With Expiration Looming, NAR, NAHB Applaud Flood Insurance …

It remains to be seen if it passes into law, or how it
will hold up during the process, but housing industry groups say an agreement
has been hammered out for renewing the federal flood insurance program. Both
the National Association of Home Builders (NAHB) and the National Association
of Realtors® (NAR) say they have been working with the House Financial Services
Committee on parameters, for, in the words of NAHB, “A viable, long-term flood
insurance reauthorization bill that will keep the National Flood Insurance Program
(NFIP) fiscally sound and enable home builders to provide safe and affordable
housing to consumers.”

A flood insurance policy is required of homeowners who
live in certain Federal Emergency Management Agency (FEMA) designated flood
plains and have a mortgage issued by any federally charted financial
. The program
provides $1.25 trillion in coverage for about 5 million policyholders
nationwide. Policies are issued by private insurers but are backed
by FEMA. Because not all homeowners are required to carry the insurance, risk
is not shared over various levels of risk. 
NFIP was authorized by an act of Congress in 1968 and has been
reauthorized periodically since then.  

The current reauthorization would be
through the “21st Century Flood Reform Act.”  NAR said changes to the legislation have
cleared the way
for their endorsement of the bill.

The Chicago Tribute, after the
recent flooding in Illinois, reported that the federal program is indebted to
the U.S. Treasury for $24.6 billion after massive payouts for damages caused by
Hurricane Katrina, Superstorm Sandy, and other recent and devastating floods. NFIP
is paying $400 million in interest on that debt.

Flood insurance premiums do not
reflect the true cost of the program and policies are not only backed by FEMA,
they are federally subsidized. The last reauthorization of the program in 2012,
the Biggert-Waters Flood Insurance Reform Act, required NFIP to raise premium rates
to reflect true risk.

While Biggert-Waters grandfathered existing
policies, albeit with a gradual reduction of those subsidies, new policies were
issued at a full risk-based rate. This caused immediate disruption in coastal
and other flood-prone areas.  In 2013,
MND wrote about one homeowner, in Pinellas County, Florida,
who purchased a future retirement home in 2012 and paid a $3,300 premium for
his first year of coverage.  When he
received his next bill, it was for $24,300. 
Congress quickly rolled back the risk-based premium requirement, but it
continues to hang over the real estate market in lower elevation areas.

Among the Financial Services
Committee’s proposed changes that are supported by the housing groups are:

  • Elimination of a provision that
    would have ended NFIP coverage of new homes constructed in the 100-year
  • Ensuring that “grandfathering” will
    remain for all policyholders if their risk changes when FEMA periodically
    revises its flood plain mapping.
  • Raises the annual premium floor for
    rate increases from its current 5 percent level to 6.5 percent rather than the
    8 percent originally proposed.

The changes laid out in press
releases from NAHB and NAR do not appear to address the problem of premium
when properties change hands. There are anecdotal reports that uncertainty
over this issue is already impacting real estate sales in some coastal areas.

NAHB Chairman Grant MacDonald said, “NAHB
commends House Financial Services Chairman Jeb Hensarling and Housing
Subcommittee Chair Sean Duffy for their leadership in working with us to
produce a bill that will preserve rate affordability, shore up the NFIP and
address the concerns of the housing community. With the NFIP set to expire on Sept. 30, we urge the House to pass this bill quickly.”

NAR President William E. Brown, said,
“This legislation protects taxpayers, as well as homeowners, which is no
easy task. The September 30 reauthorization deadline still looms in front of
us, and Realtors® are eager to see this legislation progress
quickly. Leaders on both sides of the aisle are well aware that this issue
touches 22,000 communities – in every state, both coastal and inland. We’re
grateful for the committee’s support and look forward to their continued
efforts on behalf of homeowners.”

Amid U.S. real estate buying binge by foreign investors, Florida …

Foreign investment in U.S. residential real estate recently skyrocketed to a new high with nearly half of all foreign sales happening in Florida, California and Texas.

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This year’s National Association of Realtors survey of international investing in U.S. real estate once again revealed that foreign buying is focused first and foremost on Florida, where 22 percent of such activities took place. The Sunshine State was followed by California and Texas (each at 12 percent), and then by New Jersey and Arizona (four percent apiece).

