Obama to back mortgage finance reform to speed housing recovery

August 14, 2013 by

 

Obama to back mortgage finance reform to speed housing recovery

U.S. President Barack Obama smiles as he returns from a birthday weekend visit at Camp David to the White House in Washington, August 4, 2013. REUTERS/Jonathan Ernst

By Mark Felsenthal and Margaret Chadbourn

WASHINGTON | Mon Aug 5, 2013 8:03pm EDT

(Reuters) – President Barack Obama will propose overhauling the U.S. mortgage finance system in a speech on Tuesday, weighing in on a tangled and polarizing problem that was central to the devastating financial crisis in 2007-2009 and that continues to slow the economic recovery, the White House said.

Obama will propose eliminating mortgage finance entities Fannie Mae andFreddie Mac over time, replacing them with a system in which the privatemarket buys home loans from lenders and repackages them as securities for investors, senior administration officials said. The mortgage securitization process is deemed essential to the smooth flow of capital to housing markets and the availability of credit.

The government’s role would be relegated to providing some form of insurance or guarantee, and to providing oversight, according to officials and a White House statement.

The departments of Treasury and Housing and Urban Development have been working on an outline for housing finance reform. They outlined several options in a white paper to Congress in 2011.

After plunges in home values that wiped out an estimated $7 trillion in homeowner equity and wrecked many Americans’ finances, housing markets are staging a modest recovery. Obama, as part of a series of speeches pushing for steps to boost tepid economic growth, is focusing on housing issues in a speech in Phoenix, Arizona, in one of the regions hardest hit by the housing bust.

The president generally agrees with the bipartisan Senate proposal that would replace Fannie and Freddie with a system that would allow private firms to securitize mortgages, a senior administration official told reporters in a conference call. A government reinsurer of mortgage securities could backstop private capital in a crisis, the official said.

Obama would want the Senate measure to go farther in helping first-time home buyers and in making sure affordable rental housing is available, the official added.

The Senate bill, though, remains at odds with the bill advancing in the Republican-controlled House of Representatives that would liquidate Fannie Mae and Freddie Mac over five years and limit government loan guarantees.

RESTRUCTURING MORTGAGE SYSTEM TO TAKE YEARS

Fannie Mae and Freddie Mac became dominant players in housing finance when private lending to home-buyers declined after the financial crisis. The government-backed companies own or guarantee more than half of all U.S. home loans and are critical to keeping capital flowing to lenders and borrowers.

 

 

(Reporting by Mark Felsenthal and Margaret Chadbourn; editing by Jackie Frank)

 

John Marcotte

720-771-9401

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Fannie, Freddie to start new securitization firm, regulator says

March 5, 2013 by

Fannie, Freddie to start new securitization firm, regulator says

A view shows the Fannie Mae logo at its headquarters in Washington March 30, 2012. REUTERS/Jonathan Ernst

By Margaret Chadbourn

 

(Reuters) – Fannie Mae and Freddie Mac will build a new joint company for securitizing home loans as a stepping stone toward shrinking the government’s role in the mortgage market, the regulator of the U.S. government-controlled firms said on Monday.

“The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future,” Edward DeMarco, acting director of the Federal Housing Finance Agency, told the National Association for Business Economics.

Fannie Mae and Freddie Mac, which were bailed out by the government in 2008, help finance about two-thirds of new U.S. home loans. DeMarco is seeking to shrink their footprint and reduce risks to the taxpayers that support the mortgage giants.

Since they were seized by the government, the companies have drawn nearly $190 billion from the U.S. Treasury to stay afloat.

By creating a new securitization company, FHFA intends to pave the way for a single securitization platform and force Fannie Mae and Freddie Mac to abandon their separate systems.

The aim is to shrink the role the two government-sponsored enterprises play in the housing system in the absence of legislation from Congress or direction from the Obama administration on their future.

DeMarco said the goal is to build a single infrastructure to support the mortgage credit business.

The new company will be structured as a joint venture that is owned by Fannie Mae and Freddie Mac, DeMarco told reporters on a conference call to discuss FHFA’s plans.

He said the new joint venture is not expected to begin securitizing loans next year. Instead, the focus will be on creating the business and hiring staff. The company will have a separate chief executive and board.

