Jan 19 Federal Home Loan Mortgage Corp
Jan 19 Federal Home Loan Mortgage Corp
* Freddie Mac to delist from Luxembourg Stock Exchange
* Securities will be withdrawn from trading effective Feb.
Source text for Eikon:
Further company coverage:
Rates for home loans fell for the third week in a row, mortgage finance provider Freddie Mac said.
The 30-year fixed-rate mortgage averaged 4.09% during the Jan. 19 week, down from 4.12% the prior week. The 15-year fixed-rate mortgage averaged 3.34%, down three basis points during the week.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.21%, down from 3.23% last week.
Those rates don’t include fees associated with obtaining mortgage loans.
The 10-year Treasury yield
, which mortgage rates track, seesawed over the last week, ending roughly where it began, as investors weighed reports of higher inflation against signals of less-robust growth than had been anticipated.
Many investors believed the rush to sell bonds after the November election would unwind slightly, but housing analysts still expect mortgage rates to tick up from here.
Market Insider with Patti Domm
Shares of Fannie Mae and Freddie Mac plunged nearly 10 percent during midday trading on Thursday after Steven Mnuchin, Donald Trump’s pick for Treasury Secretary, made comments that “there never should be recap and release.”
The stocks have since recovered their losses, but were still ended the day more than 4 percent lower.
Recap and release, a recapitalization of the companies followed by releasing them from government control, is a plan supported by several investors who hold shares of the companies.
During Mnuchin’s hearing, the former hedge fund manager also called for housing reform and finding a bipartisan solution to create a fix.
“I believe (Fannie Mae and Freddie Mac) are very important entities to provide the necessary liquidity for housing finance. But we need housing reform,” Mnuchin said. “We should not just leave Fannie and Freddie as is for the next four years under government control without a fix.”
Fannie Mae 5-day performance
Freddie Mac 5-day performance
Until recently, the mortgage interest deduction was right up
there with Social Security as a sacrosanct institution on Capitol
Hill, protected by lawmakers on both sides of the aisle.
Backed by the powerful National Association of Realtors and
supported broadly by middle-class homeowners, previous efforts to
dismantle the mortgage deduction have gone nowhere.
However, the Better Way tax-reform “blueprint” from
Republican House Speaker Paul Ryan would essentially get rid of
the mortgage interest deduction, without policymakers having to
vote to eliminate it.
The plan would make the standard deduction far more valuable —
increasing it from $12,600 to $24,000 for a married couple. This
would result in far fewer people itemizing their taxes, which is
necessary in order to claim the mortgage tax deduction.
(President-elect Donald Trump’s tax plan calls for raising the
deduction even higher, to $30,000 for joint filers.)
Under the House Republicans’ plan, an estimated 38 million of the
45 million filers (or 84 percent) who currently itemize would opt
instead for the standard deduction, according to an analysis by the Tax Policy
Center. The GOP proposal states that “far fewer taxpayers
will choose to itemize deductions, with the vast majority of
taxpayers finding they are better off by taking advantage of the
larger, simpler standard deduction instead.”
Under current rules, taxpayers can itemize and
deduct the interest paid on up to $1 million on a mortgage, and
home equity debt of up to $100,000. The mortgage interest
deduction is the third-most expensive subsidy in the tax code,
costing the federal government about $70 billion per
year, according to the Tax Foundation.
Even with Republican control of the House, Senate and the White
House, the Republican tax plan is nowhere near a done deal.
Nearly three-quarters of Americans recently polled by the National Association of
Home Builders say that they support the government
providing tax incentives that encourage homeownership, and
lobbyists for the real estate and construction industries are
already gearing up to fight the provision.
If the blueprint were to become law, it would have ramifications
for millions of taxpayers, homeowners and sellers, but the
overall impact on the housing market (and your wallet) may be
smaller than you think. Here’s what you need to know:
1. Home values could fall in the
The total elimination of the mortgage interest deduction might
push prices down around 7 percent, according a recent paper from the Federal Reserve. The
impact might be smaller if the deduction is not fully repealed.
That’s a relatively small decrease compared to the double-digit
decline seen after the housing bubble burst in 2006, but it would
mean a paper loss of nearly $17,000 on the average $240,000 home.
