Ginnie Mae TBAs Rally With Bonds, Affecting Mortgage REITs

Important Economic Indicators For Real Estate Investors This Week (Part 6 of 6)

(Continued from Part 5)

Ginnie Mae and the to-be-announced market

The Fannie Mae to-be-announced (or TBA) market represents the usual conforming loan—the plain Fannie Mae 30-year mortgage. Meanwhile, Ginnie Mae TBAs are where government loans go—such as the federal housing administration (or FHA) and veterans affairs (or VA) loans.

The biggest difference between a Fannie Mae mortgage-backed security (or MBS) and a Ginnie Mae MBS is that Ginnies have an explicit guarantee from the federal government. Fannies don’t have a guarantee—just a wink-wink, nudge-nudge guarantee. As a result, Ginnie Mae MBS trade at a premium compared to Fannie Mae TBAs.

There are two different Ginnie Mae TBAs—Ginnie 1s and Ginnie 2s. Ginnie 1 TBAs include mortgages with the exact same coupon payment. Ginnie 2 TBAs can include a variety of coupons within a range.

Since you can have more certainty with Ginnie 1s compared to the 2s, the 1s typically trade at a premium. This premium can vary. You’ll often see investors switch between 1s and 2s as a relative value trade. The Ginnie Mae 1s tend to be more liquid than the 2s and have narrower bid-to-ask spreads.

Ginnie Mae mortgage-backed securities rally

The ten-year bond had a tiny rally, with yields decreasing from 2.32% to 2.31%. Ginnie Mae TBAs rallied as well, rising from 104 10/32 to 104 17/32.

Implications for mortgage REITs

Mortgage REITs, such as Annaly Capital Management (NLY), American Capital Agency (AGNC), MFA Financial (MFA), and Capstead Mortgage Corporation (CMO), announced big drops in book value per share. Rising rates hurt the value of their mortgage-backed security holdings. The REIT sector spent most of 2013 deleveraging to position itself for rate increases.

As a general rule, a lack of volatility is good for mortgage REITs and the mortgage REIT ETF (MORT), which hedge some interest rate risk. Increasing volatility in interest rates increases the cost of hedging. As interest rates rise, the expected maturity of the bond increases because there will be fewer pre-payments. On the other hand, if interest rates fall, the maturity shortens due to higher prepayment risk.

Mechanically, this means mortgage REITs have to adjust hedges and buy more protection when prices are high. Then, they have to sell more protection when prices are low. This buy-high, sell-low effect is called “negative convexity.” It explains why Ginnie Mae MBS yield so much more than Treasuries, which both have no credit risk.

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Fannie Mae transferring 44 properties to Detroit, will give $15,000 apiece for 18 to be demolished

Fannie Mae is transferring 44 of its foreclosed houses to Detroit and giving the city $15,000 apiece for 18 of the properties that need to be demolished.

Monday’s announcement from the federal government-sponsored Fannie Mae outlines a partnership with the Detroit Land Bank Authority to help stabilize neighborhoods hard-hit by foreclosure. The other properties involved are to be renovated.

The Detroit News reports this is the first group of surplus foreclosed properties that Fannie Mae plans to get into the city’s hands.

Kevin Simowski of the Land Bank says the agreement is an important piece of its larger strategy to stabilize neighborhoods through its auction program, demolitions and side lot sales. He says the Land Bank is “working with multiple financial institutions on similar deals.”

Loan limits raised in four California counties by Fannie, Freddie

In the realm of mortgages backed by Fannie Mae and Freddie Mac, California tends to fall into two categories — high-cost counties where eligible single-family home loans can’t be higher than $625,500 (Los Angeles, Orange) or those with the standard limit of $417,000 limit (Riverside, San Bernardino).

It’s the old coastal versus inland divide, for the most part, as in San Francisco at a $625,500 loan max and San Joaquin at a $417,000 limit.