DeMarco expects Congress will ultimately decide how the securitization platform is operated and whether it should be privatized.

“We are on a path to replace the outdated proprietary operational systems of Fannie and Freddie,” DeMarco told reporters. “It could be turned to some form of a market utility.”

Fannie Mae and Freddie Mac do not directly make loans. They provide financing to banks and lenders by purchasing mortgages, which they either keep on their books or package as securities which they then sell to investors with a guarantee.

DeMarco, in laying out FHFA’s goals for 2013, said he also plans to start reducing Fannie Mae and Freddie Mac’s role in the housing finance system by shrinking their business by 10 percent in the loan market for multifamily homes.

Fannie and Freddie will also aim to complete $30 billion in single-family credit guarantee business in 2013, sharing some of the risk with the private market. Those transactions could include mortgage insurance or other types of debt securities.

The companies will also be required to reduce the less liquid portion of their portfolio of mortgages by 5 percent next year. This goal comes on top of an existing mandate that requires Fannie and Freddie to shrink their investment portfolios over time and turn over profits to taxpayers.

(Reporting by Margaret Chadbourn; Editing by Tim Ahmann and David Gregorio)

 

John Marcotte

720-771-9401

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2013: Transition to “Normal”?

February 28, 2013 by

2013: Transition to “Normal”?

economic_growth_chart_cash The trend of gradual but below-potential economic growth seen in 2012 is expected to carry over through 2013 and into 2014. This modest growth path combined with the real GDP growth rate during the recovery from 2009 to this point of 2.2 percent annualized give credence to claims that the recovery’s slow pace has become the “new normal,” according to Fannie Mae’s Economic & Strategic Research Group. The fiscal cliff and ongoing debt ceiling debate, which are likely to suppress consumer spending in the first half of 2013, continue to present potentially strong headwinds to meaningful growth activity. Overall, a 2 percent growth rate is forecasted for 2013, similar to the subdued pace of 2012.

This is despite the fact that the housing sector, which has become a bright spot in the economy since home prices began to rebound in 2012, is expected to provide a rising contribution to GDP in 2013 and in coming years. Recent data indicate that the housing recovery has transitioned to a faster upward track, boosted by an improving labor market and low mortgage rates. Overall, home sales, home prices, and home building activity as well as homebuilder confidence appear to be on the upswing, having risen to multi-year highs.

“What we view as sub-par economic growth may actually continue to be par for the course for the near term,” says Fannie Mae Chief Economist Doug Duncan. “We expect the fiscal policy climate to act as a drag on growth this year with possible implications on the direction of the economy in the long term. As fiscal policy debates subside later in the spring, we expect to see some upward trend in economic activity, with growth accelerating moderately in the second half of the year. That momentum will find support in the form of continued, albeit slow, improvement in the housing sector. In the longer term, the gradual return of manufacturing to the U.S. and increasing domestic energy production will work together to accelerate economic growth. However, we anticipate overall growth in 2013 will remain below its potential, extending what has been a slow recovery.”

For an audio synopsis of the January 2013 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full January 2013 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

For more information, visit www.fanniemae.com

John Marcotte

www.boulderhomes4u.com

720-771-9401

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FHFA House Price Index Up 0.6 Percent in November

February 24, 2013 by

FHFA House Price Index Up 0.6 Percent in November

U.S. house prices rose 0.6 percent on a seasonally adjusted basis from October to November, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). The previously reported 0.5 percent increase in October was revised upward to a 0.6 percent increase. For the 12 months ending in November, U.S. prices rose 5.6 percent. The U.S. index is 15.2 percent below its April 2007 peak and is roughly the same as the August 2004 index level. National home prices have not declined on a monthly basis since January 2012.

For the nine census divisions, seasonally adjusted monthly price changes from October to November ranged from -1.0 percent in the East North Central division to +2.1 percent in the Mountain division, while the 12-month changes ranged from +0.5 percent in the Middle Atlantic division to +14.8 percent in the Mountain division. FHFA uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index. Monthly index values and appreciation rate estimates for recent periods are provided in the table and graphs on the following pages.

For more information, click here

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

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