Still, the impact of increasing the standard deduction, rather
than eliminating the mortgage-interest deduction, would likely
have a smaller impact.
2. But only a small portion of taxpayers uses the
While it enjoys broad support, the vast majority of homeowners
don’t benefit from the mortgage interest deduction as it
currently stands. The benefit is only available to those who have
a mortgage on their home and who itemize their taxes.
Only about 20 percent of taxpayers currently claim the deduction,
and it has an average benefit of just over $2,000, according to the Tax Policy Center. “You go to
[mid-tier markets] like Texas, Florida, and Arizona, and no one
talks about buying a home to save on taxes,” says John Burns of
John Burns Real Estate Consulting, which provides data and advice
to real estate investor. “It’s not even part of the equation
3. Most consumers would still be better off
It’s cheaper to buy than to rent a home in most parts of the
country, and that wouldn’t change with the elimination of the
mortgage deduction. “This doesn’t fundamentally affect the
rent-versus-buy decision,” says Trulia Chief Economist Ralph
McLoughlin. “It makes it less of a better deal to buy than to
rent, but buying still remains a good financial option if a
household can stay in their home for seven years.”
by Politico finds that a homeowner with a
$65,000 annual salary would see the tax benefits of buying a
$263,000 condo plummet from $3,325 a year to $166. Tying up your
assets and losing the ability to easily relocate may not be worth
that much, although there are other benefits of homeownership,
such as growing equity and protection from rising rents, and
there are many emotional incentives that compel people to become
4. Middle-income homeowners would feel the biggest
Any impact on home prices would likely be concentrated on more
moderately priced homes, where the owners aren’t paying enough in
interest to outweigh taking the new deduction but aren’t in a
high enough tax bracket to get a huge
break. The Tax Policy Center estimates that
middle-income taxpayers would see an average tax cut of only $260
per year under the Republican plan. That’s hardly enough to
offset even a modest loss in home equity, although long-term
demand would likely see prices bounce back over time.
5. High-income homeowners would benefit.
The wealthiest homeowners would benefit from both the tax cut and
continued access to the mortgage-interest deduction, since they’d
likely continue to itemize. Those making more than $1 million a
year typically save nearly $9,000 thanks to the deduction. Under
the Republic tax plan, the top quintile of taxpayers would also
receive an average tax cut of $11,000 a year.
Due to larger mortgages and a higher tax rate, wealthy borrowers
already benefit disproportionately from the mortgage interest
deductions, which wouldn’t change. Wealthy taxpayers often choose
to finance the purchase of a home even though they could pay
cash, as part of a broader tax planning strategy.
Dear incoming CEO of the National Association of Realtors,
I am just a lowly 30-something broker of a three-agent office, serving a small rural niche with only a decade of real estate under my belt.
There are those who have delved deeper and have longer resumes, which include local, state and national leadership roles within the Realtor associations.
However, if you judge me for who I am not, you will miss out on the fact that I am your core membership. I am a member not because I am enthused by your efforts, but because it is the path of least resistance.
I admittedly follow NAR’s efforts out of the corner of my eye while focusing a majority of my efforts on things that I can control to improve my business. I volunteer my time in a thousand more worthy community causes than the Realtor boards because they don’t truly impact my business or my community.
If you believe that I represent an unhappy minority instead of an apathetic majority, I ask that you conduct some open-minded polling of your members.
In 2013 in “An Open Letter to the National Association of Realtors,” I questioned the value of the organization on numerous levels in hopes that the organization would read my concerns and strive to make improvements.
Sadly, my list of grievances has grown longer.
I read that NAR is seeking new leadership, however, so I thought it may be good to write an open letter imploring a change of course.
Step 1: Define your goals
The first step of any organization is to define its goals — yet I am completely baffled as to what NAR seeks to achieve.
If NAR is, in fact, a trade association, then everything should be viewed through the prism of helping its members succeed in that trade. Rather than going in 50 directions at once, let’s focus on the getting the basics right first.
Step 2: Build a brand
The most basic of steps of a trade group should be to define why their members (Realtors) are better than non-members (real estate agents).
I don’t see how this can be achieved if you aren’t willing to start by enforcing more serious sanctions and expelling bad actors. If a Realtor egregiously violates the code of ethics, he should no longer be able to claim that he is a Realtor.
