Friday, March 20, 2015

Starting to sound very different in 2015: Fannie Mae

Delaney, Carney & Himes File Housing Finance Reform Legislation to Protect 30-Year Mortgage & Taxpayers


The bill winds down Fannie Mae and Freddie Mac and allows them to be sold and recapitalized.

Small Lender Access

* During the transition Fannie and Freddie may remain as aggregators of mortgage loans for small lenders that do not have the sufficient volume to pool and create these new securities with their mortgage loans on their own, so long as adequate private sector alternatives do not exist

Winding Down Fannie and Freddie

* Fannie and Freddie will be wound down over a five year period. Their government guarantee and charter will be removed and they will repay the government with interest for the government's investment in the institutions. The repayment must take into account both the injection of capital and overall exposure to the government. THIS IS DONE ALREADY $90 billion profit now to taxpayers!

* During the transition, Fannie and Freddie may act as an aggregator for small lenders to retain small lender access to the new Ginnie Platform.

* The transition will continue until competitive access for small lenders is established and Ginnie has achieved an adequate return to taxpayers and established a competitive private housing finance market.

* The assets of Fannie and Freddie will be returned to the private sector and may operate within the new mortgage system as issuers and/or aggregators 

Multifamily Housing

* Fannie and Freddie's multifamily business will be spun out as separate entities. Ginnie will be required to create and implement a workable multifamily guarantee that utilizes private sector pricing consistent with the single family model.

* The current multifamily businesses of Fannie and Freddie will continue to function within the new multifamily housing market as purely private organizations with an explicit government guarantee provided by Ginnie Mae and a private sector reinsurer.

Shareholders are still owners of these Spin-offs. (my comment)

* The assets of Fannie and Freddie will be returned to the private sector and may operate within the new mortgage system as issuers and/or aggregators
RETURNED!

*Fannie and Freddie’s multifamily business will be spun out as separate entities
Seperate entities! They cant spin off what they dont own, So those entities will be shareholders of current corps!

* The current multifamily businesses of Fannie and Freddie will continue to function within the new multifamily housing market as purely private organizations
Continue to function within the new housing market!

The talk on the Hill is changing rapidly from shutter to Recapitalize!
The fact that FHFA has let the two pay less in profit to Treasury in Q1 2015 is all part of the game. I guarantee it was decided to show less profits starting in 2015 to push the need to prevent another bailout. Bailouts are over. No one wants a bailout in 2015, this is not 2008!
Its all accounting Folks! Fannie is profitable! Very!
even at 1 billion per quarter after taxes, your looking at $4 billion a year
with a pe of 10 your staring at a $35 dollar stock. I suspect the profits are more in the $2 billion a quarter range! $70 dollar stock. Again its all accounting, FHFA accounting directed onto Fannie Mae!



Wednesday, March 18, 2015

Senators Rally Against Using Fannie, Freddie to Offset Federal Spending

Senators Rally Against Using Fannie, Freddie to Offset Federal Spending

http://themreport.com/news/government/03-17-2015/senators-rally-against-using-fannie-freddie-to-offset-federal-spending

A bipartisan group of Senators have introduced a budget point of order to prevent a government plan that would use funds from Fannie Mae and Freddie Mac to offset federal spending. Led by Senators Mike Crapo (R-Idaho) and Mark Warner (D-Virginia), a group of colleagues from the Senate Banking Committee introduced the bill, S. 752

“Guarantee fees should be used to protect taxpayers from risk, but some want to increase these fees simply to create a piggy bank for Congress,”

The proposed legislation would make a congressionally mandated increase of guarantee fees only to be used for deficit reduction and would not be scored as an offset. It would also continue to require a 60 vote threshold on a provision that spends more or reduces taxes and is offset with a guarantee fee increased because the fee would not be recognized as an offset.
The bill is co-sponsored by Senators Richard Shelby (R-Alabama), Jon Tester (D-Montana), Bob Corker (R-Tennessee), Heidi Heitkamp (D-North Dakota), David Vitter (R-Louisiana), Joe Donnelly (D-Indiana), Mark Kirk (R-Illinois), Dean Heller (R-Nevada), Tim Scott (R-South Carolina) and Jerry Moran (R-Kansas).