Florida was the most popular state for Canadian buyers, fueled by a sharp increase in sales dollar volume. Chinese buyers mostly chose California, while Texas was the preferred state for Mexican buyers.

Overall, 284,455 U.S. properties were bought by foreign buyers, up 32 percent from 2016. Purchases accounted for 10 percent of the dollar volume of existing-home sales, up from 8 percent last year.

NAR’s study found that between April 2016 and March 2017, foreign buyers and recent immigrants purchased $153 billion of residential property. That’s a 49 percent jump from $103 billion in 2016 and surpasses the $103.9 billion in purchases in 2015 as the new survey high.

“The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year,” NAR chief economist Lawrence Yun stated.

“While the strengthening of the U.S. dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work and invest.”

Yun attributed the rise in Canadian purchasing property in U.S. markets that remain more affordable than in their own country.

“Inventory shortages continue to drive up U.S. home values, but prices in five countries, including Canada, experienced even quicker appreciation,” said Yun.

Foreign buyers typically paid $302,290, which was a 9.0 percent increase from the median sales price in the 2016 survey ($277,380) and above the sales price of all existing homes sold during the same period ($235,792).

About 10 percent of foreign buyers paid over $1 million, and 44 percent of transactions were all-cash purchases, down from 50 percent in 2016.

Fannie Mae prices $1.35 billion credit risk sharing transaction

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Fannie Mae has priced a $1.35 billion risk sharing transaction, its fifth such note offering in the year under its Connecticut Avenue Securities program.

The offering, CAS Series 2017-C05, is scheduled to settle on July 26. Fannie Mae’s benchmark Connecticut Avenue Securities program is designed to share credit risk on its single-family conventional guaranty book of business.

More than 174,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $43.8 billion comprise the reference pool for the offering. The loans have original loan-to-value ratios between 60% and 80% and were acquired from October 2016 through December 2016. The loans are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls.

“We’re pleased to see such strong investor appetite for CAS with our most recent deal, 2017-C05. We consistently see a broad and diverse account base in our transactions and investors have continued to increase their allocations to the program,” said Laurel Davis, vice president of credit risk transfer, Fannie Mae. “There has been a sustained expansion in the CAS investor base, with buyers attracted to the liquidity, transparency, and continued strong performance of the CAS program. Given robust market demand, we expect to bring our sixth deal of the year, CAS 2017-C06, to market in early August.”

Bank of America Merrill Lynch is the lead structuring manager and joint bookrunner for the transaction and Citigroup Global Markets is the co-lead manager and joint bookrunner. Barclays Capital, Goldman Sachs, Morgan Stanley, and Nomura Securities are co-managers, while Academy Securities and Loop Capital Markets are selling group members.

Related stories:
Fannie Mae completes two credit insurance risk transfers on single-family loans
Freddie Mac completes transaction for pool of re-performing loans

Freddie Mac Follows Fannie Mae to Rental Market, With Affordability …

“It is, first and foremost, affordable,” said the official, David D. Leopold, a Freddie Mac vice president for targeted affordable sales and investments. “The size of the sponsor is less important than affordability.”

Freddie Mac is still hashing out many of the details of the plan, but Mr. Leopold said the company hoped to announce the first deal within 90 days.

The Federal Housing Finance Agency, which regulates Freddie Mac and Fannie Mae, has approved the financing effort on a trial basis. The agency’s view of the single-family rental market has changed since 2012, when it balked at a Freddie Mac plan to provide financing to some buyers of foreclosed homes because of concerns that low-cost loans would hurt banks and might also encourage home-flipping.

Still, any specific Freddie Mac transaction would need the agency’s approval, just as Fannie Mae’s deal with Invitation Homes did.

The approach being taken by Freddie Mac is in part a response to criticism of Fannie Mae’s deal to provide a guarantee to investors in the 10-year, $1 billion loan that Wells Fargo provided to Invitation Homes and will securitize. The loan is backed by about 7,000 rental homes.