When you take away the MLS (which the Department of Justice seems to be doing, little by little) what is NAR’s compelling value proposition?
You can’t say, “It’s the brand” unless you are willing to educate the population about the difference between non-Realtors. And if there isn’t a difference, then there is no brand value.
Step 3: Education
Education is one area where a trade association can make a big difference that could lead to a measurable difference in building a brand.
All of the best training programs, however, are coming from outside of NAR.
In a cutting-edge industry like real estate, by the time you write, train and distribute a formulated program, it is almost undoubtedly obsolete.
NAR should be devoting a majority of its manpower to making education of the highest quality and then delivering it to us through highly knowledgeable instructors via webinars and recorded video. It should have people on staff producing marketing podcasts and interviewing the top agents across the country.
It should do all of this while lowering the cost so that it is attainable by all members.
We should move away from agents collecting an alphabet soup of designation abbreviations and work toward the Realtor designation itself being the most important thing on our business card, not something omitted for brevity.
This should be done while being mindful not to place all agents in one box, but allowing them to pursue specializations that fit within the market or niche that they serve.
In other words, they should acknowledge that a country boy like me does not need to learn about condos and would appreciate a mention of land sales once in a blue moon.
Step 4: Provide value
My state association (SCAR) provides me tangible benefits, including a legal hotline, a real estate forms program — and, most recently, a membership to Inman (woo hoo!).
My local board (CTAR) provides me with my MLS (without getting into the minutiae of the word “provides”), a local property record software and prospecting tools and a CMA tool.
Through collective bargaining, these organizations have been able to deliver useful tools for which I would have individually had to pay more than the cost of my dues to compile and thereby leveled the playing field and allowed me to compete with major brokerages.
NAR collects more dues than my local and state organizations but fails to provide the same valuable line of products.
I get a discount on computers and car rentals from specific brands I never use, a credit union I have no need for and a sub-par insurance marketplace. I will acknowledge it’s hard work on Realtors Property Resource (RPR); however, my local board decided not to participate in the program, and after hearing concerns about how data would also be used, I support the decision and appreciate the concern.
NAR has failed to solve any of the big problems faced by members, such as a real health insurance product for independent contractors and a national MLS, which would unite us.
NAR also needs to be careful that it is not stifling innovation through its allegiance to individual service providers. There was a great benefit to my state association getting all Realtors on the same legal forms program for the ease of business, but doing so on a national level can pick winners and losers in the market and hold back companies with cutting-edge and superior products and services.
Grants and unbiased coverage to encourage innovation would be far better than offering discounts to a single product or service in a sector.
Step 5: Be good stewards of our money
Ronald Reagan famously described the government by saying, “We could say they spend like drunken sailors, but that would be unfair to drunken sailors because the sailors are spending their own money.”
Members of NAR work hard for their money and would be more supportive of NAR initiatives if they saw more discretion with spending.
Of course you can’t please all of the people all of the time, but I predicted that .realtor and .realestate top level domains (TLD’s) would be a huge failure for the organization. It seemed clear to me that a .realtor domain would be confusing to the public and less valuable than a solid .com address — not to mention the four-times price point they were charging after the first complimentary year — but some praised the move and said it would be the greatest thing in the world and everyone would want one or more, even though I have seen no adoption in our industry.
The single largest source of wasteful spending is the $100 billion spent by NAR since 1999 on lobbying.
As one of the largest political action committees (PACs) in the U.S., NAR now forces its members to pay what was once a voluntary contribution. Proponents of lobbying are quick to chime in that you can’t get anything done in Washington without greasing the wheels.
That makes me feels slimy and violates my own personal code of ethics. Maybe it is business as usual — but prove to me that any single political accomplishments in NAR’s lifetime would not have passed if we didn’t buy off politicians who voted for the law, and then show me how my career in real estate would have been so impacted by this that my very livelihood was threatened.
One example: If mortgage interest deductions (MID) are such a crucial part of homeownership, why don’t citizens take up arms and march on Washington when they are threatened? Why don’t the tax benefits of homeownership ever come up when working with buyers?
Just as they need to cut wasteful spending, they should also stop nickel-and-diming their very own members.
Realtors should not have to purchase a copy of NAR’s reports; they should be given it. At the same time, they should also be so amazingly well-written and produced that we would want to pay for them.
