Do Or Die Time For Freddie And Fannie Shareholders?

The government had asserted various privilege claims to keep confidential more than 11,000 FNMA (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) documents, arguing that the information in the emails, draft memos, and other documents would destabilize the economy. This secrecy was so unusual that the New York Times intervened with the Court of Federal Claims requesting documents’ release.

Judge Margaret M. Sweeney of the Court of Federal Claims privately reviewed the secret documents and ruled that the government was unjustified in withholding the vast majority, ordering that they be released.

Peter Chapman recently wrote, “The government wants 43 additional days to comply with Judge Sweeney’s instructions to turn documents improperly withheld over to Fairholme. The government says it’s reviewed nearly half of the documents in the past six weeks and will start releasing them to Fairholme on Apr. 14. Fairholme tells Judge Sweeney it doesn’t object to the 43-day extension, but would take a dim view of any delay beyond the end of May.”

What incriminating evidence will be found once the 11,000 documents have been turned over the counsel for Fairholme Funds? Will all the documents be released in chunks so to speak and will it be by late May as many expect? Have they begun to release the documents? FNMA shares have dropped from $4.39 on February 6, 2017 to a current price of $2.38 (a 48% decline) after the U.S. Court of Appeals for the District of Columbia Circuit ruled that Fannie and Freddie shareholders cannot pursue many of their claims related to the so-called “Third Amendment sweep.” They are currently trading at around the low for 2017. FNMAS preferred is showing some signs of life currently at $6.35, up from a low of $5.42 on April 7 but down significantly from its 52 week high of nearly $11.00 on cancellation of net worth sweep optimism just prior to the U.S. Court of Appeals decision in February 2017.

There is still a lot of hope among FNMA and FMCC investors that U.S. Treasury Secretary Mnuchin will address the FNMA and FMCC net worth sweep after tax reform is addressed. I am in that camp so to speak. Depending upon what evidence is found in the 11,000 documents, the net worth sweep could end sooner rather than later or never and FNMA and FMCC stock and their preferred issues could soar. If not enough evidence is found on the alleged dirty deeds of the U.S. Government in the net worth sweep, FNMA stock could take out its $1.57 52 week low and preferred issues such as FNMAS could drop towards the $3.00 low which was pre Mnuchin and Trump.

I own Fairholme Fund and indirectly own Fannie Mae and Freddie Mac preferred shares, which have a large position in Fairholme Fund.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

BRIEF-Freddie mac prices $1 billion multifamily K-deal, K-725


April 18 Federal Home Loan Mortgage Corp


* Freddie mac prices $1 billion multifamily K-deal, K-725

* Freddie mac – company expects to issue more than $1 billion in K-725
certificates, which are expected to settle on or about APRIL 24, 2017
Source text for Eikon:
Further company coverage:

BRIEF-Freddie Mac announces issuance of new 3-year reference notes security


April 18 Federal Home Loan Mortgage Corp

* Freddie Mac announces the issuance of a new three-year
reference notes security


* Freddie Mac – issue will be priced on April 19, 2017, and
will settle on April 20, 2017, at benchmark size

* Freddie Mac – plans to issue a new three-year USD
reference notes security, CUSIP number 3137eaef2, due on April
20, 2020
Source text for Eikon:
Further company coverage:

Freddie Mac Prices $1 Billion Multifamily K-Deal, K-725

MCLEAN, VA–(Marketwired – Apr 18, 2017) – Freddie Mac ( OTCQB : FMCC ) recently priced a new offering of Structured Pass-Through Certificates (K Certificates), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 7-year terms. The company expects to issue more than $1 billion in K-725 Certificates, which are expected to settle on or about April 24, 2017.

K-725 Pricing

Details

  • Co-Lead Managers and Joint Bookrunners: Wells Fargo Securities, LLC and Citigroup Global Markets Inc.
  • Co-Managers: J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner Smith Incorporated, Multi-Bank Securities, Inc., PNC Capital Markets LLC
  • Rating Agencies: Fitch Ratings, Inc. and SP Global Ratings

Related Links

The K-725 Certificates are backed by corresponding classes issued by the FREMF 2017-K725 Mortgage Trust (K-725 Trust) and guaranteed by Freddie Mac. The K-725 Trust will also issue 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-725 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 securities of Freddie Mac or any other issuer. 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 Web site at www.sec.gov.

