May 16, 2014, 3:55 PM
- “I don’t lay awake at night worrying about what’s fair to the shareholders,” says FHFA boss Mel Watt in an interview to be aired on Sunday. "There would be no Fannie (FNMA -1.8%) or Freddie (FMCC -1.2%) but for the taxpayers."
- Watt also notes the he had no role in altering the bailout agreements to allow for the continuous taking of all GSEs profits by Treasury. “I don’t know whether I would have thought differently had I been there, but I don’t have that luxury ... It’s an arrangement that I’m comfortable operating under.”
May 15, 2014, 12:20 PM
- The Senate Banking Committee today passed a bill to wind down Fannie Mae (FNMA -2.8%) and Freddie Mac (FMCC -3%), but the vote, 13-9 in favor, looks too narrow to force the full Senate to vote on the legislation. The bill's authors say they'll try and add support in coming weeks, but the chances of something winding up on the President's desk this year look slim.
- Previously: U-turn on GSE mortgage policy
May 14, 2014, 6:24 AM
- Obtaining a mortgage may be about to get a lot easier as FHFA chief Mel Watt - in his first public speech since taking over as regulator of Fannie Mae (FNMA) and Freddie Mac (FMCC) in January - says the mortgage giants should focus on making credit more readily available to homeowners.
- The call is a U-turn from the policy of previous FHFA boss Ed DeMarco. "I don't think it's FHFA's role to contract the footprint of Fannie and Freddie," says Watt, adding that winding down the companies without proof private investors are willing to fill the gap "would be irresponsible."
May 8, 2014, 7:59 AM
May 8, 2014, 7:41 AM
- Fannie Mae (FNMA) Q1 net income of $5.3B vs. $5.7B in Q4, and includes $4.1B in revenue from legal settlements.
- Expected $5.7B dividend payment to Treasury will bring total to $126.8B vs. $116.1B in draws.
- "Fannie Mae expects to remain profitable for the foreseeable future," but annual net income going forward should be "substantially lower" than 2013.
- Press release
May 6, 2014, 12:01 PM
- Now making the rounds is Bill Ackman's 111-page slide presentation laying out the bull case on Fannie Mae (FNMA +2.9%) and Freddie Mac (FMCC -0.7%)
- Yesterday: Ackman pitches Fannie and Freddie at Ira Sohn
- Ackman notes much of the GSEs losses during the financial crisis - which pushed their capital levels far below minimum requirements and precipitated the bailout - were due to credit provisions. What actually happened, though, were losses of "just" $102B, or $142B less than the cumulative provisions taken from 2007-2011.
- Further, much of those losses were the result of an ill-fated move to guarantee Alt-A and subprime loans. Losses from just the core portfolio of prime mortgages would have been only barely enough to push the GSEs below their minimum capital levels.
May 5, 2014, 3:47 PM
- Finally addressing Congressional plans to wind Fannie (FNMA +2.8%) and Freddie (FMCC +1.8%) down, Ackman isn't buying it. A private-label replacement would need to raise $500B to capitalize itself, he says - not likely given the government's "stealing" of the GSEs dividends. "We don't think there's an investor in the world of any consequence that will invest in a new version of Fannie and Freddie."
- Previously: Ackman pitches Fannie and Freddie at Ira Sohn
May 5, 2014, 3:35 PM
- One of the hot hands in the hedge fund world at the moment, Bill Ackman reiterates his bull case on the GSEs. Owning Fannie Mae (FNMA -1.8%) and Freddie Mac (FMCC -1.8%), he says, is like owning a royalty on the housing market.
- Ackman first disclosed stakes in the common stock of both last November and boosted those bets with a derivative play earlier this year.
- Earlier Sohn conference coverage
- Live blog
Apr. 30, 2014, 11:09 AM
- Under the FHFA's baseline scenario, neither Fannie Mae (FNMA -1.3%) nor Freddie Mac (FMCC -1.8%) would require addition draws from the Treasury through 2015, but under the "severely adverse" scenario applied to the banks by the Fed in its stress tests, incremental draws of between $84.4B and $190B would be necessary.
- The severely adverse scenario includes a 25% decline in home prices over about a two-year period, a 20-90% decline in non-agency MBS prices, and the instantaneous default of the largest derivative counterparty.
- Under the worst FHFA scenario, home prices would decline 2% over nine quarters.