We shouldn’t have to pay for the continued use of the designations; we should be able to brag to the public about the great training we received for years to come.
Step 6: Shake things up
In an industry that tries to re-invent itself every three or four years, I’m shocked that we have had the same CEO for 36 years.
I’ve never met the man and don’t have a bad thing to say about him, but let’s take this opportunity to ditch the status quo and try something new.
Restructure things from the top down. Bring in some outsiders who are willing to listen to the agents too busy to fly out to national conventions and cheerlead but are still trying to be the best agents possible for their clients.
Because we just want an awesome trade association that supports us in our efforts.
Daniel Bates is the broker/owner of MCVL Realty.
Email Daniel Bates
With less than 48 hours to go before the start of the Trump Administration, there are reasons for optimism that the Net Worth Sweep, the wall of secrecy and the cavalier attitude toward the rights of private shareholders we have seen for over five years may soon come to an end.
Treasury Secretary-designate Steve Mnuchin in November 2016 said ending the conservatorship of Fannie Mae and Freddie Mac will be a top priority in the Trump Administration. On an Investors Unite teleconference today, scholars indicated the new administration has every reason to end the Net Worth Sweep and drop the Obama Administration’s tenacious bid to block public scrutiny of the deliberations behind the Sweep.
Photo by NCinDC
“I think the election makes a big difference here because it gives an incoming president the opportunity to review the constitutional claims of the last presidents and decide whether to change or alter them,” said John Yoo, Heller Professor of Law at the University of California Berkley School of Law. “This provides an opportunity for the Trump Administration to make a stand in favor of greater transparency and accountability and pull away from the Obama Administration’s excessive claims of secrecy.”
The policy of diverting Fannie and Freddie’s revenues to the U.S. Treasury, in place since 2012, has been the subject of shareholder suits for years. The suits challenge whether the policy violated the Housing and Economic Recovery Act of 2008 (HERA) and led to a parallel legal battle over the Obama Administration’s use of Executive Privilege to keep internal deliberations related to the Sweep off limits to the public. A three-judge panel in the U.S. Court of Appeals for the U.S. Circuit Court for the District of Columbia could rule any day on one key case.
Noting U.S. Court of Federal Claims Judge Margaret Sweeney’s sweeping rebuke last fall of all of the Administration’s claims of privilege on 57 specific documents, Professor Sai Prakash, the James Monroe Distinguished Professor of Law at the University of Virginia School of Law, speculated the new Administration could easily say, “Perhaps we just need to turn over these documents now.” He noted the Trump Administration will have the authority to end the Sweep on Day One. If it did, then the court cases would simply be “smaller parts of a bigger puzzle.”
Despite the unfortunate eight-year saga, Fannie and Freddie remain privately-held companies that have been profitable for years. Had they become insolvent, HERA provided for them to be placed into receivership. Of course, that was never the case. Quite the contrary, documents that have been unsealed to date suggest Treasury Department officials saw the revenues as a way to enable additional borrowing by the government. If that is the case, the Sweep was almost certainly a violation of HERA and, in the words of Investors Unite Executive Director Tim Pagliara, “a form of internal embezzlement.”
This could explain why the Obama Administration has gone to extraordinary lengths to hide actions that have drawn rebukes from federal judges and legal scholars. Horace Cooper, a Senior Fellow at the National Center for Public Policy Research, homed in on that point and explained that, if officials knew their actions did not conform with HERA and then insisted their actions did, this would be a “significant breach.” And the courts have never expanded the narrowly-tailored recognition of Executive Privilege to include avoiding the political consequences of policymaking breaches.
The rule of law and public officials’ proper discharge of their duties transcends elections. Cooper pointed out there have been significant concerns in Congress that are not going to simply evaporate at noon on Friday, January 20. He noted that former Senate Banking Committee Chairman Richard Shelby, R-AL, last year requested a formal investigation of how Fannie and Freddie and other financial services entities are operating. Meanwhile, Sen. Ted Cruz, R-TX, could use the Senate Judiciary Committee as a platform to ask hard questions about government secrecy.
President Obama and his team are saying their farewells and a new day is about to dawn. Let’s hope the rays of sunshine penetrate the walls of secrecy and expedite the adoption of housing policies that uphold shareholder rights and the interests of all taxpayers.