U.S. to ease repurchase demands on bad mortgages

Some counties fall in between, including San Diego, Ventura, Monterey and Napa. And those four, along with 42 other counties across the nation, will see their upper limits for Fannie and Freddie loans increase in 2015 as a result of rising home prices.

The Federal Housing Finance Agency, which has overseen Fannie and Freddie since 2008, when they were bailed out and became wards of the government, on Monday issued a list of the counties that saw adjustments. They include:

lRelated High-end home sales are surging in Southern California
BusinessHigh-end home sales are surging in Southern CaliforniaSee all related

Napa at $615,250, up from $592,250.

Ventura at $603,750, up from $598,000.

San Diego at $562,350, up from $546,250

Monterey at $502,550, up from $483,000.

The FHFA also released an updated list of the 2015 limits for every area of the country. 

Some jumbo loans are now even cheaper than conforming mortgages

Some jumbo loans are now even cheaper than conforming mortgages E. Scott Reckard Lenders are now offering jumbo loans with interest rates near and in some cases lower than rates of smaller conforming loans. Lenders are now offering jumbo loans with interest rates near and in some cases lower than rates of smaller conforming loans. ( E. Scott Reckard ) –>

Fannie and Freddie keep housing finance going by buying bundles of loans from lenders, written to conform to rules including the size limits. They use the loans to back mortgage securities, guaranteeing payments to bond investors if the borrowers default.

About 60% of the mortgages written in the United States are backed by Fannie and Freddie, with the government also guaranteeing large numbers of  Veterans Administration and Federal Housing Administration loans.

Much of California’s housing is so expensive that affluent buyers get loans not from those sources but from lenders offering outsized loans known as jumbos. In recent years those lenders have mainly been banks that keep the loans on their books as investments.

Competition to provide jumbos to high-net-worth individuals has become so intense that, in a reversal of the usual state of affairs, jumbo mortgages sometimes have lower interest rates these days than loans backed by Fannie and Freddie.

Ex-Fannie Mae worker gets prison in kickback case

Ex-Fannie Mae worker gets prison in kickback case E. Scott Reckard A former Fannie Mae specialist in foreclosures was sentenced to 15 months in prison for soliciting illegal kickbacks from a real estate broker, a practice he said was “a natural part of business” at the nation’s largest mortgage finance company. A former Fannie Mae specialist in foreclosures was sentenced to 15 months in prison for soliciting illegal kickbacks from a real estate broker, a practice he said was “a natural part of business” at the nation’s largest mortgage finance company. ( E. Scott Reckard ) –>

Wells Fargo Co. the nation’s largest home lender, on Monday was advertising conforming 30-year fixed-rate loans to purchase houses at 4.125% annual interest. The rate was just 4% for purchase-money jumbo mortgages with the rate fixed for 30 years.

Richard Cirelli, a mortgage broker in Laguna Beach, said rates on conforming loans and jumbos are comparable for loans of up to $1 million for an owner-occupied single-family home purchase or refinance.

However, Cirelli noted that other factors make conforming loans preferable for many borrowers. Allowable credit scores and down payments are lower on conforming loans than for jumbos, and it’s easier and cheaper to finance two- to four-unit properties or to cash out equity when refinancing a home, he said.

Follow @ScottReckard for news about banks and home loans

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Freddie Mac Improves Transparency of Single-Family Loan-Level Publicly Available Data

MCLEAN, VA–(Marketwired – Nov 24, 2014) – Freddie Mac (OTCQB: FMCC) today announced that it is increasing investor transparency by adding loan-level actual loss data to its Single Family Loan-Level Historical Dataset.

The enhanced dataset will increase transparency, which helps investors build more accurate credit performance models in support of the company’s Single-Family credit risk offerings.

Quotes
Attribute to Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac.

  • “It is important for investors to have this expanded view of credit risk, especially as we continue to grow and evolve our credit risk offerings. Having data openly available in the marketplace allows us to expand the amount of risk transferred to private investors.”