Apr. 29, 2014, 5:09 AM
- The Senate Banking Committee is due to meet today to discuss replacing Fannie Mae (FNMA) and Freddie Mac (FMCC) with an agency that will offer a government mortgage guarantee but only after private interests have absorbed big losses.
- However, the agency would still preserve the 30-year fixed rate loans that are at the center of the mortgage system.
- The 22-member panel is expected to approve the proposals, although supporters want at least 16 votes so they can pressure for a ballot on the Senate floor.
Apr. 28, 2014, 8:09 AM
- As soon as tomorrow, the Senate Banking Committee will decide if GSE reform legislation - which would wind down Fannie Mae (FNMA) and Freddie Mac (FMCC) over five years - will move forward or not. At the moment, committee leaders are involved in busy horse-trading to win over a few of the half-dozen Democrats on the panel who haven't yet come out in support.
- An impasse means the status quo - in which the two companies operate under federal control with no resolution on the status of privately-owned stakes - could continue for years.
- At the moment, a majority looks to be in place to move the bill out of committee, but Majority Leader Reid is expected to allow a floor vote only if more Democrats come on board. “Senate leadership appears far from enthused by the prospects of a floor vote on the measure,” says Compass Point's Isaac Boltanksy. “Reforming the mortgage market just doesn’t fit into the pre-election priorities of either party.”
Apr. 25, 2014, 4:43 AM
- The amount that lenders originated in mortgage loans plunged 58% on year Q1 to a 14-year low of $235B, almost entirely due to drop in refinancing. The figures are from industry newsletter Inside Mortgage Finance.
- Loans for acquisitions were flat on year and lower than in Q4.
- The trend is the latest indication that increasing interest rates are hampering the housing recovery. The average 30-year fixed-rate mortgage was 4.5% last week, up from 3.6% in May last year, when rates spiked after the Fed indicated it would scale back its QE program.
- Tickers: DHI, PHM, RYL, MHO, NVR, LEN, SPF, MDC, HOV, TOL ORI, NLY, AGNC, MTGE, ARR, TWO, IVR, CMO, MFA, WMC, FMCC, FNMA, RDN, NMIH, ESNT, GNW
- ETFs/ETNs: ITB, XHB, MORT, MORL, REM, MORT, MORT
Apr. 24, 2014, 8:17 AM
- "Any time a large financial institution starts promising regular earnings increases, you're going to have trouble," Warren Buffett famously said in 2010, explaining why he dumped stakes in Freddie Mac (FMCC) and Fannie Mae (FNMA) many years before the housing bust.
- As for whether Berkshire Hathaway (BRK.A, BRK.B) has any interest in the GSEs at this point, the answer is "no," says Buffett in a Bloomberg interview. Buffett does though, see a role for government in housing finance. "The 30-year fixed-rate mortgage is very good for the American public and I think that you will need government participation in some way to bring the costs down.”
Apr. 22, 2014, 12:19 PM
- The markup session for the housing-finance reform bill - which has the support of the bipartisan leadership of the Senate Banking Committee - is set for April 29, leaving only about one month for Congress to vote before election season begins. Height Analytics' Edwin Groshans thinks there's less a less-than 5% chance of passage this year.
- By scheduling such a late markup session, lawmakers hoped to have time to raise support for the complex bill which would include the contentious wind-downs of FNMA and FMCC. There is, of course, a wide chasm between the Senate and more conservative House views, but there's also Fannie and Freddie shareholders looking to be heard.
Apr. 4, 2014, 9:17 AM
- "It's a stretch," says former FHFA chief James Lockhart of those investors who have bought up the stock of Fannie Mae (FNMA) and Freddie Mac (FMCC) hoping to profit should government lift its thumb off the companies. "The (common) stock and the preferred is worthless and should be worthless."
- Lockhart is now vice chairman at WL Ross & Co, where they know a thing or two about distressed securities.
Mar. 31, 2014, 11:06 AM
- Pershing Square actually hasn't boosted its near-10% stakes in Fannie Mae (FNMA +4.5%) and Freddie Mac (FMCC +3.1%). Instead it's entered swap agreements in each, bringing its "total economic exposure" to 11.31% of Fannie and 11.08% in Freddie. Pershing gets paid as the stock rises (or dividends are made), and the counterparty gets paid as the stock falls.
- SEC Forms 13D for Fannie, for Freddie
FNMA vs. ETF Alternatives
Fannie Mae is a government-sponsored enterprise that was chartered by Congress in 1938 to support liquidity, stability and affordability in the secondary mortgage market, where existing mortgage-related assets are purchased and sold.
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