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  1. Congressmen Seek to Subpoena FHFA for Principal Reduction Documents

    By on January 18, 2012

    In a letter to Rep. Darrell Issa, the Chairman of the Committee on Oversight and Government Reform, Reps. Elijah Cummings and John Tierney asked Issa to subpoena the Federal Housing Finance Agency (FHFA) over documents relating to mortgage principal reductions.  The FHFA is the conservator for Fannie Mae and Freddie Mac.  The head of the FHFA, Ed DeMarco, has consistently opposed Fannie and Freddie mortgage principal writedowns.  DeMarco has opposed them on the grounds that principal reductions would cost taxpayers more money than other alternatives to foreclosure.  Cummings and Tierney seek FHFA documents and analysis of potential principal writedowns:

    “During a hearing before the Committee on November 16, 2011, the Acting Director of FHFA, Edward DeMarco, committee under oath to provide these materials to the Committee.  Despite numerous written and oral follow-up requests, however, Mr. DeMarco has failed to provide them”.

    DeMarco’s specific comment during the November hearings was:

    “We have been through the analytics of the underwater borrowers at Fannie and Freddie, and looked at the foreclosure alternative programs that are available, and we have concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer”.

    Cummings and Tierney noted that several economists have recently advocated principal reductions as a possible alternative to foreclosure.  NY Federal Reserve President William Dudley advocated for “earned principal reduction” in a recent speech.  Further, Fed Chairman Ben Bernanke and his staff wrote a white paper that included principal reductions as a possible means of decreasing the probability of default.  They also cite similar statements from Neil Barofsky, Mark Zandi and Alan Blinder.

    There is about $700 billion worth of negative equity in the housing market.  This is one of the biggest obstacles to a housing recovery, and I am in complete agreement with Adam Levitin that any housing plan that does not address negative equity is not really a plan (Levitin is a Georgetown Professor who has testified before Congress on matters of housing, he addresses the matter of negative equity on his blog).

    If FHFA has good reasons and sound analysis for not doing principal reductions, they should come forward with that information.  Their refusal to do so makes me somewhat suspicious of the quality of their data or the quality of their argument.

    I’ll be interested to see if Issa grants the request for a subpoena.  My gut instinct tells me that it won’t be.  We shall see.

    Category: Mortgage Rates

  2. FHFA: Home Prices Rise After Six Months of Declines

    By on June 22, 2011

    Home prices rose 0.8 percent (seasonally adjusted) in April according to the most recent FHFA House Price Index.  This comes on the heels of six consecutive months of declining home values.  A 0.3 percent decline in prices in March was revised to a 0.4 percent decline.  Between April 2010 and April 2011, home values were down 5.7 percent.  The index is now down 19.3 percent from its peak in 2007, and home prices are now at the same level as they were in January 2004.

    The FHFA House Price Index is a measure of the price of single family homes that are backed by Fannie Mae or Freddie Mac.  Prices were still falling in three of the nine census areas, lead by the Mountain region where prices fell 1.3 percent from May to April.  Prices in the New England region rose the most, gaining 2.2 percent.  Over the course of the previous twelve months, prices did not rise in any of the nine census regions.

    I’ve yet to see any good explanation for the increase in values, and until it becomes a trend that other indices agree with, I am not inclined to believe that this increase is significant.  Other home price indices continue to reflect declining prices:

    • The CoreLogic Home Price Index for March (which is an average of January, February, and March) showed a 7.5% year-over-year price decline, with declines accelerating from 5.8% y-o-y in February.
    • The RadarLogic RPX Home Price Index is at the lowest point since March of 2003, and is 36% below it’s peak in mid-2007.
    • The S&P/Case-Shiller Home Prices Index showed a 4.2 percent decline in home values in the first quarter of 2011.

    The S&P Case-Shiller Home Price Index comes out next Tuesday, and I will be very interested to see what the results are.  I suspect that the increase in prices in the FHFA Index is more of a short-term aberration than the beginning of an upward trend.  There are still far too many housing headwinds (foreclosure, unemployment, low household formation, lots of supply and little demand, and declining home values, to name just a few) to be dealt with before I can envision a significant housing recovery.

    Category: Mortgage Rates

  3. FHFA: Home Prices Down 1.6% in February, 5.7% Year-Over-Year

    By on April 21, 2011

    This morning the Federal Housing Finance Agency released its House Price Index for February.  FHFA found that home prices continued to fall, and the decline is becoming steeper.

    The FHFA home price index is for purchases only, and prices were down 1.6 percent in February.  This follows on the heels of a 1.0 percent prices decline in January.  On a year-over-year basis, the index is down 5.7 percent, an increase over the 4.7 percent year-over-year decline seen in January.

