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Hedge Fund Perry Capital Asks Supreme Court to Revive Fannie Mae Lawsuit

Perry Capital, a once high-flying hedge fund that last year began liquidating its investments, asked the Supreme Court Monday to revive its largely failed attempt to pry the profits of Fannie Mae and Freddie Mac from the coffers of the U.S. Treasury.

The move sets the stage of a showdown over the federal government’s authority over the mortgage finance giants, which have been wards of the state since they were seized amid the burgeoning financial crisis in 2008.

In February, a federal appeals court in Washington, D.C. refused to overturn a judge’s ruling that said Perry Capital and other investors in the two companies could not sue the government over the government’s claim to all of the profits generated by Fannie and Freddie. Ever since a 2012 change to their bailout agreements, both companies have been required to turn over nearly all of their profits to the Treasury, an arrangement known as the “net worth sweep.”

The appeals court said that although most of the claims made by investors were rightly dismissed, certain contract-based claims could be valid. Those claims will likely be heard by U.S. District Judge Royce Lamberth, who first threw out the investor lawsuit in 2014.

Perry Capital and Bruce Berkowitz’s Fairholme Funds are significant owners of Fannie and Freddie’s preferred shares. Bill Ackman’s Pershing Square Capital Management is the largest owner of Fannie and Freddie’s common equity. John Paulson’s hedge fund is also an investor in Fannie and Freddie. Perry and Fairholme are among the investors who have sued in several federal courts to overturn the profit sweep, efforts that have so far failed.

In its petition asking the Supreme Court to hear its case, Perry Capital argues that the government has a duty to “preserve and conserve” the companies, and that collecting all of their profits is contrary to its role as their conservator. That argument has been rejected by every federal court that has ruled on it.

Fannie and Freddie were bailed out with $187 billion in taxpayer funds and a still existing promise to inject hundreds of billions more if needed, providing all of the capital that has enabled the companies to survive. Although their common and preferred shares survived the bailout, no private shareholder has invested new capital in the companies or taken part in their restoration to relative health. The government has argued that since taxpayers bore all of the cost and all of the risk of reviving Fannie and Freddie, their profits properly belong to taxpayers as well.

Perry Capital was one of the largest hedge funds in the U.S. when it purchased its shares of Fannie and Freddie. In September of last year, founder Richard Perry told investors he was winding down his flagship fund after 18 years, saying his investment style no longer worked.

Fannie Mae and Freddie Mac Update Servicing Guides

On October 11, Fannie Mae and Freddie Mac announced updates to their respective Servicing Guides.

Fannie Mae. Servicing Guide Announcement SVC-2017-09 highlights recent updates to the Servicing Guide, including topics related to the management of electronic transactions such as: (i) confirmation that sellers and servicers may originate, service, and modify loans using electronic records (electronic promissory notes require special approval); (ii) streamlined language clarifying requirements for the accuracy of information in electronic records; (iii) specification that paper records are not required for recorded mortgages and deeds of trust; (iv) clarification that all electronic signatures must comply with ESIGN, UETA, and other applicable laws; and (v) the removal of requirements for document custodians from the Servicing Guide that were duplicative of requirements set forth in Fannie Mae’s Requirements for Document Custodians. Additional updates address changes made to the reimbursement of foreclosure sale publication costs for costs incurred on or after January 1, 2018, and specific guidance for servicers pertaining to mortgage liens (to be implemented by December 1, 2017).

Freddie Mac. Freddie Mac issued Bulletin 2017-22 announcing servicing updates concerning (i) modifications to imminent default evaluation and process requirements (jointly developed with Fannie Mae) that will take effect July 1, 2018; and (ii) provisions under the Servicemembers Civil Relief Act (SCRA) related to compliance time frames for servicers when responding to, or submitting requests for, interest rate reductions, along with updates that take effect February 1, 2018, concerning Guide Exhibit 71 used by servicers to report eligible SCRA interest rate subsidized loans. The updates also eliminate the manual property condition certificate process and modify time frame requirements for cancelling property insurance policies on real estate owned properties.

Freddie Mac Announces Small-Pool Pilot With EarnUp

Freddie Mac is announcing a 12-month long pilot with EarnUp, a financial technology company that helps consumers make timely loan payments and manage their financial health.  FreddieMac is encouraging low and moderate income earners to participate in the program by doing it through three non-profit financial counseling organizations: HomeFree-USA, GreenPath Financial Wellness, and InCharge Debt Solutions.  