President-elect Donald Trump’s nominee for Treasury Secretary Steven Mnuchin went to Washington for his confirmation hearing with the Senate Finance Committee, where the the former Goldman Sachs partner took on questions over his resume and gave new insight into his views on taxation, trade, housing policy, and a potential reform of post-crisis financial regulations.
Mnuchin, a Yale graduate and longtime executive at Goldman who was stationed on the front-lines of the mortgage backed securities market, faced the toughest criticism for his activities after leaving the investment bank. After a 17-year career at Goldman, Mnuchin became an investor first with ESL Investments and then with his own fund Dune Capital Management. However, Mnuchin’s big strike came in the aftermath of the housing bust when he arranged a $1.6 billion rescue of IndyMac Bank, one of the largest bank failures in U.S. history.
Mnuchin renamed the bank OneWest and over a number of years worked through the California-based lender’s portfolio of defaulted home loans, while expanding its footprint. The deal proved wildly successful for Mnuchin and his partners. In 2015, OneWest was sold to CIT Group for $3.4 billion. However, when President-elect Trump nominated Mnuchin as Treasury Secretary, renewed scrutiny was given to OneWest’s activities while he was in control, including its foreclosure practices and its reverse mortgage lending operations.
Recently, a housing advocacy group accused OneWest of being a ‘foreclosure machine’ due to the alleged 36,000 foreclosures that occurred under Mnuchin’s watch. On Wednesday, reports in the media indicated New York Attorney General Eric Schneiderman may target OneWest for its now-shuttered reverse mortgage operation, Financial Freedom.
Mnuchin got a chance to defend his record. In testimony the Treasury nominee said, “we invested $1.6B of capital into a failing financial institution when most investors were running for the hills.” Mnuchin added, “let me be clear: my group had nothing to do with the creation of the risky loans in the IndyMac loan portfolios. When we bought the bank, we assumed these bad loans which had been originated by previous management. Some of those individuals had to answer to federal authorities for their bad lending decisions.”
About foreclosures, Mnuchin said OneWest extended 100,000 loan modifications to delinquent borrowers. “In the press it has been said that I ran a ‘foreclosure machine.’ This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘Loan Modification Machine,'” Mnuchin said. He also rejected the idea that a foreclosure was financially beneficial to OneWest versus a modification.
He further argued OneWest was an advocate for struggling homeowners, working with bond trusts to gain freedom to modify loans and proposing regulatory changes with the Department of Housing and Urban Development to avert foreclosure on elderly homeowners. About Financial Freedom, Mnuchin said the operation was built under the previous management and it was dismantled during his tenure.
Record aside, Wall Street is closely watching Mnuchin’s commentary for insights on how regulations, taxes, and the housing market may be reformed in the new administration. The two most germane statements Mnuchin made for global investors during the early parts of testimony surrounded the U.S. dollar and the U.S. debt ceiling.
Despite President-elect Trump’s concern with the dollar’s strength, which has rattled currency markets, Mnuchin said unequivocally he supports the strength of the currency. “The U.S. currency has been the most attractive currency to be in for very long periods of time,” Mnuchin said. “The long term strength of the dollar, over long periods of time, is important,” he added.
Mnuchin also vowed to work expeditiously to raise the U.S. debt ceiling, averting a standoff similar to the 2011 crisis that harmed the U.S. economic recovery. “I would like us to raise the debt ceiling sooner rather than later,” Mnuchin said before stating that honoring U.S. debt obligations is his greatest priority. “The U.S. has the obligation to honor its debt,” he said, a statement that differs with Trump’s campaign trail hints at renegotiating debts. Mnuchin also will call China a currency manipulator if it restarts such efforts.
On taxation, Mnuchin and President-elect Trump’s tax plans are still unclear. It appears Mnuchin believes he can lower tax rates for businesses and workers, but in a manner that may not necessarily lower absolute rates paid by America’s wealthiest individuals. Meanwhile, many have panned the House GOP plan for border adjustability, arguing that tariffs will leave U.S. businesses and the global economy worse off.
“We will work diligently to limit regulations, lower taxes on hardworking Americans and small businesses, and get the engine of economic growth firing on all cylinders once again,” Mnuchin said. Further insights into his plans for a prospective repatriation holiday, or the extent corporate rate cuts, are of great interest.