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.

US pending home sales surge to ten-month high ahead of spring


WASHINGTON Contracts to buy previously owned U.S. homes jumped to a 10-month high in February, pointing to robust demand for housing ahead of the busy spring selling season.

The report on Wednesday from the National Association of Realtors suggested higher home prices and mortgage rates were having little impact on the housing market for now, underscoring the economy’s resilience despite an apparent slowdown in growth in the first quarter.

The NAR said its Pending Home Sales Index, based on contracts signed last month, surged 5.5 percent to 112.3. That was the highest reading since April and the second best showing since May 2006.

“This bodes well for home sales this spring,” said Misa Batcheller, an economic analyst at Wells Fargo Securities in Charlotte, North Carolina.

Contract signing last month was likely boosted by unseasonably warm temperatures. The gains reversed January’s 2.8 percent drop. Pending home contracts become sales after a month or two, and last month’s surge implied a pickup in home resales after they tumbled 3.7 percent in February.

Economists had forecast pending home sales rising 2.4 percent last month. Pending home sales increased 2.6 percent from a year ago.

U.S. financial markets were little moved by the data as investors assessed comments from Federal Reserve officials on further interest rate increases this year. Chicago Fed President Charles Evans, one of the U.S. central bank’s most consistent supporters of low interest rates, said he supported additional monetary policy tightening this year.

The Fed raised its benchmark overnight interest rate by a quarter percentage point earlier this month and has forecast two more rate hikes this year. The dollar was trading higher against a basket of currencies while U.S. stocks were mixed. U.S. government bond prices rose.

TIGHT INVENTORIES

Demand for housing is being driven by a strong labor market, which is generating wage increases, as it nears full employment. Sales activity, however, remains constrained by tight inventories, which are driving up home prices.

“The good news is that warm winter weather has led to a surge in construction that will hopefully result in a bloom of new homes for sale this spring,” said Joseph Kirchner, senior economist at realtor.com.

A report on Tuesday showed home prices increased 5.7 percent in January on a year-on-year basis. The NAR expects sales of previously owned homes to increase 2.3 percent this year to around 5.57 million units.

Existing homes sales increased 3.8 percent last year. Housing market strength suggests an apparent sharp slowdown in economic growth early in the first quarter is likely temporary.

The Atlanta Fed is forecasting gross domestic product increasing at a 1.0 percent annualized pace in the first quarter. The economy grew at a 1.9 percent rate in the final three months of 2016.

Given labor market strength, economists expect only a modest impact from higher mortgage rates. The 30-year fixed mortgage rate is currently at 4.23 percent, below a more than 2-1/2-year high of 4.32 percent hit in December.

In a separate report on Wednesday, the Mortgage Bankers Association said applications for home purchase loans rose 1.2 percent last week from the prior week. It was the fourth increase in the past five weeks.

Last month, pending sales of existing homes increased 3.4 percent in the Northeast and jumped 3.1 percent in the West. Contracts surged 11.4 percent in the Midwest and rose 4.3 percent in the South.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

Are Realtors Making Bank? NAR’s Gross Household Income …

Reposted from notorious-rob.com with permission from Rob Hahn.

According to the 2016 National Association of Realtors (NAR) Member Profile, Realtors are making bank, yo! It kind of goes against what I’ve been hearing ever since I started in the real estate industry, so figured I’d discuss it with you all.

Check this out:

Now, according to that, half of all Realtors are making $100K or more in gross household income. Add in the 31 percent who are making at least $50K per year and we have 81 percent of Realtors making a solid middle-class or upper middle-class income.

In fact, if we go by common definitions of income classes in the United States, here’s how things break down:

So roughly speaking, maybe half of the Realtors are in that “middle class” bucket from $41,869 to $125,609. And we know that more than 29 percent are over the $125,609 line since 29 percent are over $150,000. Think about that. Nearly a third of all Realtors can be classified as Upper Income!

