Every saint has a past, and every sinner has a future." The
mortgage industry has both, and it is important to remember that individuals
and companies do some fine works of charity around the nation - few of which
are mentioned by the mainstream press. Today's commentary has a random
cross-section of what many are doing to help others in need, big and small. Of
course I can't print all of the efforts of hundreds of lenders and tens of
thousands of individuals are doing, but it is important to remember that the
industry is doing its part, and then some!
Lenders continue to help those less fortunate. Of course I can't
list every company's & individual's good works, but here is a random
sampling of lenders helping others that are usually not mentioned by the
mainstream press.
Over the past 4 years, the employees of Fairway Independent
Mortgage Corporation have contributed over $1.5 million dollars to
Fairway's non-profit, the American Warrior Initiative, to fund initiatives all
over the country for wounded veterans. Those initiatives have included
business grants, service dogs, vehicles, mortgage free homes, home upgrades and
remodels, home furnishings, housing assistance, help for homeless veterans,
sponsorship of para-triathletes, and much more. "The mission of Fairway's
American Warrior Initiative is to educate and inspire Americans to give back to
our wounded heroes. Over the past 3 years, almost 50 boot camps have been
held across the country, led by Louise Thaxton with Fairway and Sean Parnell,
Army Ranger and author of the NY Times best seller, 'Outlaw
Platoon.' These boot camps are hosted by Fairway branches and over 10,000
real estate agents have not only received continuing education credits, they
also learned how to best serve and give back to military clients with the
message of, 'None of us can do everything but all of us can do ONE THING.'
Through payroll deduction, Fairway employees, loan officers, processors,
underwriters, contribute on a monthly basis to fund these life changing
initiatives. In the words of CEO Steve Jacobson, "They served us -
now we serve them."
Ann Arbor's Gold Star Mortgage Financial Group is proud
to be an active member of the communities it serves. CEO Dan Milstein wrote,
"Some of our most recent charitable initiatives include an annual
Make-A-Wish charity golf outing, quarterly Gold Star 'FUNdraisers' (small,
corporate-sponsored events held every quarter that give employees an
opportunity to socialize while contributing to causes they care about, such as
the local Humane Society), annual toy drives for the Toys-For-Tots program
[that we've been doing for several years], and a holiday gift collection for
Adopt-A-Family, a program that benefits local families in need in the
communities across the country we operate in. At this year's Make-A-Wish golf
outing (this year was our second annual), we raised $10,000, enough to grant a
full wish to a child facing a life-limiting illness."
The industry is very interested in what Freddie Mac and Fannie
Mae are up to, and this week saw the duo announce their earnings. First was
Freddie Mac which reported a loss of over $500 million - its first loss in over
four years! Federal Housing Finance Agency Director Mel Watt said the Treasury may have to inject some
capital. "Volatility in interest rates coupled with a capital
buffer that will decline to zero in 2018 under the terms of the senior
preferred stock purchase agreements with Treasury will likely make both
enterprises increasingly susceptible to the possibility of quarterly losses
that could result in draws going forward." Freddie's loss reflected two
market-related items: a $1.5 billion loss on the value of derivatives used to
hedge the company's interest rate risk versus a $600 million loss due to credit
spread changes on various assets and liabilities measures at fair value.
Fannie, however, logged in with a profit of $1.96 billion, half
of its prior results - but heck, who wouldn't take nearly $2 billion? The
decline to $1.96 billion was driven by fair-value losses: the drop in long-term
interest rates hurt the value of Fannie's derivative position. Fannie Mae saw its 15th
straight profitable quarter and said it will pay a dividend of $2.2 billion to
the U.S. Treasury next month. With that payment, Fannie will have paid a total
$144.8 billion in dividends.
Politicians are more or less content when Fannie & Freddie
are paying billions into "The System". Freddie has paid $96.5 billion
in dividends to the Treasury as of Sept. 30 - more than the $71.3 billion in
bailout support it has received from taxpayers. But Freddie's loss was used by
some to voice their displeasure. Rep. Ed Royce, R-Calif., warned that Freddie's
loss was an imminent threat to taxpayers. (Under the conservatorship, Freddie
cannot retain capital, and will have to go to Treasury if it suffers a serious
loss.) "Losses like this combined with multimillion dollar CEO salaries at
the GSEs are the warning shots of a return to the pre-crisis model of private
gains and public losses that wrecked the economy," Royce said in a press
release. "We can't simply put the blinders on and say that Fannie and
Freddie are just like other companies when taxpayers are on the hook if they go
in the red." As one might recall Royce has introduced legislation to reform
Fannie Mae and Freddie, including limiting the total CEO compensation at the
GSEs to $600,000 a year each.
Freddie and Fannie have done a pretty good job of lowering
overall risk by increasing their core profitability (all of which flows to the
Treasury), reducing legacy assets, and engaging in more risk-sharing (at least
by using the large bank lenders). The GSEs are required to reduce their
retained portfolios and transfer credit risk away from taxpayers to the private
sector, which will also reduce overall revenues.
Shifting our collective gaze to rates, yesterday the long-term
bond market hemmed and hawed and by the end of the day didn't see much
movement. Short term rates, however are on the move and the 2-year note yield
touched its highest level since February 2011. But today is the first Friday of
the month, and that means... the jobs report. Ready for a December Fed change
in short-term rates? At 271k Nonfarm Payrolls exceeded expectations, the
Unemployment Rate at 5.0%, Hourly Earnings shot higher... and bond prices are
down. Given the strong employment numbers the 10-year yield is up to 2.31%
and agency MBS prices are worse by .5 versus Thursday's close.
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