In commentary, Mnuchin said the Trump administration will bring trillions of dollars in corporate cash onshore, where it can be reinvested and overall rates can be lowered. Presumably, there will also be a coincident growth bump. Mnuchin believes the administration will come up with a plan that doesn’t increase the deficit. “I want to make sure tax reform doesn’t result in a widening of the deficit,” Mnuchin said, without citing specifics.
As Treasury Secretary, Mnuchin will have a major role in regulating the sector where he was employed for decades.
The Treasury Secretary is a pivotal figure on the Financial Stability Oversight Council, a committee established in the wake of the crisis to oversee America’s largest lenders and potentially dissolve a failing firm. During testimony, Mnuchin indicated he would limit the oversight of FSOC where it might harm the competitiveness of small community banks, which he characterized as pivotal for business creation and reviving local economies.
“Regulation is killing community banks,” Mnuchin said before stating he would relieve regulatory burdens on these small lenders so “we don’t end up in a world where we have four big banks in this country.”
More broadly, the Trump campaign has vowed to repeal and replace the 2010 Dodd Frank Act, the signature post-crisis financial reform. However, even some large bank CEOs see such a maneuver as unnecessary and counterproductive given the increased health of the U.S. banking system. In his commentary, it appears Mnuchin will take a middle ground.
He said he supports the so-called Volcker Rule, which bars proprietary trading but also has limited the ability for market makers to hold inventories of assets that can help stabilize markets at times of volatility. “I do support the Volcker Rule… The concept for proprietary trading doesn’t fit banks that are FDIC insured,” he said. But Mnuchin will look to improve the rule so it doesn’t impede market liquidity, citing recent analysis from the Federal Reserve and echoing long-standing concerns raised by investors.
Mnuchin also did not express a desire to dismantle the Consumer Finance Protection Bureau, instead arguing the agency should be funded by government appropriations, not the Federal Reserve. When pressed by Senator Maria Cantwell of Washington, Mnuchin rejected the idea of breaking up America’s largest banks, stating “I don’t support going back to Glass Steagall as is.” He favors a so-called 21st Century Glass-Steagall because a break-up of banks would disrupt capital markets and commerce.
Still unclear are Mnuchin’s views on Fannie Mae and Freddie Mac, two trillion dollar government sponsored mortgage agencies that are the lifeblood of the housing market.
In commentary with the press, Mnuchin has vowed to restructure Fannie and Freddie, putting them in private hands. Those comments caused Fannie and Freddie shares to spike, netting a big windfall for hedge funds (including one where Mnuchin was a limited partner) who’ve long speculated on a privatization. These so-called GSE’s backstop most prime mortgages in the United States, so any change to status quo will have a meaningful impact on America’s over 60 million homeowners. Mnuchin downplayed the idea he will push a so-called recapitalization of Fannie and Freddie and release of their profits.
“My comments were never that there should be recap and release,” Mnuchin said before favoring a more generic recommendation ofbi-partisan housing reform and an exit of the GSE’s from government control. Fannie and Freddie, two of the most volatile stocks and a large holding inside America’s biggest hedge funds, plunged as much as 11% on Mnuchin’s comments before rebounding.
When it comes to trade policy, the Treasury Secretary has a major influence. Again, Trump has vowed to tear up long-standing deals and take a more insular view of global trade. Wilbur Ross, nominee for Commerce Secretary, echoed some of these ideas on Wednesday stating he would look at renegotiating the North American Free Trade Agreement.
Mnuchin appeared to toe the party line, stating NAFTA will likely be scrutinized. But he took a softer tone, noting trade policy will be about increasing exports, not necessarily limiting imports. Mnuchin, whose post Goldman life also included years of financing Hollywood films, said he would be focused on protecting U.S. intellectual property. “Among President-elect Trump’s signature issues is reviving trade policies that put the American worker first. I will enforce these trade policies that keep and protect American jobs,” Mnuchin said.
During the early stages of Mnuchin’s confirmation hearing, his most striking comments surrounded the Internal Revenue Service. Though Mnuchin has vowed to simplify the tax code, he told the Senate Finance Committee he believed the IRS was understaffed and had insufficient technology.
