Fannie Mae and Freddie Mac would be turned into shareholder-owned utilities and face competition from new companies under a trade group’s mortgage-finance overhaul plan that could eventually require about $200 billion in private capital.
The Mortgage Bankers Association proposal released Thursday calls for the U.S. government to remain involved in the housing market, putting its guarantee behind mortgage-backed securities that the firms issue but no longer backstopping the companies themselves.
The proposal comes as Congress and President Donald Trump’s administration ramp up work on what to do about Fannie and Freddie, which have been in government-managed limbo for more than eight years. What the government decides to do will have huge ramifications for the $10 trillion mortgage market, about half of which is backed by the two companies.
“There are two options here for anybody in the process,” said MBA President David Stevens. “You can kick and scream on how you want the game to be played differently or you can play the game. We’re staying in the game on this one.”
Stevens said he believes statements made by the Trump administration and lawmakers make a serious legislative effort probable within the next year.
The process could help determine whether any value is realized by holders of Fannie’s and Freddie’s old common and preferred shares, including funds managed by Paulson Co., Pershing Square Capital Management and Fairholme Funds as well as individual investors.
On a call with reporters, Stevens said senior members of the Trump administration had signaled to MBA that they support a legislative process to overhaul Fannie and Freddie. Some investors and others have advocated for the Treasury Department and the companies’ regulator, the Federal Housing Finance Agency, to release them from government control without legislation.
The Treasury Department didn’t respond to a request for comment.
At a conference in Washington on Thursday, Treasury Secretary Steven Mnuchin said that housing-finance reform was a priority for the administration, along with tax reform and regulatory relief.
“We need housing reform. We have to fix — we have two entities, Fannie Mae and Freddie Mac, that are sitting under government control — we’ve got to figure out how to reform housing finance so we don’t have taxpayers at risk and yet we have liquidity,” Mnuchin said.
The MBA first gave a general outline of its proposal in January. The 60-page paper released Thursday is more detailed, describing capital requirements and proposed options for transitioning to the new system.
Fannie and Freddie don’t make loans themselves. They buy them from lenders, wrap them into securities and make guarantees to investors in case of default. That process frees up lenders to make more mortgages and is widely credited for making 30-year fixed-rate loans possible.
The government took over Fannie and Freddie in 2008 during the financial crisis, eventually injecting them with $187.5 billion in bailout funds. In return, the government received a new class of senior preferred shares and warrants to acquire nearly 80 percent of the companies’ common stock. Since 2013, the companies have been profitable and sent nearly $266 billion to taxpayers, though the money isn’t counted as repayment for the bailout.
The success or failure of the MBA proposal and others could hinge on threading the needle to satisfy competing priorities of lawmakers, advocates and borrowers.
Some conservative lawmakers, for example, argue that a government role in housing keeps taxpayers exposed to potential future bailouts. Some Democrats contend that a government subsidy is appropriate to keep mortgage rates low for lower-income borrowers.
On a call with reporters, MBA officials said the amount of capital standing in front of taxpayers in the new system could eventually be about $200 billion, including both shareholder equity and transfers of mortgage-credit risk to other investors. Fannie and Freddie combined currently back around $5 trillion in mortgages.
The trade association also suggested that Congress create a mortgage insurance fund, standing behind Fannie, Freddie and competitors, which could make payments in the event of failures.
Banks and other lenders would be forbidden to own more than 10 percent of the companies, in part to keep large lenders from controlling both the primary and secondary mortgage markets. Guarantors should give large and small lenders equal access to the system, MBA said.
“We were glad to see MBA’s endorsement of the utility model for the GSEs and the principle that there must be fair and equal access and pricing for lenders of all sizes,” Glen Corso, executive director of the Community Mortgage Lenders of America, said in an email. Corso added that the group needed to review the proposal to ensure it achieves that outcome.
Some affordable housing advocates are also likely to be concerned about how the new system could affect mortgage rates, especially for less-affluent borrowers. The MBA said its proposal would likely lead to slightly higher mortgage rates. The new housing-finance system should encourage lending to lower-income borrowers through mechanisms including target amounts of lending to certain demographic or income-based groups, the group said.