Official Titles as Introduced:

A bill to establish a scorekeeping rule to ensure that increases in guarantee fees of Fannie Mae and Freddie Mac shall not be used to offset provisions that increase the deficit.

Rosner PPT Wharton/NYFed Conference March 18 2015

Rosner PPT Wharton/NYFed Conference March 18 2015

http://www.scribd.com/doc/259147917/Rosner-PPT-Wharton-NYFed-Conference-March-18-2015#scribd

The Future of the U.S. Housing Finance System: Bringing the U.S. Residential Mortgage Finance System into the 21st Century
Joshua Rosner Graham Fisher & Co.
March 18, 2015

If FHFA Does Its Job, Legislation Becomes Easier

Congress should ensure that the GSEs’ regulator places safety and soundness of these companies as primary.

Replace the current regulatory oversight with a Public Utility Commission responsible for determining allowable rates of return:
 –
 Any income above that rate of return would go to enhance capital.
 –
 Any income above the enhanced capital requirements would be split between dividends and an affordable housing trust fund.
 –
With capped rates of return the GSEs would not have the deep pockets with which to lobby legislators, thus avoiding much of the basis for capture.

Use stringent methods to price guarantees, separate from the GSEs and from political influence.
This would create incentives for increased private market, unwrapped issuances on which investors would be forced to retain the risk (eliminating the broad government guarantee);

Sever the government’s sponsorship to end the provisioning of an implied government guarantee;

Ensure that GSEs can function in a counter-cyclical environment, the GSEs are regulated in the same manner as other utilities providing essential public services.
“A public utility model offers one possibility for incorporating private ownership. In such a  model, the GSE remains a corporation with shareholders but is overseen by a public board.  Beyond simply monitoring safety and soundness, the regulator would also establish pricing  and other rules consistent with a promised rate of return to shareholders”
 –
Federal Reserve Chairman Ben Bernanke (October 31, 2008)

Tuesday, March 17, 2015

The Probe: #fanniegate

The Probe

Many financial institutions resorted to inappropriate, misleading, aggressive and fraudulent methods to boost their mortgage operations during the pre-crisis period that fueled the sub-prime mortgage crisis. Consequently, Freddie Mac and Fannie Mae reached the brink of bankruptcy and the government intervened to rescue these lenders.

In order to avoid such dire situations in the future, the regulators started implementing stringent restrictions. Consequently in 2011, the Federal Housing Finance Agency (‘FHFA’) sued 18 financial organizations, including Wall Street biggies like The Goldman Sachs Group, Inc. and Bank of America Corp. BAC for selling faulty mortgage-backed securities to Freddie Mac and Fannie Mae that caused investors severe losses.

http://finance.yahoo.com/news/nomura-royal-bank-scotland-fha-200308418.html

One more time:
Many financial institutions resorted to inappropriate, misleading, aggressive and fraudulent methods to boost their mortgage operations during the pre-crisis period that fueled the sub-prime mortgage crisis.

Consequently, Freddie Mac and Fannie Mae reached the brink of bankruptcy and the government intervened to rescue these lenders.

That sums it up. BANKS should be wound down or Fannie mae and Freddie Mac?
The answer is in the PROBE!

The FHFA has accused the Japan-based Nomura, sponsor of the above mentioned securities, and Royal Bank of Scotland, the underwriter, of providing it with misleading details about securities worth $2 billion. Moreover, the regulator has alleged the underwriter of misconduct in the underwriting process, which artificially inflated the average value of securities by 11.1%.

If proven guilty, the banks will have to take over the distressed securities worth $480 million (valued a week ago), besides incurring the $1 billion fine.

FRAUD for $2 billion will cost them $1.48 billion, worst case, if Nomura loses in court. 
Not $2 billion! Why is that? Same reason the TBTF banks got off with 10 cents on the dollar for their FRAUD against Fannie mae and Freddie mac! Over $200 billion in Fraud was committed by the TBTF banks and the VICTIM'S were Fannie and Freddie (GSE'S)

#Fanniegate FannieGate