But the strategy also stems from a growing consensus among housing policy makers and landlords that both Freddie Mac and Fannie Mae should play roles in providing financing to single-family home operators. The market has grown since the collapse of housing prices a decade ago touched off the worst financial crisis since the Great Depression and led to more than six million completed foreclosures.

There are now about 17 million homes being rented, up from 11 million in 2007. About 300,000 of those rentals are operated by Invitation Homes and other big Wall Street-backed firms that sprouted up after the crisis like American Homes 4 Rent, Colony Starwood Homes and Pretium Partners.


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The vast majority of rentals are still managed by mom-and-pop operators who own a small number of homes. And Fannie Mae and Freddie Mac have long provided financing to small investors. But financing has been hard to come by for nonprofit housing groups and midsize investor landlords who have had to rely mainly on private-equity-backed firms for financing.

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In the wake of the financial crisis, most banks have tended to avoid lending to smaller landlords out of concern that such firms have scant operating histories and that the homes posted as collateral are not sufficient to secure the loans. But the hope is that with loan guarantees from the government-controlled mortgage finance companies, more traditional lenders may be willing to venture into that part of the market.

“There is no doubt they want to be in this space, and I think they should be in this space,” said Julia Gordon, the executive director of the National Community Stabilization Trust, which oversees a program that helps housing organizations across the country get the first chance at buying foreclosed homes from banks.

“Freddie seems to want to distinguish itself from Fannie,” she added.

The push into single-rental housing by Freddie Mac and Fannie Mae comes amid a debate over the future of the two companies, which the federal government bailed out in 2008 and placed in a government conservatorship at the height of the crisis. The main mission of both is to maintain the viability of the 30-year mortgage by ensuring such loans against default and then packaging them into mortgage-backed securities.

The Federal Housing Finance Agency is also prodding the two mortgage finance giants to do more to actively support the rental market for single-family homes.

“F.H.F.A. has authorized both Fannie Mae and Freddie Mac to explore single-family rental transactions on a very limited basis,” Corinne Russell, an agency spokeswoman, said. “These transactions will help the enterprises test, and learn about, the market.”

The agency held an invitation-only conference in Washington last month to discuss challenges related to the single-family rental industry. Representatives from Fannie Mae and Freddie Mac, as well as from for-profit and nonprofit landlords, participated.

Laurie Goodman, a director of housing-finance policy for the Urban Institute, who spoke at the conference, said that “there is a huge hole in the middle market” that Fannie Mae and Freddie Mac could fill. Unlike others, she was less critical of Fannie Mae’s decision to guarantee the loan to Invitation Homes, saying the deal was a “very valuable learning experience.”

Fannie Mae declined to comment. Claire Parker, an Invitation Homes spokeswoman, said the loan was consistent with Fannie Mae’s mission to promote rental housing.


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“The reality is that housing needs are evolving, and single-family leasing can very often represent a better and more affordable option for families,” Ms. Parker said.

John O’Callaghan, the president of the Atlanta Neighborhood Development Partnership, which has rehabilitated homes in the Atlanta area, said he would prefer that Fannie Mae and Freddie Mac provide financing to organizations like his that work to create affordable rentals and, sometimes, to resell those homes to local families.

“Our No. 1 goal is to allow neighborhoods that have had homeownership stripped out of them to have it returned,” said Mr. O’Callaghan, who also participated in the housing finance agency conference.

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Fannie Mae DTI increase could add 95000 borrowers each year

As the GSEs seek to ease access to credit and allow more homebuyers into the market, Urban Institute pointed out one change that could allow nearly 100,000 new homebuyers to qualify for a mortgage each year.

Earlier this year, mortgage giant Fannie Mae announced it was raising its debt-to-income ratio to further expand mortgage lending. The GSE raised its limit up to 50%, up from the previous limit of 45%. Even under the only limit, Fannie Mae allowed for flexibility up to 50% DTI for certain case files with strong compensation factors.

However, that flexibility was almost always offered to mortgages with loan-to-value rations lower than 80%. This new increase is significant as increasingly, 3% down payments are becoming the new normal, even on conventional loans.

Urban Institute estimated that 95,000 new loans will be approved each year due to Fannie Mae’s DTI increase, it stated in a report written by Edward Golding, Laurie Goodman and Jun Zhu.