The MBA plan, like others released in the past year, is a marked departure from complete replacements of the housing-finance system proposed several years ago. Rather than wind down Fannie and Freddie, the association would preserve their employees and other assets to be used by successors in an effort to lessen disruption to the market.
The plan doesn’t address what could happen to current shareholders of Fannie and Freddie. In its outline of potential ways to transition to the new system, the MBA said the companies could be put into receivership or could create subsidiaries, unburdened by guarantees on legacy-mortgage backed securities, which could then be spun off into the private market.
MBA Chairman Rodrigo Lopez said the transition could take as long as 10 years to avoid market disruption and give time for new companies to be formed.
Morgan Stanley Treasurer Celeste Mellet Brown is leaving after 17 years at the firm to become deputy chief financial officer at Fannie Mae, according to people familiar with the matter.
Ms. Brown, who will be taking the new job in June, will succeeded by John Ryan, a finance executive who has worked over the years in Morgan Stanley’s trading division and its private bank, the people said.
One of the more senior women at…
April 18 Federal Home Loan Mortgage Corp
April 18 Federal Home Loan Mortgage Corp
* Freddie Mac april 2017 outlook
* Project home sales to decrease to 5.90 million in 2017,
“failing to build on momentum of 2016”
* “Home prices have still not recovered to their pre-crisis
levels for many homeowners”
* Housing starts were 1.17 million for 2016 and are
projected to be 1.26 million for 2017
Source text for Eikon:
Further company coverage:
MCLEAN, VA–(Marketwired – Apr 19, 2017) – Freddie Mac (OTCQB: FMCC) announced today that it priced its new 1.375% three-year USD Reference Notes® security due on April 20, 2020. The issue, CUSIP number 3137EAEF2, was priced at 99.658 to yield 1.492%, 11 basis points more than the yield on three-year U.S. Treasury Notes. The issue will settle on Thursday, April 20, 2017.
The new three-year Reference Notes security will be offered via a syndicate of dealers headed by Citigroup Global Markets Inc., Wells Fargo Securities, Inc. and TD Securities.
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, 2016, filed with the Securities and Exchange Commission (SEC) on February 16, 2017; 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, 2016, 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, 2016, 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 website.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
April 19 Federal Home Loan Mortgage Corp
April 19 Federal Home Loan Mortgage Corp
* Freddie Mac prices new $2.5 billion three-year reference
* Issue will settle on April 20, 2017
* It priced its new 1.375% three-year usd reference notes
security due on April 20, 2020
* Issue, CUSIP number 3137EAEF2, was priced at 99.658 to
Source text for Eikon:
Further company coverage:
reAltitude, a cooperative of REALTOR® associations, has added 60 associations to its ranks since its inception, as well as recently partnered with realtor.com®, the organization announced. The cooperative is now 230,000 members strong.
“The purchasing power of this combined group has driven costs down and allowed us to expand our member services to drive more value into being a REALTOR® in one of our reAltitude member associations,” says Teresa Kinney, CEO of the Miami Association of REALTORS®.
Realtor.com has partnered with reAltitude to develop an education track, including live and remote training, that reAltitude member associations can use. Twenty-three companies have already partnered with the cooperative.
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“We are very excited to work with the reAltitude group,” says Dave Phillips, realtor.com. “They leverage the combined experience of great REALTOR® associations to improve the effectiveness of our relationships. Together we have developed a compelling curriculum that will really raise the bar for REALTORS®.”
reAltitude was founded in January 2016 by the Miami Association of REALTORS®, Mainstreet REALTORS® of Chicago, the San Antonio Board of REALTORS® and the Greater San Diego Association of REALTORS® in an effort to share experiences and resources. Member associations are listed here.
REALTOR® associations interested in learning more about reAltitude are invited to a reception at the National Association of REALTORS® (NAR) Midyear Legislative Meetings Trade Expo in Washington, D.C., this May.
For more information, please visit www.realtitude.org.
Local real estate sales continue to increase, with first quarter activity this year almost surpassing $100 million.
Individual sales remained strong, a longstanding trend as year-over-year sales activity continued to spike. Interest rates, meanwhile, are trending down.
