Wednesday, February 22, 2017

Training and Events, Fannie/Freddie Legal News Not Helping Stockholders



Are you lending in areas where LOs are receiving more calls from recruiters than they are from real estate agents? Let's hope not. But here's something else that's going on: a blockchain project for syndicated loans is in the works. The R3 consortium of major financial institutions plans to unveil a blockchain-based ledger for syndicated loans in March. Transactions in this $4.5 trillion industry are still largely conducted by fax and the new system promises dramatic improvements in settlement times and efficiency.
 In wholesale news for brokers, the Product Development Team at WESTERN BANCORP is pleased to announce the release of the JUMBO 2 HIGH LTV, NO MI PROGRAM. In addition to the High LTV, No MI option, the product features multiple characteristics not typically allowed on a Jumbo Loan. Program Highlights include 89.99% LTV to $1,500,000 with no mortgage insurance ;75% LTV to $1,000,000 with credit score of 700(Purchase or Rate/Term) and Permanent Resident Alien and H1-B Visa are eligible (80% LTV or less) This product is available for both our Wholesale and Non-Delegated Correspondent Customers and guidelines and pricing are available now in LMS Xpress.
 Upcoming training & events? You bet!
 Freddie Mac is offering free CreditSmart® counselor training next month. Its multi-lingual financial education curriculum and consumer outreach initiative teaches consumers life-long money management skills. Housing counselors will learn how to help consumers build and maintain better credit, make sound financial decisions and understand the steps to sustainable homeownership. They'll be taught best practices for facilitating counseling workshops and they'll be provided with teaching tools.
 Registration is underway for the ABA Real Estate Conference (March 29-31) in Orlando, FL. This premiere conference for banks engaged in residential and commercial mortgages, offers the full range of perspectives and insights of what is affecting institutions today. This year's conference will feature Outlook from Lawrence Yun, Realtors' Chief Economist, Industry insights from Rob Chrisman, Best Business Practices and Strategies, New Technology Solutions, New HMDA Rules and so much more.
 There is still time to register for California MBA's February 23rd Social Media Compliance Webinar.
 John Seroka of Seroka Brand Development, a premier provider of brand development and marketing, PR, digital and social media services to the mortgage industry, will be conducting a webinar for members of The Mortgage Collaborative on Thursday at 11:00 entitled "Launching an Effective Social Media Program." It will cover where to be active, getting your website social-ready, content strategy and content promotion. If you would like to attend, you may register at this link.
 If you're near Albuquerque, New Mexico, in a couple weeks, or want to visit it, the New Mexico Mortgage Lenders Association is having its March Luncheon with yours truly privileged to speak.
 Valuation Expo will be held March 18th-20th at the Caribe Royale Hotel in Orlando, FL. Join lenders, regulators, and valuation professionals at the nation's largest gathering of real estate appraisers. Offering 14 hours of continuing education for appraisers with sessions on how to streamline the appraisal process and addressing emerging issues in the industry.
 For better or worse, Fannie & Freddie can't stay out of the news.
 If my daughter lived with me, and through her job she paid me, oh, let's say $1 billion a month, would I be in a hurry to have her move out? Maybe not. Freddie Mac sent a $4.5 billion dividend to the Treasury after posting a sharp profit increase in its latest quarter and having its capital buffer legally decrease on schedule. Freddie reported Q4 profits of $4.85B, compared with a prior-year profit of $2.16B and a Q3 profits of $2.33B. And Fannie was no slouch, weighing in with a $5 billion 4th quarter profit. Hey, there's money in them thar mortgages! And so we find government-backed mortgage giants Fannie Mae and Freddie Mac paying a combined $10 billion in dividends to the U.S. Treasury.
 Recall that both sweep their profits to the government. New Treasury Sec. Steven Mnuchin said at his confirmation hearing that Fannie and Freddie shouldn't be left under government control "without a fix" but also said he didn't want to limit housing finance.
 The Federal Housing Finance Agency, which regulates Fannie and Freddie, has pushed so-called guarantee fees higher in a bid to draw more private companies into the housing system. One article I saw noted that, "That move hasn't done much so far - private-label securities represented just 1% of the market for new single-family mortgage-related issuance in 2016."