“The IRS should hire more people,” Mnuchin said. He also vowed to close loopholes surrounding offshore entities, particularly those employed by hedge funds to shield profits from income tax. “It would be one of my great priorities. I hope that is at least a bi-partisan issue that we all can agree on,” Mnuchin said.
Former Fannie Mae CFO: Trump’s Treasury pick can get Fannie out of government control ‘reasonably fast’
Mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) have seen their stocks soar 185% since election day on the assumption that they’ll finally get out of government control during the Donald J. Trump administration.
“It makes no sense that [Fannie Mae and Freddie Mac] are owned by the government and have been controlled by the government for as long as they have,” Steve Mnuchin, the Treasury Secretary-designate, told Fox Business on Nov. 30, adding, “We gotta get them out of government control.”
Mnuchin, a former partner at Goldman Sachs who ran the bank’s mortgage-backed bond trading desk, also told Fox Business this is a top priority for the Trump administration.
“And in our administration, it’s right up there in the list of the top ten things we’re going to get done, and we’ll get it done reasonably fast,” Mnuchin said.
“I think that once the new group of people that will be coming into the Trump administration learn the facts about what happened, that will substantially improve the prospects of an outcome that is good for the economy and good for consumers,” Howard said in the video above.
Howard, who served as CFO from 1990 until 2004, noted that if Mnuchin wants to get Fannie and Freddie out of government control “reasonably fast,” the Treasury Secretary-designate first has to settle the lawsuits.
The net-worth sweep
Since the “net-worth sweep” — a deal in which Fannie and Freddie are required to pay the government dividends equal to 100% of earnings — was implemented in 2012, there’s been 20 or so lawsuits filed against the government by investors and hedge funds. One of the arguments is that the net-worth sweep violates the Fifth Amendment by taking private property for public use without just compensation.
In the process of negotiating those lawsuits, Mnuchin will learn the facts of what actually happened that led to conservatorship and the way the companies have been managed subsequently, Howard added.
“I would say look at the facts of what happened leading up to the financial crisis. Look at the Fannie and Freddie model for guaranteeing mortgages. Look at proposed alternatives. And make the right choice. I think because he’s a financial person, it won’t be hard for him to understand what actually happened and to evaluate competing alternatives and say this actually works, This doesn’t work. Let’s do what works.’ Because remember if he does what doesn’t work it’s on him and the Trump administration. There’s no passing the buck. They now own this problem and so they have a very strong incentive to get it right,” Howard said.
Fannie and Freddie are one of the legacy issues from the financial crisis. The Treasury placed Fannie and Freddie into conservatorship in early September 2008 amid concerns about their capital. At the time, though, the GSEs met their statutory capital requirements, but then-Treasury Secretary Hank Paulson called those capital requirements “thin and poorly defined as compared to other institutions.”
Over the next few years, Fannie and Freddie incurred large credit-related losses. But by 2012, home prices had bottomed out, and Fannie and Freddie began to make money again. In August 2012, the Treasury amended the terms of its senior preferred stock agreement, requiring the GSEs to pay the net-worth sweep.
It’s been eight years and Fannie and Freddie still operate in a state of conservatorship. They’ve repaid the billions in bailouts they’ve received and they’ve returned to profitability, making billions in profits all of which goes directly to the Treasury as a way to reduce the deficit.
Shareholders, like Bill Ackman’s Pershing Square and Bruce Berkowitz’s Fairholme Capital, don’t benefit.
Meanwhile, mortgage reform has dragged on for the last eight years. There still isn’t a workable solution.
“Ironically, partly, it’s because the supporters of banks have falsely claimed that Fannie and Freddie caused the crisis. And we now have data showing that they were by far the most responsible lenders leading up to the crisis. Their loans a performance 3-times, as well as loans made and kept by banks and almost 8-times better than the loans made by the so-called private label securities — these, are Wall Street issued securities that aren’t actually guaranteed by the issuer but rely on credit protection that’s produced by estimates made by credit rating agencies. And that experiment in private capital in the early 2000s blew up spectacularly in 2007 leading to the crisis. But the Wall Street firms and banks who want to replace Fannie and Freddie are pretending that never happened and they’re saying ‘No, Fannie and Freddie caused the crisis.’”