  • “We expect to introduce an actual loss credit offering in our ACIS reinsurance and STACR programs next year. We are releasing this data now to give potential credit investors sufficient time to get familiar with Freddie Mac’s actual loss performance.”

News Facts

  • In addition to such loan level loss information as expenses and recoveries, the dataset contains loan-level credit performance data on 30-year fixed-rate single-family mortgages. It excludes data on adjustable-rate mortgages, balloon mortgages, initial interest mortgages, government-insured mortgages, relief refinancing mortgages (including Home Affordable Refinance Program, or “HARP”) and other affordable or non-standard mortgages.

  • The dataset covers approximately 17 million 30-year, fixed-rate, single-family mortgages originated between January 1, 1999, and June 30, 2013. Actual loss and monthly loan performance data, including credit performance information up to and including property disposition, is being disclosed through December 31, 2013.

  •  The historical dataset was first made available in March 2013.

  • The Single-Family Loan-Level Dataset and FAQs are accessible on Freddiemac.com at http://www.freddiemac.com/news/finance/sf_loanlevel_dataset.html

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

New FHFA Strategic Plan Encourages Fannie Mae and Freddie Mac to Work …

WASHINGTON, D.C. – November 24, 2014 – (RealEstateRama) — The Federal Housing Finance Agency (FHFA) released on November 21 the final version of its strategic plan for fiscal years 2015-2019. The plan outlines FHFA’s goals and priorities for overseeing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs).

FHFA’s strategic plan discusses several steps that FHFA will take to help Fannie Mae, Freddie Mac, and the FHLBs maintain liquidity in the housing finance market. Notably, FHFA pledges to work with both Fannie Mae and Freddie Mac to address those barriers that prevent them from working with state HFAs. FHFA also makes it clear that it views strong participation from state HFAs as necessary toward ensuring a liquid and accessible housing market. FHFA also promises to work with the FHLBs to develop policies that allow for fair and equal participation by all FHLB member institutions.

The final strategic plan is nearly identical to the proposed strategic plan FHFA released in August. NCSHA submitted comments on the proposal, praising FHFA for developing a plan that “strikes a proper balance between safeguarding these entities’ fiscal health and ensuring that they continue to support a liquid and accessible housing finance market.” NCSHA also expressed strong support for FHFA’s commitment to work with Fannie Mae and Freddie Mac to increase their ability to partner with state HFAs.

FHFA’s strategic plan identifies three major performance goals: ensuring safe and sound regulated entities; ensuring a liquid, stable, and accessible housing finance market; and managing the enterprises’ ongoing conservatorship. FHFA makes it clear that it will balance these three goals equally, with none of them taking precedence over the others.

 

 

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    WASHINGTON, D.C. – March 6, 2013 – (RealEstateRama) — Statement from the National Multi Housing Council (NMHC) and National Apartment Association (NAA) Joint Legislative Program by Cindy Chetti, NMHC Senior Vice President of Government Affairs, in response to the Federal Housing Finance Agency (FHFA) 2013 scorecard outlining its regulatory goals for Fannie Mae and Freddie Mac in the current year….
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Freddie Mac Issues 2015 Funding Calendar

MCLEAN, VA–(Marketwired – Nov 24, 2014) – Freddie Mac (OTCQB: FMCC) today issued its 2015 funding calendar, which provides optional announcement dates for Reference Notes® securities and announcement and auction dates for Reference Bills® securities. The 2015 funding calendar is available on the Debt Securities page of the company’s Web site at www.FreddieMac.com.

On the Reference Notes announcement dates set forth on Freddie Mac’s 2015 Funding Calendar, Freddie Mac will announce whether it plans to issue a Reference Notes security. If a Reference Notes security will be issued, Freddie Mac also will provide relevant transaction information. Future Reference Notes issuances may vary in size and frequency based on the company’s funding needs or market demands. 

