Wed, Apr. 15, 4:40 PM
- Low-income housing advocates are sure to be disappointed by what's expected to be a very modest cut in fees from Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). Riskier borrowers could see savings amounting to just hundredths of a percentage point on a mortgage rate.
- It could be worse. Prior to Mel Watt taking over at the FHFA, his predecessor Ed DeMarco was planning on hiking fees - a move Watt promptly halted, leading some to believe a significant move in the other direction was coming.
- Source: WSJ
Fri, Apr. 10, 12:26 PM
- The WSJ's John Carney has repeatedly ignored securities owned by Treasury in his calculations of the government's return on investment in Fannie Mae (OTCQB:FNMA +2.7%) and Freddie Mac (OTCQB:FMCC +2.8%), writes Dick Bove.
- The senior preferred securities held by the U.S. have 10% coupons, says Bove, making them worth far more than their combined $189B in face value. If allowed to trade on the open market, they could go for a 75% premium, putting their value at $331B.
- Then there's the warrants - the Treasury owns 7.2M of them (Fannie and Freddie combined). Carney values them based on the current market prices of the GSEs, but they would be worth tens of billions more under fairly conservative assumptions were Fannie and Freddie released from their conservatorship.
- Adding it all up, Bove finds the government with a profit of $416B on its $189B investment, and he believes the Grassley inquiry is aimed at getting past a lot of the hyperbole and finding out the facts.
- Previously: Carney: Grassley letter not indication of support for GSE lawsuits (April 9)
- Previously: FRBNY: Fannie and Freddie have not yet repaid bailout (March 25)
Thu, Apr. 9, 9:37 AM
- “Senator Grassley isn’t taking a position on who’s entitled to what shares or appropriate levels of return," says his spokeswoman Jill Gerber.
- Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) had big sessions yesterday after Senator Grassley - chairman of the Judiciary Committee - sent letters to the DOJ and Treasury seeking details about the government's stonewalling over the release of documents pertaining to the decision to change the terms of the GSEs' bailout.
- Dick Bove called the letter "gargantuan news."
- More from Gerber: "He’s simply asking why the Administration reportedly is citing executive privilege to withhold documents on major government decisions."
- Source: WSJ
Wed, Mar. 25, 3:58 PM
- Treasury's investment in the mortgage giants is entitled to a "substantial risk premium," argues a new paper from the New York Fed, thus justifying payments well in excess of the nominal bailout amount.
- Fannie Mae received $116.1B and has repaid $134.5B; Freddie received $71.3B and has repaid $91B, reports John Carney.
- What's more, the government backstop has lowered funding costs for Fannie (OTCQB:FNMA -1.6%) and Freddie (OTCQB:FMCC -1%), thus boosting profits for the two. The government has also never forced payment of the commitment fee the GSEs promised to pay in exchange for Treasury's commitment to continue providing emergency funding.
- Instead of being returned to control of shareholders, the two should be wound down, concludes the paper, which calls the failure to do so a "colossal missed opportunity to put U.S. residential mortgage finance on a more stable long-term footing."
Wed, Mar. 18, 2:14 AM
- Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) could require more bailouts from U.S. taxpayers due to rising risks from shrinking reserves, said the FHFA's Inspector General in a report today.
- The firms could chalk up losses on their derivatives portfolios again, similar to those they reported in the fourth quarter, increasing "the likelihood of additional Treasury investment," the report continued.
- The possibility of another taxpayer draw raises pressure on Congress to overhaul housing finance laws, although new legislation is not expected anytime soon.
Thu, Mar. 5, 2:29 PM
- "Let me remind you, both recapitalization of (OTCQB:FNMA and OTCQB:FMCC) and draws against the existing Treasury backstop due to potential future losses would come at taxpayers’ expense,” says Michael Stegman, Treasurys counselor to the secretary for housing finance policy, speaking at a Goldman Sachs housing-finance conference.
- He notes both have significant remaining credit to draw on should capital run low.
- In the absence of any housing finance reform from Congress, Stegman suggests he would like to see the two GSE wind down their mortgage portfolios at a faster pace than is currently happening. He also likes recent efforts to offload some of their credit risk to the private sector, and would like to see more of such deals.
Fri, Feb. 20, 8:16 AM
- Q4 net income of $1.3B vs. $3.9B in Q3. Full-year net income of $14.2B vs. $84B in 2013. Last year's income included a $45.4B tax benefit.
- Fannie (OTCQB:FNMA) expects to pay Treasury $1.9B in dividends this quarter, bringing the total paid to $136.4B vs. draws of $116.1B.
- "Fannie Mae expects to remain profitable on an annual basis for the foreseeable future; however, the company expects its earnings in future years will be substantially lower than its earnings for 2014, due primarily to the company’s expectation of substantially lower income from resolution agreements, continued declines in net interest income from its retained mortgage portfolio assets, and lower credit related income."