What’s even more amazing is that 38 percent of new agents (under two years of experience) are making $100K or more. One out of two is in the over $250K category, and almost one in 10 are making over $200K per year.

Now, keep in mind that this is Gross Household Income — not what the Realtor made from real estate sales.

And only 48 percent of Realtors say that real estate is the primary source of income for the household. So in the vast majority of the above, we’re talking about Realtors married to or living with someone else who makes a bunch of money, too.

When I saw this, I immediately thought of the “80/20” rule, that says that 80 percent of the business is done by 20 percent of the Realtors. Maybe that’s true — and that 20 percent are the top two tiers making at least $200K a year plus a few from the $150,000-$199,999 range.

But the 31 percent who are in the $75K -$150K range? That’s actually kind of an incredible stat. Almost suggests that even those who aren’t really producing very much are still very much in the upper middle class….

There are some dark-side worries to have about this, but I’ll keep those to myself for now while I look into a few things. For now, let’s just let the numbers speak for themselves.

Robert Hahn is the Managing Partner of 7DS Associates, a marketing, technology and strategy consultancy focusing on the real estate industry. Check out his personal blog, The Notorious R.O.B. or find him on Twitter: @robhahn.

Email Robert Hahn.

It’s Tax Day! Here Are Two Deductions for Homeowners That Can …

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Fannie Mae recognizes Associated Bank as STAR™ Performer for mortgage servicing excellence for fifth year

GREEN BAY, Wis., April 18, 2017 /PRNewswire/ — Associated Bank is recognized for the fifth year for its mortgage servicing performance as part of an assessment and recognition program sponsored by Fannie Mae, the leading source of residential mortgage credit in the U.S. secondary market.

Fannie Mae recognized Associated for outstanding mortgage “general servicing” as part of its Servicer Total Achievement and Rewards™ (STAR™) Program. General servicing encompasses customer service, loan administration, and other areas.

Associated serviced approximately 62,000 Fannie Mae mortgages in 2016 with total balances in excess of $7.4 billion.

“The STAR Program provides clear objectives and specific, consistent measurements for overall servicing performance, customer service, and foreclosure prevention efforts,” said Caroline Patane, vice president of the STAR Program. “The program evaluates servicers across key operational and acknowledges high achievers through annual STAR Performer recognition.”

“We are honored again to have been recognized by Fannie Mae for our continued efforts and our success in assisting homeowners,” said John Crandall, director of residential loan servicing for Associated’s Consumer and Small Business Banking unit. “While changes continue in the financial industry, we remain focused on our customers, their needs and the overall objective of homeownership. We have the right colleagues across the enterprise to assist in this process.” 

Earlier this year the company attained its 8th consecutive year as Wisconsin’s largest mortgage lender. Associated has significant residential mortgage lending business in Minnesota and Illinois as well.

ABOUT ASSOCIATED BANC-CORP
Associated Banc-Corp (ASB) has total assets of $29 billion and is one of the top 50 publicly traded U.S. bank holding companies. Headquartered in Green Bay, Wisconsin, Associated is a leading Midwest banking franchise, offering a full range of financial products and services from over 200 banking locations serving more than 100 communities throughout Wisconsin, Illinois and Minnesota, and commercial financial services in Indiana, Michigan, Missouri, Ohio and Texas. Associated Bank, N.A. is an Equal Housing Lender, Equal Opportunity Lender and Member FDIC. More information about Associated Banc-Corp is available at www.associatedbank.com.

Contact: Cindy Lorentzen
Public Relations Specialist
414-278-1876
Cynthia.Lorentzen@AssociatedBank.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/fannie-mae-recognizes-associated-bank-as-star-performer-for-mortgage-servicing-excellence-for-fifth-year-300441081.html

Nationstar Receives Fannie Mae Top Servicer Recognition …

On Monday, Nationstar Mortgage announced that it received the Servicer Total Achievement and Rewards (STAR) performer recognition for overall performance from Fannie Mae. This is the third year in a row in which Nationstar has received the recognition.