According to Matthew Cooper, co-founder and CEO of EarnUp, “People are more likely to stay current on their loan payments if we make it quick and easy for them to do so. EarnUp is proud to be working with Freddie Mac to provide technology solutions that can help consumers.” EarnUp will also help customers improve their credit score and overall financial health, Cooper said.

The collaboration also allows a limited number of customers to use EarnUp for free during the pilot. “Experimenting on a relatively small scale allows us to easily evaluate results” said Danny Gardner, VP of affordable lending and access to credit in Freddie Mac’s Single-Family Business. “We believe EarnUp’s online platform is an innovative and convenient approach that may help the next generation of potential homebuyers meet their future goals” Gardner said.    

HomeFree and InCharge are currently part of Freddie Mac’s Borrower Help Network and intend to support prospective buyers for sustainable homeownership, including buyers with pre-existing Freddie Mac-owned mortgages. According to the New York Fed’s Quarterly Report on Household Debt And Credit, aggregate household debt experienced its 11th consecutive increase in the first quarter of 2017. In contrast, U.S. homeownership in the second quarter of 2017 has risen to 63.7 percent, up from 62.9 percent during the same period last year.

Twenty-two percent of adults claim their monthly income varies occasionally while 10 percent say their income varies often from month to month based on a May report from the Board of Governors of the Federal Reserve System this year.

Ninety percent of EarnUp’s customers are considered to be either low- or moderate-income earners and 86 percent who join EarnUp are doing so for the first time, based on internal data from EarnUp.

The full press release can be found on Freddie Mac’s website here.

Clarksville Association of Realtors Raises $84000 For Urban Ministry’s SafeHouse

October 15, 2017 |
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Clarksville Association of REALTORSClarksville, TN – The Clarksville Association of Realtors’ Young Professionals Network (CAR YPN) raised over $84,000 for Urban Ministry’s SafeHouse from their fourth annual Handbags For Hope event held at the Wilma Rudolph Event Center on Saturday, August 12th, 2017. The check was presented to Martita Alvarez, Program Director for Urban Ministry’s SafeHouse.

Handbags For Hope featured over 400 handbags in a silent and live auction. The live auction featured themed bags with special items inside, some being auctioned for as much as $6,500.

Clarksville Association of Realtors’ Young Professionals Network presenting the check to Martita Alvarez.

Clarksville Association of Realtors’ Young Professionals Network presenting the check to Martita Alvarez.

“Handbags for Hope provides a wonderful opportunity for SafeHouse to provide services to victims served through our emergency domestic violence and sexual assault shelter,” said Beverly Dycus, Executive Director of Urban Ministry’s SafeHouse. “The funds are used to provide direct client benefits for those impacted by violence, such as emergency shelter, relocation of victims to safety, providing 24 hours a day advocacy, and other services as needed,” said Dycus.

The Urban Ministry SafeHouse was the primary recipient, with proceeds from the event also going towards the CAR YPN Mike Groves Memorial Scholarship Fund, which was established to honor the legacy of Mike Groves. Groves was a member of the Clarksville Association of REALTORS® from 1991 until his passing in 2015. In his 24 years with CAR, Mike served in dozens of leadership roles, including being CAR’s primary REALTOR® Code of Ethics instructor. He was named REALTOR® of the Year in 2001, and was elected to serve as President in 2000 and 2015.

“As Realtors in our community, we feel a strong obligation to support Clarksville and Montgomery County in every way we can,” said Melissa Powers, 2017 CAR YPN Chair and volunteer for SafeHouse. “CAR and its committees are thankful for the support we receive, and that allows us to touch the lives of families in this great community,” said Powers.

The CAR YPN would like to thank their Platinum Purse Sponsors: Allstate Insurance – The Morford Agency, Castle Rock Mortgage, Century 21 Platinum Properties, Draper Kramer Mortgage Corp., Sweet Home Realty Property Management, and Veterans United Home Loans.

About the Clarksville Association of Realtors

The Clarksville Association of Realtors has over 850 active REALTOR members and 70 Affiliate Partners that work together to improve the public awareness of the value of Realtors to the community and to the benefits of their services. The Clarksville Association of RealtorsÒ also serves to promote the success and future developments of its members in association with the Tennessee and National Associations of Realtors.




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