The report also explained a disproportionate share of the new loans will go toward black and Latino families as they are 1.5 times more likely to have DTI ratios above 45%.

The new loans will also be riskier as the probability the mortgage will fall into default increased 31% for those with DTI ratios between 45% and 50% when compared with the median DTI level of 35%.

The increase in the DTI ratio will also allow Fannie Mae to purchase 3.4% more loans. Fannie Mae estimated that between 3% and 4% of recent applications were approved by the AUS and held DTI rations between 45% and 50%, but were ineligible due to additional overlays.

Small Banks Warn Lawmakers Against ‘Extreme’ Overhaul of GSE …

Amid efforts to overhaul Fannie Mae and Freddie Mac as they deplete their capital buffer, small lenders are warning against actions they say could be disastrous for community-based mortgage lending.

Representatives from small banks and credit unions on Thursday urged the Senate Banking Committee to avoid mirroring previous congressional proposals regarding government-sponsored enterprises and instead called for changes to level the playing field for all mortgage lenders.

“Reform need not be radical or extreme, but should be targeted and surgical,” said Brenda Hughes, senior vice president and director of mortgage and retail lending at First Federal Savings in Twin Falls, Idaho, on behalf of the American Bankers Association.

Hughes said changes should include a ban on volume-based discounts offered to larger lenders, and she argued for the preservation of the “cash window” that allows originators to sell loans on an individual basis to the GSEs.

Community Home Lenders Association President William Giambrone told the panel that Congress should prohibit vertical integration, even in small percentages, that allows larger lenders to be involved in primary and secondary markets.

The six witnesses agreed that no more than two entities should be chartered to compete with the GSEs, in order to minimize complexities and avoid driving up their legal and internal costs. The small lenders said that without a set method of recapitalization through Federal Housing Finance Agency or the U.S. Treasury, the current state of affairs in the housing finance market could trigger another crisis.

In May, Federal Housing Finance Agency Director Mel Watt delivered sobering testimony that Fannie Mae and Freddie Mac will deplete their capital buffer by 2018 and could require drawing additional taxpayer funds — dire circumstances noted by Senate Banking Committee Chairman Mike Crapo (R-Idaho) in his opening remarks at Thursday’s hearing.

“The GSEs are currently earning profits, but taxpayers could again be on the hook for billions of dollars when the housing market experiences its next downturn,” Crapo said. “Reform is urgently needed.”

Wide and bipartisan support should make recapitalizing Fannie Mae and Freddie Mac a top priority while other housing finance reform proposals are hashed out, according to Pete Sepp, president of center-right National Taxpayers Union.

“In the very, very near term we have to focus on capitalizing these GSEs so that we are spared the immediate and more horrifying prospect of more tax dollars spent shoring up their positions,” he said in an interview after Thursday’s hearing.

Sepp said immediate preventive action should not stop Congress from diving into a more expansive overhaul at a later date. NTU would likely support a more comprehensive approach, he said, with elements similar to Republican-backed legislation from 2013 known as the PATH Act.

“It’s always so tempting for Congress to make some tweaks at the edges and call it a day when some very long-term thinking is often in order,” he said.

Freddie Mac Forgoes Issuing a Reference Notes Security on its July 20, 2017 Announcement Date

MCLEAN, VA, Jul 20, 2017 (Marketwired via COMTEX) — MCLEAN, VA–(Marketwired – Jul 20, 2017) – Freddie Mac (otcqb:FMCC) announced today that it will forgo issuing a Reference Notes® security on its July 20, 2017 announcement date. The company’s 2017 Reference Notes calendar designates dates that it may use to announce the issuance of Reference Notes 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.

MEDIA CONTACT: Lisa Gagnon 703-903-3385 INVESTOR CONTACT: Sean Forde 571-382-4090

� 2017 Nasdaq, Inc. All rights reserved.

US 30-year mortgage rates fall back below 4 percent: Freddie Mac

NEW YORK (Reuters) – Interest rates on U.S. 30-year mortgages dropped back below 4 percent this week in line with a drop in Treasury yields, retreating from their highest levels in two months, Freddie Mac said on Thursday.

