward establishing the administrative foundation to reform the housing finance system. That action should occur now,” Carr concluded.

FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked

FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked


Senate Republicans blocked a vote on the nomination of Rep. Mel Watt (D-North Carolina) to head up the Federal Housing Finance Agency (FHFA).

Watt’s nomination was stopped in a 56-42 vote to end the debate over his confirmation. Sixty votes were needed to invoke cloture and move forward.

Watt’s proponents say the former real estate lawyer would support stronger consumer protections and greater assistance for at-risk homeowners. Critics, though, say acting director Edward DeMarco has dutifully protected taxpayers, pursued policies that promote a healthy housing economy, and should get the nod for the director spot.

DeMarco has led the agency in an “acting” capacity since August 2009 following his appointment by President Obama when James B. Lockhart stepped down. Throughout his tenure, DeMarco has attracted criticism from Democrats and consumer advocates who say he hasn’t gone far enough to help distressed homeowners. One

of the bigger controversies surrounding DeMarco is his steadfast opposition to the use of principal forgiveness by the GSEs, which he believes would be too costly to taxpayers.

While he has said he would have to further investigate before making a move as FHFA director, Watt has in the past urged for principal reduction. (He asserted at a Senate Banking Committee hearing in June that he was advocating for his constituents in North Carolina at the time and not necessarily the country at large.)

The topic of principal forgiveness isn’t the only point where Watt and DeMarco diverge, however.

“A Watt-led FHFA would be a considerable departure from DeMarco’s tenure,” said FBR Capital Markets in an analysis released before the vote. “He would be less likely to lower the loan limits at Fannie and Freddie and would be unlikely to make aggressive changes to their multi-family lending programs. We believe that Congressman Watt could change the course of some of DeMarco’s strategic goals and could be more accommodative to lender concerns on clarity for representations and warranties.”

FBR also noted that Thursday’s failed vote could throw a wrench in Watt’s plans, with February 28, 2014, being the deadline for the congressman to file for re-election should his nomination not work out.

“Practically speaking, he would likely need to make a decision well before the deadline,” the firm said.

Should Watt take his name out of the hat, FBR has its eye on Sandra Thompson, who is currently FHFA’s deputy director of housing mission and goals, as the next potential nominee.

Wells Fargo, SunTrust Reach Repurchase Agreement with Freddie Mac

Wells Fargo, SunTrust Reach Repurchase Agreement with Freddie Mac


Two more companies are in the clear with Freddie Mac following agreements on claims related to loans that went south after they were sold to the GSE.

Wells Fargo and SunTrust Mortgage are the two most recent companies to settle over claims regarding representations and warranties on single-family loans sold to the GSE. It was announced at the end of last month that Freddie Mac had also reached an agreement with Citigroup for the same issues. All agreements were approved by the Federal Housing Finance Agency (FHFA), acting in its capacity as Freddie Mac’s conservator.

Together, the three institutions are paying $1.3 billion to the enterprise. In exchange, they will be released from certain existing and future repurchase obligations for loans sold during the housing boom.

For its portion, San Francisco-based Wells Fargo has agreed to pay a total of $869 million, $89 million of which has already been credited for repurchases already made. The bank said in a statement it had “fully accrued for the cost of the agreement” as of the end of the second quarter. The agreement covers approximately 6.7 million loans.

A representative for Wells Fargo could not be reached for comment.

Under SunTrust’s agreement, the Richmond, Virginia-based company will pay the GSE a total of $65 million (minus credits of $25 million). As part of the settlement, it will be released from obligations on approximately 312,000 mortgages. While the majority of the settlement is covered by SunTrust’s repurchase reserves, the company expects to take a mortgage provision expense of $15 million for the third quarter.

“We are pleased to enter into this agreement with Freddie Mac as it marks another step in our resolution of legacy mortgage-related matters,” said SunTrust Mortgage CEOJerome Lienhard. “We continue to remain focused on providing high quality products and services to our mortgage clients.”

“With these settlements, Freddie Mac is recouping funds effectively due to the nation’s taxpayers,” said Freddie Mac CEO Donald Layton. “We believe these settlements are equitable, and we are pleased to have resolved legacy repurchase issues with three of our valued customers.”

FHFA and Zillow Talk HARP

FHFA and Zillow Talk HARP


Zillow partnered with the Federal Housing Finance Agency (FHFA) Thursday to review eligibility requirements for the Home Affordable Refinance Program (HARP) and respond to borrowers confused about the program.

Meg Burns, senior associate director for housing and regulatory policy for FHFA, joined Zillow for a Google+ Hangout session to field questions from underwater homeowners and explain HARP’s finer points. Hosting the call was Erin Lantz, Zillow’s director of mortgages.

Responding to borrowers’ worries about their financial situations, Burns reiterated that HARP has no minimum income or credit score requirements (though different lenders may have their own criteria).

“It’s a very streamlined product, which means lenders don’t do traditional underwriting. They don’t assess the borrowers’ income amount nor look at the credit report,” she said. “Most lenders really like that feature of the product because it makes it much easier for them to qualify a borrower for participation.”

Instead, borrowers are required to have a solid payment history, with no missed payments in the six months prior to refinancing and up to one missed payment in the 12 months prior. That history is used instead as a proxy for a borrower’s ability to pay.

“One of the great things about HARP is, if you continue to make payments on time, you ultimately will meet the payment history requirement,” Burns remarked.

She also stressed that the program can also be used for second homes and for investment properties, though the fees may be slightly higher.

Also discussed were several enhancements to the program (sometimes dubbed as “HARP 2.0”) that went into effect in 2012 and expanded eligibility to more borrowers. Because those changes went into effect well after HARP’s inception, Burns urged borrowers who applied prior to March 2012 to try again.

One of the biggest changes was the removal of the original HARP’s 125 percent ceiling on loan-to-value (LTV) ratios.

The elimination of that cap has been especially helpful for borrowers in states like Nevada, which has seen a significant boost in HARP refinances since eligibility opened up, Burns said.

In the second quarter of 2013 alone, loans with LTVs of 125 percent or higher made up nearly 20 percent of allHARP activity, FHFA revealed in its latest quarterly report.

Finally, answering a Realtor’s question regarding dubious advice offered by some companies to struggling borrowers, Burns warned consumers to be careful of who they trust—especially if that person recommends deliberately missing payments.

“Don’t ever go delinquent on your mortgage if you want to qualify for a program,” she said. “It’s highly likely, for one thing, that you’ll be rejected anyway, and it’s really bad for your credit score.”

Thursday’s question and answer session represented one way in which FHFA is working to spread knowledge ofHARP and get more borrowers involved. In addition to loosening eligibility requirements last year, the agency has extended the program for an additional two years, bringing the expiration date to December 31, 2015. In addition, FHFA recently announced the launch of a public awareness campaign that has it partnering with HGTVpersonality Mike Aubrey.

Through the end of this year, FHFA will be working with Zillow on a HARP-specific blog created to answer questions about the program’s specifics and offer advice. More information can be found at


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