Financial Regulatory Forum

ANALYSIS-Social agenda true hurdle to US housing finance reform

By Al Yoon

NEW YORK, Aug 18 (Reuters) – In March of 2000, American homeowners got a scare.

Gary Gensler, a U.S. Treasury undersecretary, threw his support behind legislation whose impact could have jacked mortgage rates up to levels that would fly in the face of what lawmakers say is good for the nation: expanding homeownership.

He wanted Treasury to cut ties with Fannie Mae and Freddie Mac — companies whose federal charters make them the key vehicles for Washington’s housing policy and mortgage market intervention.

It was a test of the companies’ political backing, and the companies won. Lobbyists killed the effort amid a housing boom cheered by homebuyers and their political representatives, underscoring the power of the American dream of home ownership and its ability to drive the political and financial agenda.

One decade and a wrenching financial crisis later, social agendas remain the stumbling block for the “fundamental change” demanded on Tuesday by the Obama administration as it tries to fix a housing finance system central to a crisis rivaled only by the Great Depression.

ANALYSIS – US mortgage investors see headway on second-lien write downs

By Al Yoon

NEW YORK, April 12 (Reuters) – On March 17, 2009, a group of mortgage bond investors worried about the losses they could suffer as a result of U.S. foreclosure prevention plans asked top bankers to share the pain by taking some write-downs on $450 billion in home equity loans.

But the bankers said they would talk only after the investors first allowed modifications on their primary loans as prescribed under the Obama administration’s Home Affordable Modification Program, according to a trader who attended the meeting at the American Securitization Forum in New York.

Thus began a year of frustration for the investors, such as asset manager BlackRock Inc, who claim their rights as primary mortgage holders have been trampled by the foreclosure program that let second-lien holders off the hook. Most agreed that the program, known as HAMP, was good policy, but balked at who sustained losses and when.

SCENARIOS – Reshaping Fannie Mae and Freddie Mac

WASHINGTON, March 22 (Reuters) – Treasury Secretary Timothy Geithner is expected to lay out the Obama administration’s broad vision for restructuring mortgage finance giants Fannie Mae and Freddie Mac on Tuesday in congressional testimony.

Geithner has said that any specific legislative proposals will not come until 2011 at the earliest. His testimony before the House Financial Services Committee on Tuesday is expected to be the first step in a long journey to make changes to the existing housing finance system.

The government seized Fannie and Freddie at the height of the financial crisis, in what at the time was said to be a temporary measure to ensure credit remained available for homebuyers.

Fannie, Freddie to clear interest rate swaps

   By Ann Saphir
   BOCA RATON, Fla., March 11 (Reuters) -   Fannie Mae and Freddie Mac, the mortgage-funding giants that were seized by the government in September 2008, will start using central counterparty clearing this year in a move that could mark a seismic shift in the $400 trillion global swaps market. (more…)

Fannie, Freddie regulator pitches new housing goals

By Al Yoon

NEW YORK, Feb 17 (Reuters) – The federal regulator of Fannie Mae and Freddie Mac on Wednesday proposed an overhaul of government rules on how the mortgage funding giants serve low-income homeowners while limiting their risks.

The Federal Housing Finance Agency wants new goals that would target borrowers with lower incomes than in the past — including families with incomes at or below 80 percent of their area’s median, down from 100 percent — while giving Fannie Mae and Freddie Mac more flexibility in measuring success.

In a twist from past practices, the proposals would prohibit Fannie Mae and Freddie Mac, the two biggest sources of U.S. housing finance, from buying home equity loans and Wall Street’s mortgage securities to satisfy the goals.

US to focus on housing stability in reform of Fannie Mae, Freddie Mac – Barr

(Adds background, comment)

By Al Yoon

WASHINGTON, Feb 1 (Reuters) – The Obama administration must ensure U.S. housing market stability is retained as it reforms the nation’s two largest providers of home mortgage credit, a top Treasury Department official said on Monday.

The administration will further outline principles that will guide the reforms of Fannie Mae and Freddie Mac, two government-sponsored enterprises, said Michael Barr, the Treasury’s assistant secretary for financial institutions.

“We want to be sure, that as we move to reform the GSEs, we are focused on retaining strong market stability in our housing sector,” Barr told a conference of the American Securitization Forum, a group that promotes interest in the public and private bond markets.

US Rep Frank sees ending Fannie Mae, Freddie Mac in current form

WASHINGTON, Jan 22 (Reuters) – Mortgage giants Fannie Mae and Freddie Mac are likely to be abolished in their current form, a key lawmaker in the U.S. House of Representatives said on Friday.

“I believe this committee will be recommending abolishing Fannie Mae and Freddie Mac in its current form and coming up with a whole new system of housing finance. That is the approach rather than the piecemeal one,” said Representative Barney Frank, chairman of the powerful House Financial Services Committee and a Massachusetts Democrat.

Frank made the comments at hearing on executive compensation.    He later told reporters he will hold hearings on the housing finance market and then move to a restructuring of Fannie Mae and Freddie Mac. He said he would look at Federal home loan banks and the structure of the Federal Housing Administration and Ginnie Mae.

Unlimited credit for Fannie, Freddie seen as backdoor U.S. bailout

By Corbett B. Daly

WASHINGTON, Jan 5 (Reuters) – At a hearing last fall, U.S. Treasury Secretary Timothy Geithner told lawmakers that he and his team were working to put the $700 billion financial bailout fund “out of its misery.” But some in Washington now see a second, backdoor bailout in its place.

On Dec. 24, the Obama administration announced it was extending an unlimited credit line to mortgage finance agencies Fannie Mae and Freddie Mac, which would keep them afloat no matter how high their losses.

Representative Dennis Kucinich, an Ohio Democrat who was an early opponent of Obama in the 2008 presidential race, thinks the move is backdoor way to help banks, and a congressional subcommittee he leads is investigating the Treasury’s decision to cover unlimited losses at the housing finance companies.

US pay czar: Fannie Mae, Freddie Mac unique when it comes to pay

WASHINGTON, Dec 30 (Reuters) – Mortgage finance firms Fannie Mae and Freddie Mac face a unique set of problems that distinguish them from other companies receiving government aid when it comes to setting executive pay, the Obama administration’s pay czar said on Wednesday.

The two government-controlled companies, which have tapped Treasury credit lines to the tune of a combined $111 billion, said last week they would pay their CEOs up to $6 million in cash for this year.

Kenneth Feinberg, the Treasury Department official charged with overseeing executive pay at firms receiving aid from the government’s $700 billion bailout fund, told CNBC the uncertainty over the future of the mortgage finance companies was one factor that made their situation unique.

BREAKINGVIEWS-US forges risky new weapon for mortgage battle

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Rolfe Winkler

NEW YORK, Dec 29 (Reuters Breakingviews) – Uncle Sam is adding a risky new weapon in its battle to shore up the housing market. Granted, the latest Standard & Poor’s/Case-Shiller figures showed a fifth month of improvement. But analysts had already discounted that, expecting prices to fall 10 percent or more next year as various government supports are wound down.

The Treasury’s Christmas gift of almost unlimited support for Fannie Mae and Freddie Mac might be able to fend some of that off. But it will be a tough fight. A housing tax credit — of up to $8,000 for first-time buyers — ends in April. Meanwhile, the Federal Housing Administration plans to tighten its loose lending standards as its reserve fund has dwindled.

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