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User 16154732

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  • Fannie And Freddie: It Was Never An Issue Of Solvency [View article]
    Don’t question my credentials they are out of scope and irrelevant-- question the facts!
    “Will you do your own homework, Marv?”

    Solvency was the issue then and remains a concern now.

    I never said all DTA’s were due to LIHTC (but for the GSE’s Accumulated unused LIHTCs were the bulk of what was recently reversed as an accounting gimmick at Fannie and one-time spike in earnings. Freddie has not pulled the trigger on it’s LIHTC yet)

    There has been a lot of movement in the accounting space about LIHTC investments; a few people/firms have created a cottage industry. However, the Financial Accounting Standards Board’s Emerging Issues Task Force (EITF) deferred approval of revised standards for accounting for low-income housing tax credit (LIHTC) investments, including the DTA treatment.

    On the International Banking side, under Basel III, a new rule has been adopted with respect to what are called “deferred tax assets,” which are tax credit and loss carry-forwards. The new rule provides that if a bank does not expect to be able to use its deferred tax assets within the next 12 months, those assets come off your balance sheet for purposes of measuring capital adequacy.
    Pre conservatorship, Fannie and Freddie were counting these unused credits as capital (to be clear -- that’s a no-no).

    Regarding losses and charge-offs – suffice to say the GSE’s are fighting tooth and nail to avoid the asset classifications applied to banks. Federal Housing Finance Agency (FHFA) Prudential Management and Operations Standards (PMOS) were published on August 7, 2012 but questions remain as to whether they can be enforced. For example, although FHFA issued Advisory Bulletin 2012-02 over two years ago, neither GSE is in a position to comply. There is still widespread mistrust in the GSE’s ability to classify loans and the quality and reliability of loan loss provisions.

    Dude, transparency has never been the GSE’s strong suit. Recall they were exempt from SEC filings until 2004 and Arthur Andersen (infamous for Enron, MCI/Worldcom, Waste Management and Sunbeam) was Fannie’s external auditors until they were replaced by Deloitte with massive restatements and a scandal.

    Prior to 1992 no one questioned the GSE capital reserves but then they grew ten-fold in size. A capital requirement of 3.5% was set. What became a growing problem was that the GSE’s were not required to maintain capital reserves similar to the banks and Deferred Tax Assets should not have been a component of those already way too small capital reserves.

    Also the GSE’s have not paid back the government, READ the SPSA agreements! Saying the dividends paid exceed the amount borrowed is not the same as a repayment of principal. Not one dollar of principal has been repaid to date. That is a fact.

    Finally gain a better understanding of how and why they make money. Fannie and Freddie make money guaranteeing payment on mortgage backed securities. Without the government support that guarantee is worthless to an investor. But if you want to play this longshot the common stock would not be the investment of choice.
    Oct 9, 2014. 12:05 PM | Likes Like |Link to Comment
  • Fannie And Freddie: It Was Never An Issue Of Solvency [View article]
    "a deferred tax asset existed, but Treasury told the GSEs that they could not use it."
    I'm sorry but you have no clue what a LIHTC tax credit is. It can only be used when you have a profit to offset. LIHTCs were the bulk of the DTAs. The problem was liquidity. When a mortgage goes bad after 4 months the GSE's purchase the loan at face value out of any mortgage backed security they guarantee. They did not have sufficient reserves to do so when the sh*t hit the fan in 2008.

    Regarding reserves do you understand when Fannie actually books a loss? Unlike a bank which writes off bad debt at 180 days, the GSE's may hold off on recording a loss until asset disposition, which could be 5 years or more. These companies are recovering quickly but far from a statement like solvency is not a problem.