- Previously: Fannie Mae reports Q4 results (Feb. 20)
- Full report
Fri, Feb. 20, 7:56 AM
Tue, Feb. 17, 10:15 AM
- A weekend piece in the NYT brings to light the extraordinary secrecy claims the government is making to prevent it from having to produce documents concerning the decision to expropriate all profits of Fannie Mae (OTCQB:FNMA +12%) and Freddie Mac (OTCQB:FMCC +13.6%) in late-summer 2012.
- At issue is exactly what the Obama administration - in the midst of an election battle and eyeing surprise profits at the GSEs - had in mind when it altered the bailout agreement and ordered the sweep.
- More fuel: Hank Greenberg's suit against the government over the AIG could be tilting in his favor. The "Greenberg Trade," says Charlie Gasparino, is a favorite of money managers betting that if Greenberg wins, it bodes well for those fighting the government over Frannie.
- The two stocks are higher by more than 30% over the past couple of sessions.
Mon, Feb. 2, 8:18 AM
- Bruce Berkowitz's Fairholme Fund (MUTF:FAIRX) pickup about 3.1M common shares of Freddie Mac (OTCQB:FMCC) and 1.8M shares of Fannie Mae (OTCQB:FNMA) between Aug. 31 and Nov. 30 last year, according to the Fairholme annual report. As the stock prices of the two fell sharply, the fund's weighting in their common stock remained at 1.1% (the fund maintains a larger preferred stake in the two).
- "Timing is proving our thesis true," says Berkowitz.
Dec. 17, 2014, 11:30 AM
Dec. 10, 2014, 3:15 PM
- “The only way to responsibly end the conservatorship is through legislation,” said Treasury's Michael Stegman recently, dashing hopes the President might do for Fannie Mae (OTCQB:FNMA -2.2%) and Freddie Mac (OTCQB:FMCC -2.1%) what he recently did for immigration (i.e. end a legislative stalemate by making an executive order).
- These weren't off-the-cuff remarks, notes John Carney, but a prepared speech published on the Treasury website.
- Still, says Carney, bulls on the GSEs continue to pine for a "quick fix" to end the conservatorships and maybe give some real value to their common stock. "Simple or not, it isn't a play the Obama administration is set to call."
Dec. 8, 2014, 12:53 PM
- “There is a group of millennials that are waiting out there to jump into the market that do have the ability to repay,” say FHFA officials on a call announcing official approval of 97% LTV mortgages.
- Fannie Mae (OTCQB:FNMA -2%), which has more experience with the program, is already accepting applications, but Freddie Mac (OTCQB:FMCC -2.1%) - newer to the product - is waiting until late March for full implementation.
- Homebuilder ETFs: XHB, ITB
Nov. 29, 2014, 8:00 AM
- New guidelines - set to take full effect on December 1 - are the result of an agreement reached last month between banks and the GSEs meant to clarify exactly when lenders could be called to task for mortgages sold to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) which ultimately default. Since the financial crisis, Fannie and Freddie have forced banks to repurchase billions of dollars worth of mortgages, leaving them naturally gun-shy about making new loans to all but the most pristine of credits.
- “It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” says Mike Heid, president of Wells Fargo (NYSE:WFC) Home Mortgage. Along with SunTrust (NYSE:STI), Wells says borrowers should begin to see initial changes - such as faster processing times, reduced credit score requirements, and greater leeway to those whose credit history suffered due to one-time events - in a few weeks.
- "We will be able to be looser and open up the net wider," says Mason-McDuffie Mortgage CEO Bill Godfrey, now expecting to make loans down to a 620 credit score from 660 previously.
- Not everyone agrees: “Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times…we are simply going to stay on the sidelines," U.S. Bancorp (NYSE:USB) boss Richard Davis has said, and Bank of America (NYSE:BAC) CEO Brian Moynihan made similar comments at a recent conference.
Nov. 21, 2014, 2:12 AM
- Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) have revised their representation and warranty framework in response to lender concerns about the risk on buying back loans sold to the two agencies.
- Fannie says it can now only seek a mortgage repurchase if it determines the failure to comply would undermine its rights on the loan, result in a liability for the company or if the lender violated a consumer protection law or regulation. Freddie has made similar changes.
Nov. 19, 2014, 11:50 AM
- "Everyone agrees that conservatorship cannot continue forever," says Senator Tim Johnson in prepared remarks for a Senate Banking Committee hearing on the GSEs. "If Congress cannot agree on a smooth, more certain path forward, I urge you, (FHFA) Director Watt, to engage the Treasury Department in talks to end the conservatorship.”
- Watt: "Conservatorship cannot, should not be a permanent state."
- Fannie Mae (OTCQB:FNMA +10.6%), Freddie Mac (OTCQB:FMCC +9%)
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.
Other News & PR