But the plot is thickening! Despite their business being stronger than ever (Fannie's single-family serious delinquency rate has dropped for 27 straight quarters, for example) the stock prices of both F&F tumbled Tuesday based on news from the court system. Hopes for privatization has lifted the over-the-counter shares of Fannie, up 6.7% this year, and Freddie, up 7%. But even with Republican control of both chambers of Congress, experts say pushing through legislation to privatize Fannie and Freddie will be difficult, mostly on concerns over how such a move would impact the housing market but also because of the hit to federal coffers.
 Yesterday a U.S. appeals court upheld a dismissal of hedge funds' claims against the U.S. government for seizing the profits of Freddie and Fannie. By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay an amount equal to their quarterly net worth to the U.S. Treasury. But investors in F&F can still pursue breach of contract claims, the appeals court said.
 Isaac Boltansky, with Compass Point Research and Trading, offered up some thoughts on the GSE shareholder decision, aka Perry v. Mnuchin. "The Perry decision is undeniably a body blow for GSE shareholders, but this ruling does not constitute a knockout, as there are still both legal and administrative avenues for shareholders...the political and structural underpinnings defining the GSE discussion remain largely intact following this order. There are three core components that drive this view. First, GSE shareholder litigation will persist in other courts despite this defeat. Second, the path to legislative reform remains narrow and murky. We maintain our view that comprehensive mortgage finance reform legislation - meaning a bill that alters either the charters or conservatorship - only has ~30% likelihood of enactment in this Congress. Third, our view remains that the odds of administrative action addressing the GSEs remain elevated under the Trump Administration. We believe the declining GSE capital buffers (hitting $0 in 2018), the potential impact of tax reform on Fannie and Freddie's deferred tax assets (~$54B in aggregate value), and the change in personnel could compel administrative policy shifts in the year ahead."
 Mr. Boltansky ends with some thoughts on where things go from here. "There are 3 separate issues to track going forward. First, in terms of the Perry case, our sense is that an appeal to the Supreme Court should be expected. Parties generally have 90 days from the judgment to file a writ of certiorari with the Supreme Court. Second, the other flagship GSE shareholder case - Fairholme v. USA - is still being considered in the U.S. Court of Federal Claims. As a reminder, this case centers on a takings claim and the parties are expected to file a joint status report on February 21. Third, despite this legal development, we maintain our view that the odds of administrative actions are elevated under the Trump Administration and expect increasing pressure to act over the balance of 2017."
 The markets are filled with capital
 The government released final data as of the end of 2016 of major foreign holders of Treasury securities and some interesting data surfaced. By amount, Japan edged out China, with both holding over $1 trillion each. Rounding out the top 5 were Ireland ($288B), Cayman Islands ($264B), and Brazil ($259B). Meanwhile, over the full year, countries that increased their holdings by the most YOY in percentage terms were: Thailand (+69%), Israel (+52%), Korea (+25%), Netherlands (+17%) and Italy (+15%). Meanwhile, countries that reduced their holdings the most YOY in percentage terms were: Mexico (-35%), Norway (-24%), China (-15%), Saudi Arabia (-14%) and United Arab Emirates (-13%). For the record, China's decline in absolute dollar volume was the largest in history.
 As far as interest rates on Tuesday, not much happened, and the 10-year yield closed nearly unchanged yielding 2.43%. Is everyone with their kids skiing on winter break? There was some slight shifting, just as there always is, between securities, coupons, and maturities, and the NY Fed was in buying its usual $1-2 billion a day. How long that lasts is causing some concern: mortgage investors are anxious about when and how Fed tapering occurs.
 I am hearing some dramatic drops in production, depending on location, and the MBA's mortgage application reflects that. It was down 2% last week, and apps are down 21% from a year ago. Refis are down 40% from a year ago.
 Coming up at 10AM ET is the National Association of Realtors' Existing Home Sales report for January. In the early going the 10-year is perched around 2.41% and MBS prices are a shade better versus Tuesday's closing levels.

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