The company’s 2015 Funding Calendar provides announcement and auction dates for Reference Bills securities with maturities of one year or less. Reference Bills auctions will be optional each week, occurring on Mondays. If Monday is a holiday, the auction will occur on the next business day. Reference Bills auction announcements will occur in the mornings on the day the auctions will be held.

The announcement is neither an offer to sell nor a solicitation to buy any of these securities. Any such offering will be made by an offering circular and, in the case of Reference Notes securities, the applicable pricing supplement.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

Freddie Mac to make loan-level loss data available to investors

Investors looking for more information on the makeup of credit-risk sharing deals from Freddie Mac now have a new resource at their disposal, loan-level actual loss data.

Freddie Mac said that it is making the data available in an effort to increase investor transparency, which it expects to help investors build more accurate credit performance models in support of Freddie’s credit risk-sharing offerings.

According to Freddie, loan-level actual loss data will be added to its single-family loan-level historical dataset, which covers approximately 17 million 30-year, fixed-rate, single-family mortgages originated between January 1, 1999, and June 30, 2013.

Actual loss and monthly loan performance data, including credit performance information up to and including property disposition, is being disclosed through December 31, 2013, Freddie said.

“It is important for investors to have this expanded view of credit risk, especially as we continue to grow and evolve our credit risk offerings,” said Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie Mac.

“Having data openly available in the marketplace allows us to expand the amount of risk transferred to private investors.”

Throughout the year, Freddie and its GSE counterpart, Fannie Mae, have unveiled new forms of credit risk-sharing offerings in an attempt to offload some of risk currently held by Fannie and Freddie.

Through Freddie’s Structured Agency Credit Risk transactions, the GSE has offered up credit risk-sharing offerings in various forms, including high loan-to-value ratios.

Until breaking new ground in August, the previous Freddie STACR offerings were all supported by loans that carried loan-to-value ratios of between 61%-80%, with an average LTV of roughly 75%.

In the August deal, called STACR 2014-HQ1, Freddie offered up a deal supported by loans with LTV ratios of somewhere between 80% and 95%. The average LTV was 92% and the pool carried a balance of $9.975 billion, spread across 45,112 loans.

And in September, Freddie launched another high-LTV ratio deal, but that one was much larger than the first high-LTV offering. STACR 2014-HQ2 carried an unpaid principal balance of $33.43 billion and a weighted average LTV of 91.6%.

Palmer said that Freddie expects to introduce an actual loss credit offering in its ACIS and STACR programs in 2015. “We are releasing this data now to give potential credit investors sufficient time to get familiar with Freddie Mac’s actual loss performance,” Palmer said.

Freddie Mac Prices Fifteenth Multifamily K-Deal Securities Offering This Year, K-717

MCLEAN, VA–(Marketwired – Nov 24, 2014) – Freddie Mac (OTCQB: FMCC) recently priced a new offering of Structured Pass-Through Certificates (“K Certificates“) which are backed by fixed-rate multifamily mortgages with 7-year terms. The company expects to issue approximately $1.2 billion in K Certificates (“K-717 Certificates”), which are expected to settle on or about December 9, 2014. This offering represents the fifteenth K Certificates offering this year.

Details

  • Co-Lead Managers and Joint Bookrunners: Barclays Capital Inc. and J.P. Morgan Securities LLC.
  • Co-Managers: Bonwick Capital Partners, LLC, Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner Smith Incorporated and Wells Fargo Securities, LLC.
  • Rating Agencies: The three senior classes are expected to receive ratings of ”AAAsf” by Fitch Ratings, Inc. and “AAA” by Morningstar Credit Ratings, LLC subject to ongoing monitoring. 

Related Links

The K-717 Certificates are backed by corresponding classes issued by the FREMF 2014-K717 Mortgage Trust (“K-717 Trust”) and guaranteed by Freddie Mac. The K-717 Trust will also issue certificates consisting of the Class X2-A, X2-B, B, C, D, and R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-717 Certificates. 