The borrowing cost on 30-year mortgages, the most widely held type of U.S. home loan, averaged 3.96 percent in the week ended July 20. Last week, the average 30-year rate was 4.03 percent, which was the highest since 4.05 percent in the May 11 week, the mortgage finance agency said.

Treasury yields have scaled back since last Friday following a weak-than-forecast reading on the U.S. consumer price index for June.

“Continued economic uncertainty and weak inflation data pushed rates lower this week,” Freddie Mac’s chief economist Sean Becketti said in a statement.

On Thursday, the benchmark 10-year Treasury yield fell to a three-week low at 2.243 percent after the European Central Bank stuck to its ultra loose monetary policy on concerns about low inflation in Europe.

Reporting by Richard Leong; Editing by Chizu Nomiyama

Nancy Quinn Honored As Realtor Emeritus By National Association Of Realtors

Maynard, MA – Nancy Quinn, President/CEO of Berkshire Hathaway HomeServices N.E. Prime Properties, has earned the prestigious Realtor Emeritus status from the National Association of Realtors. The Realtor Emeritus designation is conferred on individuals who have held membership as a REALTOR with the National Association for a minimum of 40 years and have served at the national level. Quinn was honored with the award at Granite Links Golf Club in Quincy, MA on June 23, 2017.

Quinn began her real estate career in 1977 with family-owned Ledgard Real Estate and Appraisal Company. In 1982, she assumed the lead role of the business, and affiliated with the Gallery of Homes franchise. In 1993, she was one of the founding members of New England Prime Properties, Inc., and franchised with Prudential Real Estate and Relocation. Quinn became the President/CEO of the company in 1995. In 2014, the company changed its franchise affiliation to Berkshire Hathaway HomeServices. During Quinn’s tenure, Berkshire Hathaway HomeServices N.E. Prime Properties has grown to 18 offices in Massachusetts, Southern Maine and Rhode Island.

Quinn has served on numerous committees with The Greater Boston Real Estate Board, having been Chairperson of Government Affairs and a Marketing Director for her council. She also was on the Board of Directors for the Massachusetts Association of Realtors and served as President for both the Massachusetts Board of Real Estate Appraisers and Central Middlesex Multiple Listing Service.

Realtors endorse House flood insurance extension

The National Association of Realtors (NAR) endorsed a House plan to renew and revamp the National Flood Insurance Program (NFIP) after holding out for several changes.

NAR said Thursday that the group representing more than 1.2 million real estate agents and industry employees, backed the bill after lawmakers reduced proposed increases to flood insurance rates and preserved a policy that “protects homeowners from significant rate increases when a flood map changes.”

NAR President William E. Brown praised House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Financial Services Housing and Insurance Subcommittee Chairman Sean DuffySean DuffyOvernight Finance: GOP offers measure to repeal arbitration rule | Feds fine Exxon M for Russian sanctions violations | Senate panel sticks with 2017 funding levels for budget | Trump tax nominee advances | Trump unveils first reg agenda Realtors endorse House flood insurance extension The Hill’s 12:30 Report MORE (R-Wis.) for working with the group on fixes to the bill.

“The changes to the 21st Century Flood Reform Act will help give certainty to homeowners who have brought their property to code and have done their part to protect it against flood risk,” Brown said.

“It’s a fair and reasonable approach that recognizes the need for accessible, affordable flood insurance, while taking us one step closer towards reauthorization.”

NAR’s endorsement comes at a critical time for the House. Congress has until Oct. 1 to reauthorize the NFIP, first established in the 1960s to provide flood insurance to at-risk homes. Lawmakers are seizing on the deadline as a chance to cut the NFIP’s $24 billion debt and shift more flood insurance customers to a burgeoning private market.

Private flood insurance was largely nonexistent when the NFIP was established in 1968, and Republicans are eager to reduce taxpayer exposure to risky homes by easing federal policy holders into private plans.

The House reform plan is currently stalled in the House Financial Services Committee amid bipartisan opposition from more than 20 lawmakers.

Brown said NAR is “eager to see this legislation progress quickly.”