In the first three months of 2017, realtors in Alleghany, Ashe, Avery and Watauga counties sold 394 homes worth $99.82 million. That’s a 12 percent increase in sales compared to the first quarter of 2016 (351), and 30 percent greater than 2015 (302).
The median sold price so far this year is also higher than last, with the mid-point price of all homes sold since January $206,000, according to the High Country Multiple Listing Service. The median price through the first three months of 2016 was $195,000.
Inventory is slowly growing. As of April 19, there were 2,044 active listings within the MLS. There were 2,388 a year ago, and almost 2,500 at this point in early April 2015.
The limited supply is due to an unrelenting demand, as monthly sales figures continue outpacing previous years. In March, local realtors sold 172 listings. That’s 26 percent higher than March 2016 (136) and 51 percent higher than March 2015 (114).
The total sales value for the month was $41.58 million, with a median sold price of $212,500. It was the fourth time in the past six months the median sold price surpassed $200,000.
Buyers last month encountered interest rates which have yet to stabilize since year’s start. March opened with the average rate on a 30-year mortgage at 4.1 percent. It went to 4.3 percent by mid-month, and has fallen since.
As of April 13, the average 30-year fixed rate was 4.08 percent, the lowest recorded since January 19. A year ago the rate averaged 3.58 percent, according to loan giant Freddie Mac.
The average 15-year fixed rate was 3.34 percent.
Nationally, sales are on the upswing, according to the National Association of Realtors.
“Being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt,” said Lawrence Yun, NAR chief economist.
Hundreds of real estate professionals from towns and cities across the country convened at the Grand Wailea Resort March 5 through 8 for the annual President’s Circle Conference hosted by the National Association of Realtors’ Realtors Political Action Committee.
This year, conference attendees packed a little something extra in their suitcases: backpacks filled with school supplies for students on Maui, Lānaʻi and Molokaʻi.
The idea to collect the school supplies was conceived by Idaho Association of Realtors President Connie Fogle after she learned about the Wishing Well for Maui Students program. Since its inception 10 years ago, the Wishing Well program has collected furniture, school supplies and other items with the goal of improving the educational experiences and opportunities for Maui County’s public school students.
Run entirely by volunteer Realtors Association of Maui members, organizers say the nonprofit organization has contributed more than $1.5 million in goods, services and cash donations to every school in Maui County.
RAM member and Wishing Well founder Sarah Sorenson was one of five recipients of Realtor Magazine’s 2016 Good Neighbor Awards. The awards program honors NAR members across the nation who have made a difference in their communities through volunteer work; Sorenson was the first winner from Hawaiʻi.
Fogle, who was in attendance when Sorenson accepted her Good Neighbor award at a convention in November, successfully rallied support for the Wishing Well program through the President’s Circle Conference. It didn’t take much convincing: Conference attendees donated 133 backpacks filled with $18,000 worth of school supplies—running the gamut from pencils and pink pearl erasers to playground balls and scientific calculators—along with $2,700 in cash and gift cards.
These contributions will go a long way for Maui County students, said Sorenson, who was surprised to learn that the Wishing Well program had been chosen as a beneficiary. “I was shocked,” she said. “I was very honored when I realized this was the first time they’d reached out to a nonprofit.”
Since 1969, the RPAC has promoted the election of pro-Realtor candidates across the US through voluntary contributions made by Realtors. RPAC enables Realtors to support candidates that support the issues that are important to their profession and livelihood. The annual RPAC President’s Circle Conference is intended to provide President’s Circle investors with the opportunity to learn and discuss policy concerns affecting the real estate community.
The Wishing Well program accepts donations year-round. Sorenson said many teachers have requested items that would help them in their classrooms, like office chairs, flat screen televisions, bookcases, gardening tools for school gardens, file cabinets, chairs, carpeting or clean area rugs so students can gather for learning or quiet time.
Organizers say that if anyone is looking to offload any new or gently used household or office items or would like to purchase school supplies for the program, they can call Sorenson at (808) 283-3969. For more information about the Wishing Well for Maui Students program visit them online at www.ILoveMauiSchools.com.
Fannie Mae held its economic growth forecast steady in April at 2% for the year, saying policy changes that could result in meaningful economic growth seem unlikely for this year, according to the company’s economic and strategic research group’s April 2017 Economic and Housing Outlook.