Freddie Mac Multifamily is a leading issuer of agency-guaranteed structured multifamily securities. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (SEC) on February 27, 2014; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2013, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information furnished to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2013, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site at www.sec.gov.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing. www.FreddieMac.com. Twitter: @FreddieMac

National Association of Professional Women Announces Katie Kuo Hwa Kao, Licensed Real Estate Sales Person at Keller …

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Garden City, NY (PRWEB) November 25, 2014

NAPW honors Katie Kuo Hwa Kao as a 2014 Professional Woman of the Year. Ms. Kao is recognized with this prestigious distinction for leadership in real estate. As the largest, most-recognized networking organization of professional women in the country, spanning virtually every industry and profession, the National Association of Professional Women is a powerfully vibrant networking community with over 600,000 members and nearly 300 Local Chapters.

With more than 30 years of experience in the commercial banking industry, Ms. Kao has held the title of Senior Vice President / President at a number of financial institutions. During her successful tenure in banking, Ms. Kao honed her skills in finance, credit administration, retail banking management and client services, both in the United States and abroad.

Ms. Kao has since transitioned from banking to real estate, and today is a Licensed Real Estate Sales Person at Keller Williams Realty in New York City. Specializing in both commercial and residential properties, Ms. Kao’s extensive background in banking is a huge asset in her current role as she assists consumers with their real estate needs. Her vast knowledge of mortgages enables her to help clients navigate the often overwhelming process of acquiring the loans they need when purchasing real estate, whether it’s a dream home, a commercial building or an investment property.

A graduate of Pace University with a Bachelor’s degree in Managerial Accounting, Ms. Kao is Founding Member and President of the New York Chapter for the Asian Real Estate Association of America. She has been instrumental in the Association’s expansive growth in the New York City area and looks forward to continuing the momentum in the future.

Awards Accomplishments: Member of the National Assoc. of Realtors, Chinese Am. Real Estate Assoc., Women’s Council of Realtors, New York State Assoc. of Realtors, Asian Real Estate Assoc. of Am., Long island Board of Realtors, National Assoc. of Asian Am. Professionals and Certified Commercial Investment Management

NAPW’s mission is to provide an exclusive, highly advanced networking forum to successful women executives, professionals and entrepreneurs where they can aspire, connect and achieve. Through innovative resources, unique tools and progressive benefits, professional women interact, exchange ideas, advance their knowledge and empower each other.

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Briefs: Realtor of the Year elected in Snohomish County

Everett agent elected Realtor of the Year

Debbie Matteson was elected by her peers as the 2014 Realtor of the Year for the Snohomish County-Camano Association of Realtors. The award is based on the outstanding contributions of a real estate agent to the local, state and national real estate associations. Matteson has been a real estate for 10 years and works for Century 21 North Homes Realty in Everett.

Tax savings, charitable giving part of Everett radio show

The next Getting Your Dough To Rise personal finance radio show is from 6 to 7 p.m. on Nov. 25 on KSER Everett 90.7 FM and KXIR Whidbey Island 89.9 FM. Host Chuck Noel’s guests include the PUD’s Kevin Watier, CPA Bill Reith, licensed insurance agent Richard Ek and Jodie Miner, president of Northwest Development Officers’ Association.

Sketchbook fetches $112,500 at auction

A Picasso sketchbook, the highlight of this year’s Unclaimed Property auction held by the Washington State Department of Revenue in Kenmore, sold for $112,500. The owner of the safe deposit box that held the unauthorized sketchbook did not make a claim to collect the box contents, and Revenue was required by law to auction the item.

PSE customers to receive one-time credit

Puget Sound Energy customers will notice a one-time credit applied to December and January bills that will save the average residential electric customer about $40. It reflects the financial benefit of the sale of PSE’s assets in Jefferson County in 2010. The total amount to be paid to PSE customers will be $59.2 million, which includes interest that has accrued.