    You are completely ignorant of the truth.
    Oct 7, 2014. 04:50 PM | 2 Likes Like |Link to Comment
  • Mortgage Supply Problems [View article]
    I agree with M Plaut that banks should not be asset based lenders as much as cash flow lenders. This over-reliance on home appreciation is what got the subprime market so frothy before the crisis. It is not a rate issue as much as a capacity issue for mortgages. One other demand factor to consider is that first time home buyers are having difficulty in this tightened credit environment because the focus is properly placed on DTI and ability to repay. The unsecured consumer credit cards which are still readily available to borrowers at super high interest rates (I would argue this is a rate issue) continue to soak up any available income to put toward debt service with the rates often exceeding 22% (it is really like debtors prison). Contrast that with the 10 year risk free rate on a Treasury note of 1.85% or a German Bund at less than 1%. This is usury, plain and simple.
    Without young employed first time buyers the mortgage market will continue to suffer. I don't think the problem is solved by lower mortgage lending standards but rather to limit the amount of unsecured debt a borrow can have to a reasonable level such as 15% of their income. In addition limits of CLTV should exist for second mortgages similar to the Texas state law restricting second mortgages.
    Aug 18, 2014. 11:40 AM | Likes Like |Link to Comment
  • Fannie Mae Q2 Earnings Down, But Credit Quality Up [View article]
    I hope that Fannie Mae eventually gets to recapitalize. I thought the 10% dividend was too high, I further thought that forcing additional borrowings to pay that 10% dividend was loan sharking, the dividend sweep...a compromise but still unprecedented...however, allowing $10 Billion of non-accrual loans carried at cost to remain on the books when any other institution would have written them off after half a year of non-payment is continuing to treat them with kid gloves. Further allowing Fannie to hold 100,000 loans in REO without having to sell them is also allowing "asset games". Other large institutions must sell REO within 5 years. Fannie and Freddie are not Japanese banks they need to come clean and then rebuild.
    Aug 11, 2014. 09:52 AM | 2 Likes Like |Link to Comment
  • Fannie Mae Q2 Earnings Down, But Credit Quality Up [View article]
    No agenda, a new commenter yes, and knowledgeable on the industry. There are still major concerns with this company and they shouldn't be reducing reserves. It is idiotic and slanted to imply the Treasury under any administration is robbing anyone.

    You are more loquacious indeed but equally devoid of facts. I actually read the 10-Q and remain neutral on the politics. Your comments show you are nothing more than an Obama cheerleader. I hope you find a more productive job.
    Aug 8, 2014. 01:44 PM | Likes Like |Link to Comment
  • Fannie Mae Q2 Earnings Down, But Credit Quality Up [View article]
    How uninformed. Fannie Mae refuses to write-off billions in nonaccrual zombie loans. Also, there is no mention that 45% of net income of FNM is from credit reserve releases. Are you a lobbyist? Was this a paid endorsement?
    Aug 8, 2014. 11:19 AM | Likes Like |Link to Comment
  • Fannie Mae, Should It Go Away? [View article]
    Fannie and Freddie are propped up with Saturday Night Fever era Cobalt and DOS based systems cobbled together over 30 years and are almost incapable of slicing and dicing their investment portfolios for basic analytics the way even a new small community bank could. They continue to but mortgages on the honor system under a threat of repurchases which are hardly ever settled at 100 cents on the dollar. They used accounting gimmickry based on unused Affordable Housing tax credits to feign a return to profitability and in reality have yet to pay back any principal on their bailout draws from Treasury. All their payments have been dividends. They should continue to move towards building out a new securitization platform and not be allowed to waiver from prudent underwriting in the meantime. Then and only then do they deserve a recapitalization discussion.
    Jul 9, 2014. 12:06 PM | Likes Like |Link to Comment
  • Citi aims to boost mortgage lending [View news story]
    Citi's marketshare has dropped because it cannot compete in a high tech environment. Better to deal with Quicken or Green Tree.
    May 20, 2014. 02:43 PM | Likes Like |Link to Comment
  • Citi Announces Sale of Mortgage Servicing Rights for Loans with Unpaid Principal Balances of $10.3 Billion [View article]
    Citibank gets paid and is taken out of the on-going responsibilities attached to these loans, and as a result will not have to post additional Basel III capital in reserves. Sounds positive for Citibank. Every transaction has a winner and a loser. The delinquent loans serviced by Citibank for Fannie Mae have moved from a well capitalized highly regulated bank to whom? Another company might perform tasks better but do they have any capital behind them to survive additional market turbulence? How does the Government feel about this?
    Jan 16, 2014. 06:02 PM | Likes Like |Link to Comment
  • Fannie Mae Common Stock: A Once In A Lifetime Asymmetric Bet On Washington's Dysfunction [View article]
    "given the return to profitability..." The bulk of the $60B was a reactivation of US government LIHTC tax credits used to offset taxable income. In addition much of the recent profit has come not from profitable operations but rather accounting changes like a reduction in loss reserves set aside to offset their best guess of eventual losses from delinquent loans. Further if you think that the underwriting standards have remained high, you are blind to the high Loan-to-Value HARP refinancing and Multifamily interest only loans that are pervasive.
    Oct 3, 2013. 12:05 PM | 1 Like Like |Link to Comment