Last month, Fannie Mae announced it would be taking a “wait and see” approach to some of President Donald Trump’s policies.
“Our economic forecast remains unchanged in April as we continue to await details on the new Administration’s plans,” Fannie Mae Chief Economist Doug Duncan said. “We’re intrigued by the disparity between elevated consumer and business optimism and signs of decelerating first-quarter economic growth.”
“However, we expect growth to rebound this quarter as special factors that weighed on growth partially unwind,” Duncan said.
Fannie Mae explained that some economic data, such as consumer spending and auto sales, are tending lower. Weak economic news and increased geopolitical risks moved long-term rates lower.
However, housing data remains high due to the unusually warm winter weather. In fact, the group suggests a seasonal uptick in listings this spring will ease housing inventory shortages.
Fannie Mae also predicted recent declines in mortgages rates could cause some buyers to enter the housing market before the rates begin to rise once again as the Federal Reserve continues to normalize monetary policy.
“With the firming of the Fed’s favored measure of inflation, reduced labor market slack, and the more hawkish tone of the Federal Open Market Committee at its March meeting, we foresee that the Fed will hike rates two more times this year, in June and September, and announce a change to its reinvestment policy in December,” Duncan said.
Fannie Mae has moved its projected
timeline for further Federal Reserve price hikes forward by several
months. The company’s Economic
Strategic Research (ESR) Group points to an increase in the Fed’s favored measure
of inflation, the personal consumption expenditures (PCE) deflator, which
increased by 0.1 percent in February, bringing it 2.1 percent higher than a
year ago. This was the first time in
nearly five years the PCE had exceeded the Fed’s 2.0 percent target.
Combined with the unemployment rate which
was down 0.2 percent to 4.5 percent in March, the ESR says “firming inflation
will prod the Fed to raise the fed funds rate in June and September, compared
with September and December in the prior (ESR) forecast.” The minutes of the
March Federal Open Market Committee (FOMC) meeting also point to an upcoming
change in the committee’s reinvestment policy, one that would begin shrinking
the Fed’s balance sheet and its huge portfolio of Treasury and mortgage-backed
The ESR’s April issue of Economic Developments notes that that
reports from the housing sector during the first two months of the year were
more upbeat than from other parts of the economy, partly because of
unseasonably warm weather. Single-family
starts were up and the National Association of Home Builders’ index of builder
confidence jumped by 6 points in March, the largest increase since the housing
crisis. Multi-family starts and overall
residential permitting however were both down.
Forward-looking indicators of home sales –
pending sales and purchase mortgage applications – are both up, but the
potentially faster pace of Fed rate increases, as noted above, pose a downside
risk to home sales. Extremely low
for-sale inventory is also expected to private a headwind to the spring home
selling season. Declines in household
mobility are suppressing the supply.
Fannie Mae’s Home Purchase Sentiment Index
gave back some of the previous months’ gains in March as consumers
overwhelmingly expect rates to rise and fewer feel that this is a good time to either
buy or sell a home. Contributing to this
a continuing high rate of annual price appreciation, 7.0 percent according to
the CoreLogic Home Price Index, although slightly less per other indices.
Fannie Mae sees a slight uptick in
inventories, perhaps as some sellers chose to lock in profits from recent price
increases, and this, along with buyers jumping into the market before rates
rise further, should push home sales up by 3.0 percent this year. The company is still forecasting that 30-year
fixed rate mortgages should have an average rate of 4.3 percent by year’s end
and that mortgage originations will decline by about 20 percent this year to
$1.58 trillion. The refinance share will
drop by 50 percent from 32 percent last year to 16 percent in 2017.
In non-housing areas, Fannie Mae sees
economic growth remaining at 2.0 percent in 2017, “unconvinced that a
meaningful positive impact from stimulative fiscal policy will occur this year.” First quarter growth appears not to have met
expectations, but they expect improvement in the second quarter.
Near-term risks to the economy include a
potential government shutdown on April 29 and policy uncertainty delaying
investment decisions. The economic
impact of a short shutdown would be minor because federal pay is usually made
up retroactively, but a shutdown would weigh on consumer and business