Howard added that the proposals for replacing Fannie and Freddie aren’t workable. He’s optimistic a solution will be reached given the business and financial people making up the new administration.
“I think it’s now much more likely that if you get a new people in, like Mnuchin and other officials who will be coming into positions of influence in Trump administration, because they’re financial people and business people, they will figure out A) what the problem was because it’s it’s obvious if you look at the data that exists and also what the right solution is. And that’s why I’m optimistic we’re going to get a resolution of this and that it’s one that will be in the best interests of consumers.”
His argument for keeping Fannie and Freddie is simple. It’s a “better, more workable model.”
“They work,” he said. “Leading up to the crisis, they say they have by far the most responsible lending practices leading up to the crisis and people can say the opposite but the data don’t back that up.”
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.
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NEW YORK, Jan. 18, 2017 — Hunt Mortgage Partners, LLC, a wholly owned subsidiary of Hunt Mortgage Group and a leader in financing commercial real estate throughout the United States, today announced it provided financing to facilitate the acquisition and moderate rehabilitation of a multifamily property located in El Paso, Texas. The total investment was $5.2 million.
The property, Father Carlos Pinto Memorial Apartments, consists of a mid-rise senior-restricted multifamily property totaling 113 apartments. The property is located in the Segundo Barrio neighborhood of downtown El Paso, one of the city’s oldest and most historic districts. After the renovations, the property will offer 113 one and two-bedroom LIHTC units restricted to senior-citizen residents 62 and older earning 60% of the Area Median Income (AMI) or less.
“The property is part of the Rental Assistance Demonstration (RAD) program in which its public housing units will be converted to project-based Section 8 housing with a 20-year HAP contract in-place at closing covering 100% of the units,” explained Joshua Reiss, Assistant Vice President at Hunt Mortgage Group. “The loan will facilitate the acquisition of the properties from HACEP and rehabilitation in conjunction with the receipt of Low Income Housing Tax Credits and issuance of Tax-Exempt Bonds.”
The borrower is Paisano Housing Redevelopment Corporation (PHRC), a wholly owned instrumentality of HACEP, which will also serve as the third-party non-recourse carve-out guarantor. The Freddie Mac tax exempt loan (TEL) has an eighteen-year loan term, two years of interest-only payments and a 35 year amortization schedule beginning in year three.
“We are pleased to have the opportunity to work with HACEP again,” added Reiss. “We partnered with them in April 2015 and in September 2016 on two other portfolios, including the largest single loan to date under the RAD program, a $59.6 million loan for the rehabilitation of 13 non-contiguous sites known as the HACEP El Paso RAD I Portfolio.”
The Rental Assistance Demonstration program is transforming public housing and will bring unprecedented benefits to local communities throughout the country by enabling the use of public and private investments to help revitalize and preserve much needed affordable housing.
“Hunt Mortgage Group and the Hunt Companies are committed to working with public housing authorities under the RAD program. We are proud to play an integral role in this important program,” concluded Reiss.
In addition to the senior indebtedness, during the construction phase (estimated to be fifteen months) Series B Bonds in the projected amount of $3.1 million will be advanced and then re-paid by the subsequent receipt of low income housing tax credit equity by construction completion.
Upon completion of the renovation, Father Carlos Pinto Memorial Apartments will be in excellent physical condition with total construction hard costs projected of $6.5 million.
About Hunt Mortgage Group
Hunt Mortgage Group, a wholly owned subsidiary of Hunt Companies, Inc., is a leader in financing commercial real estate throughout the United States. The Company finances all types of commercial real estate: multifamily properties (including small balance), affordable housing, office, retail, manufactured housing, healthcare/senior living, industrial, and self-storage facilities. It offers Fannie Mae, Freddie Mac, HUD/FHA in addition to its own Proprietary loan products. Since inception, the Company has structured more than $21 billion of loans and today maintains a servicing portfolio of more than $12 billion. Headquartered in New York City, Hunt Mortgage Group has 189 professionals in 20 locations throughout the United States. To learn more, visit www.huntmortgagegroup.com.
MEDIA CONTACTS Brent Feigenbaum Hunt Mortgage Group 212-317-5730 Brent.Feigenbaum@huntcompanies.com Pam Flores 773-218-9260 firstname.lastname@example.org
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