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
Mar. 31, 2014, 10:26 AM
Mar. 23, 2014, 3:04 AM
- Credit Suisse (CS) has agreed to pay $885M is a deal with the Federal Housing Finance Agency to settle allegations that the Swiss bank misled Fannie Mae (FNMA) and Freddie (FMCC) about the quality of mortgage loans that the company sold them from 2005-2007. Fannie will receive $234M and Freddie $651M.
- As is often the way in these matters, Credit Suisse didn't admit to liability or wrongdoing.
- Following the deal, Credit Suisse is taking a charge of 275M Swiss francs ($312M) on its earnings and now says it made a Q4 net loss of 8M francs after initially reporting a 267M franc profit.
Mar. 21, 2014, 3:00 PM
- The move comes following Fitch earlier today returning the outlook on the U.S. government's AAA rating to stable from negative. "The housing GSEs are among the most active issuers in the capital markets, benefiting from meaningful financial support from the U.S. government."
- Both Fannie Mae (FNMA) and Freddie Mac (FMCC +0.8%) are now AAA with stable outlook.
Mar. 18, 2014, 1:13 PM
- Fannie Mae (FNMA -15.7%) and Freddie Mac (FMCC -15.5%) get just a little sell-side love, with KBW's Bose George boosting his price targets on both to $2 from $0, though he keeps an Underperform rating on the duo.
- The PT change "incorporate(s) the possibility of a combination of a legal victory for shareholders combined with a lack of action on both the regulatory and legislative fronts that hurts the value of the GSEs," says George, who may be the only sell-sider still covering the GSEs after they were put into conservatorship in 2008.
Mar. 13, 2014, 11:20 AM
- “It’s hard to find any reasonable outcome that’s really terrible for the preferreds, given what I perceive to be the value of the business that’s already there," says portfolio manager Jeffrey Lewis, an owner of the shares. Investors in the common stock, however, are making a bet Fannie Mae (FNMA +12.4%) and Freddie Mac (FMCC +13.4%) will be allowed to become dominating private companies again and keep their profits.
- It's up to the courts to decide how investors will be treated, says Sen. Mike Crapo, who co-wrote the bill to wind the GSEs down. "We are not necessarily going to dictate the outcome."
- As for whether a bill actually becomes law anytime soon, former Senate banking panel aide Mark Calabria gives it maybe a 10% chance of getting to the president's desk this year. The dim prospects look to be giving a boost to the common shares today.
Mar. 12, 2014, 11:09 AM
- Fannie Mae (FNMA -11.7%) and Freddie Mac (FMCC -12.1%) are lower again in volatile action one day after a the release of a Senate proposal to wind the two down. Both stocks earlier took out the panicky lows made yesterday, but have bounced since.
- SA contributor Achilles Research reminds yesterday's news was completely expected and provided zero new information. The bill is the prototypical DOA legislation, especially with upcoming elections.
- The selloff, says Achilles, is a classic market panic in a couple of highly speculative and overextended names. Congress will do what it likes, but the fate of shareholders will ultimately be decided in the courts.
Mar. 11, 2014, 3:52 PM
- "While I strongly support GSE reform that protects taxpayers, such efforts should also be mindful of investors," says Senator Pat Toomey, sticking up for preferred and common stockholders of Fannie Mae (FNMA -30.6%) and Freddie Mac (FMCC -27.5%) in wake of a proposed bill to wind down the GSEs.
- "Taxpayers should be fully compensated, but once they are, investors ... should not be denied their fair share of any remaining value."
- "The government¹s actions with respect to the GSEs' profits raise serious concerns, including whether these actions lawfully respect the rights and interests of all Americans."
- Previous: Fannie and Freddie plunge on wind-down proposal.
Mar. 11, 2014, 3:06 PM
- In one of the great delayed reactions of recent times, Fannie Mae (FNMA -39%) and Freddie Mac (FMCC -36.4%) plunge in wake of the proposed bipartisan Senate bill calling for their wind-down. Like Wile E. Coyote after running off the edge of a cliff, the stocks hung around in positive territory for a couple of hours after the news hit ... then they looked down.
- The Fannie "S" series preferred is off 9.9%, Freddie's is down 18.5%.
Mar. 11, 2014, 12:57 PM
- Buying low and selling high in the GSEs continues unabated as a long-awaited bipartisan Senate bill is introduced to continue government backing of mortgages, but wind down Fannie Mae (FNMA +4.5%) and Freddie Mac (FMCC +4.7%).
- The White House: “We support this effort and believe it is a workable bipartisan approach to complete the biggest remaining piece of post-recession financial reform.”
- A bill in the more conservative House would more or less cut the government out of housing finance. With elections months away, the chance of any sort of reform becoming law this year are probably slim.
Mar. 10, 2014, 12:45 PM
- "Total nonsense," says Bruce Berkowitz of Treasury's claim that 2012's altering of the Fannie (FNMA +4.1%) and Freddie (FMCC +3.3%) bailout - in which regular dividends were scrapped in favor of the "profit sweep" - was necessary because at the time it was worried the two couldn't earn enough to make the payments (a forecast the improving housing market has made wrong).
- Berkowitz's reading of the original bailout says the GSEs could have issued more stock to Treasury in lieu of cash, and he's' scratching his head as to how both the government and the GSEs failed to know this. Conspiracy? “I prefer the simpler reason that no one bothered to read the agreement.”
- Another reason is government lawyers' reading of the documents differs with Berkowitz. Ultimately, a judge will probably decide.
- Separately, how going long Fannie and Freddie became the latest version of The Greatest Trade Ever.
Mar. 4, 2014, 12:15 PM
- "I am confident that the Board is doing its job," says Fannie Mae (FNMA +3.3%) Chairman Phillip Laskawy, responding to Bruce Berkowitz's letter from yesterday demanding the GSEs begin retaining earnings to rebuild capital, and stop borrowing to pay voluntary dividends to Treasury.
- "FHFA has retained certain authorities for its exclusive determination and control, as provided by federal statute, including all decisions relating to the declaration and payment of dividends to the United States Treasury. Our Board and management will continue to perform their duties, as provided by federal statute and delegated by FHFA, diligently and to the best of their abilities," continues Laskawy in a long version of saying Fannie will continue to take orders from the government (Freddie Mac (FMCC +1.6%) too, no doubt).
- Press release
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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