    As we have discussed ad nauseum on this blog, the fundamental problem facing the housing market is the huge supply of unsold homes (in both normal and shadow inventory) and the lack of demand for these homes.  Further exacerbating the problem is that we are not making any great strides in improving the jobless situation (recent declines in the unemployment rate are mostly due to a declining number of people in the workforce rather than large scale job creation).  Additionally the foreclosure crisis continues on (while we have seen recent declines in foreclosure starts, this is more likely due to banks holding off on foreclosures because of increased scrutiny due to the MERS/robo-signing mess moreso than anything else).  I fully expect that we will see rising numbers of foreclosures soon, and falling home prices will only make the problem worse.

    The FHFA Index is down 18.6% from its 2007 peak, and is at levels last seen in 2004.  The S&P/Case-Shiller Home Price Index will be published this coming Tuesday, and I expect that they will report declines in home values as well.

    Category: Mortgage Rates

  4. Home Prices Fell Broadly in 4th Quarter, Double Dip is Here

    By on February 25, 2011

    Home values continued to get walloped in the fourth quarter, according to the Federal Housing Finance Agency’s Fourth Quarter House Price Index.  The House Price Index fell 0.8 percent from the thirds quarter to the fourth quarter.  Prices are down 3.9 percent from the fourth quarter of 2009 to the third quarter of 2010 (on a seasonally adjusted basis).  Quarterly home prices have declined for 13 straight quarters (year-over-year).

    Prices fell broadly, but the most severe yearly declines were experienced in Idaho (-15.8%), Arizona (-13.4%), Georgia (-11.9%), Alabama (-10%), and Oregon (-10%).  A recent Zillow report showed that 27% of American homeowners with mortgages are underwater.  Approximately another 25% have little to no home equity.  If anything, I expect this situation to get worse in the coming year.

    Edward DeMarco, the director of the FHFA commented:

    “Lingering unemployment and elevated inventories of for-sale homes contributed to the ongoing decline of home prices.”

    DeMarco pretty much nailed it.  The problem of excess supply is only going to worsen as foreclosures are expected to increase in 2011.  Unemployment shows few signs of abating, so I don’t anticipate that weak demand for homes will increase.  2011 will be a tough year for the housing market.

    Category: Mortgage Rates

  5. Mortgage Servicing Model to Change to Encourage Mortgage Modifications

    1 By on January 18, 2011

    In a joint statement to the Federal Housing Finance Agency (FHFA), Secretary of the Treasury Timothy Geithner and Secretary of the Department of Housing and Urban Development Shaun Donovan called for revisions to the way that mortgage servicers are compensated, calling the current system “broken”.  They said:

    “The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure”.

    The current compensation system has failed to properly align servicer, lender, and borrower incentives in order to encourage all involved parties to push toward mortgage modifications.  Government efforts to stem foreclosures have been lackluster at best.  The government’s flagship foreclosure prevention plan, the Home Affordable Modification Program (HAMP), has been criticized for its general ineffectiveness, yielding only about 500,000 permanent modifications, far fewer than the 3 to 4 million modifications originally expected.

    The Congressional Oversight Panel and the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) have both been highly critical of the failings of HAMP in reports to Congress.  Part of the failure is due at least in part to the inability to properly align servicer incentives.

    Fannie Mae and Freddie Mac were put under FHFA conservatorship in 2008 in order to prevent their insolvency.  FHFA has directed Fannie and Freddie to develop a new system of servicer compensation that would allow for more mortgage modifications.  Edward DeMarco, director of the FHFA commented:

    “As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions.  The goal of this join initiative is to explore alternative models for single-family mortgage servicing compensation that better address the needs of borrowers, servicers, originators, investors, and guarantors”.

    No specific alternatives have been proposed.  The FHFA is expected to listen to feedback from regulators, consumer advocates, trade groups, and housing industry experts in order to formulate alternate servicing compensation.  No changes are expected until at least mid-2012.

    Category: Mortgage Rates

  6. FHFA: Fannie Freddie Bailout May Cost Another $215 Billion

    By on October 21, 2010

    Another quick update here:

    According to a Washington Post article by Zachary Goldfarb, government sponsored entities Fannie Mae and Freddie Mac may require an additional $215 billion in taxpayer funds from the U.S. Treasury.  The article estimates that the GSEs may need between $221-$363 billion through 2013.