“This recognition belongs to our dedicated team members who are focused on giving our customers the best home loan experience possible,” said Jay Bray, Chairman and CEO of Nationstar. “We are honored to receive the highest level of recognition from Fannie Mae’s STAR program for the third year in a row and proud to be recognized for helping to keep the dream of homeownership alive for our customers.”

Nationstar had ended 2016 on a strong note, posting positive Q4 results. Q4 2016 was worth $2.01 per diluted share and net income reached $198 million, a significant gain over Q3 2016’s $45 million and $0.46 per diluted share. Overall, Nationstar ended the year with a total revenue of $789 million, a 37 percent increase over last year.

The servicing segment finished the year with a net revenue of $528 million, $58 million for the quarter. Adjusted pretax income experienced a 49 percent improvement over the previous quarter. According to the Q4 2016 report, Nationstar, “continued to implement technology and process initiatives to drive overall servicing profitability higher.”

“Nationstar had an incredible year of success in 2016,” said Bray. “We increased servicing profitability BPS over 87 percent while ending the year with a record 2.9 million customers.

Fannie Mae’s STAR Program aims to recognize the highest performing servicers for customer service. The program recognizes servicer performance based on three STAR performer categories: general servicing, solution delivery, and timeline management.




Is the great Chinese Fannie and Freddie selloff finally over?

If President Trump and China’s leader Xi Jinping needed a light topic of conversation for their Florida rendezvous earlier this month, they could have picked mortgages. Trump knows a thing or two about taking out real estate loans, while Xi’s government controls billions in U.S. housing debt. There was plenty to talk about.

China had been selling off U.S. mortgage bonds at a rapid clip as it moved to shore up its currency and was no longer the largest owner of securities backed by Fannie Mae and Freddie Mac as of January 2017. But transaction data for February from the U.S. Treasury released Monday show that the selloff could be coming to an end. China added a net $12.9 billion worth of bonds that month.

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Chinese entities held $181.8 billion worth of mortgage bonds issued by U.S. agencies at the end of January, according to the new data. That’s down 18 percent from a June 2015 peak of $222 billion. The volume of Chinese holdings of U.S. agency bonds for February is not yet available.

Japan is now the biggest foreign owner of U.S. agency bonds, expanding its holdings from a low of $151.9 billion in March 2015 to $226.5 billion in October 2016 before falling slightly to $218 billion in January.

China had been shedding foreign assets in a bid to stop the Renminbi from tumbling in value and make it more appealing as a global reserve currency. Buying and selling dollar-denominated securities like U.S. Treasury or mortgage bonds is a preferred method for foreign governments to weaken or strengthen their currencies.

“People pay a lot of attention to China’s holdings of Treasuries, so perhaps they [the Chinese government] prefer to let these similar assets [agency bonds] decline while holding on to their Treasuries,” said David Dollar, a fellow at the Brookings Institution and a former U.S. Treasury emissary to China.

The slide in China’s overall foreign currency reserves reportedly stopped in February and March as stricter capital controls took effect.

In the years leading up to 2008, China accumulated more than $500 billion in agency mortgage bonds, causing plenty of anxiety when their value tanked in the U.S. financial crisis. “I was talking to them regularly because I didn’t want them to dump the securities on the market and precipitate a bigger crisis,” Hank Paulson, Treasury Secretary from 2006 to 2009, said in a 2014 interview. 

Paulson claimed that the Russian government at one point tried to topple the US economy by selling its Fannie and Freddie bonds in concert with China.

“The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship,” Paulson said.

In September 2008, the U.S. government took over conservatorship of Fannie and Freddie and soon China began selling off bonds backed by the two mortgage giants (see chart). But in between 2013 and 2015 it expanded its holdings again, before reversing course once more.

Buying mortgage bonds marked China’s first major foray into the U.S. real estate market in the early 2000s. More recently, Chinese institutions also invested heavily in commercial real estate properties, particularly in New York.