    Fannie and Freddie have already been the recipient of about $150 billion from the taxpayers in order to stave off insolvency.  The GSEs were seized by the Federal Government and put under Federal Housing Finance Administration conservatorship, where they remain today.

    Earlier today, the FHFA announced that it was issuing subpoenas in an effort to determine if it can pursue loan buybacks from major lenders that may have sold defective mortgage-backed securities to Fannie and Freddie.

    Category: Mortgage Rates

  7. FHFA Outlines New Housing Goals For Fannie and Freddie

    By on September 3, 2010

    Today the Federal Housing Finance Agency released a list of its new housing goals for mortgage giants Fannie Mae and Freddie Mac, which are under the conservatorship of the FHFA.

    Fannie and Freddie were seized by federal regulators in 2008 to avoid their insolvency.  Since that time, $150,000,000,000 of taxpayer money has been used to keep the mortgage lenders afloat.  The Obama Administration has pledged and unlimited amount of capital to backstop the losses of the GSEs.  Total estimates for the cost of the bailout of Fannie and Freddie range between $400 billion and $1 trillion dollars.

    The goals are as follows:

    The benchmarks for the four single-family goals are (as expressed as a percentage of mortgages acquired by the GSEs):

    • 27 percent for the low-income home purchase goal
    • 8 percent for the very low-income family home purchase goal
    • A percentage to be set annually by FHFA for the low-income/high minority/disaster areas home purchase goal (with a subgoal of 13 percent to measure acquisitions in low-income/high minority areas only); and
    • 21 percent for the low-income family refinance goal.

    The final multifamily goals reflect the current market conditions and are lower than those proposed initially:

    • Fannie Mae’ s goal is to acquire mortgages that finance at least 177,750 low-income rental units and 42,750 very low-income rental units.
    • Freddie Mac’s goal is to acquire mortgages that finance at least 161,250 low-income rental units and 21,000 very low-income rental units.
    • The Enterprises must also report on their acquisition of mortgages involving low-income units in small (5- to 50-unit) multifamily properties.
    Category: Mortgage Rates

  8. Congressmen Urge Fannie and Freddie to Take Agressive Action to Recoup Losses

    By on August 23, 2010

    4 out 5 primates agree: the GSEs should pursue mortgage repurchases.

    Last week we discussed government mortgage giants Fannie Mae and Freddie Mac’s attempts to force loan originators to buyback some of the bad loans on their books.  Today there is a little more information on these efforts, from an article Housingwire.com’s Christine Ricciardi.

    According to the article, several prominent members of Congress wrote letters to President Obama and the Federal Housing Finance Agency (FHFA) to take action to recover money from lenders that fraudulently dumped bad mortgages on Fannie and Freddie.

    Congressman Barney Frank, Chairman of the House Financial Services Committee was quoted in the article as saying:

    “These losses largely result from business decisions during the bubble year that were honest but flawed.  However, some of these losses result from deception.  Private companies sold Fannie and Freddie loans or securities based on fraudulent doceuments… they should be fought with every tool at the companies’ and the agency’s disposal.”

    Continue Reading…

    Category: Mortgage Rates

  9. Top 9 Fun Foreclosure Facts From the FHFA’s Foreclosure Prevention Report*

    By on August 16, 2010

    The most recent Federal Housing and Finance Agency (FHFA) Foreclosure Prevention and Refinance Report came out last week, and there was a wealth of statistical data contained in the reports, none of which paints a particularly pretty picture of the housing market.  I am going to present some of the information in list form, because if there is anything I’ve learned from David Letterman (other than the G.E. handshake) it is that everything is better in list form.  And if you’re thinking I was just looking for an excuse to link to the G.E. handshake video, you are absolutely correct.  Without further adieu:

    Continue Reading…

    Category: Mortgage Rates

  10. Freddie Mac Loses $4.7b in 2Q, Requests $1.8b From Treasury

    By on August 9, 2010

    Freddie Mac issued its second quarter report today, and it showed that the government controlled mortgage giant lost $4.7b in the last quarter and will be requesting an additional $1.8 billion of our money from the Treasury in order to make ends meet.  This is a decrease from the previous quarter when Freddie lost $6.7 billion.  Last week Fannie Mae requested $1.5 billion from the Treasury, bringing the total tab for bailing out Fannie Mae and Freddie Mac to just shy of $150 billion.

    Fannie Mae and Freddie Mac were seized by the government in 2008 to ward off their financial collapse.  Since that time there has been considerable debate about the future of Fannie and Freddie.  Most agree that the current cash-hemorrhaging model is unsustainable, but nobody seems to quite know what shape reform should take.

    Continue Reading…

    Category: Mortgage Rates

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