Senators Introduce Bill to Replace GSEs in 5 Years

By: Tory Barringer, DSNews.com

A bipartisan group of senators introduced on Tuesday legislation to replace Fannie Mae and Freddie Mac with a newly created agency.

Citing the overwhelming presence of the GSEs in today’s mortgage marketplace, Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) unveiled a new piece of legislation designed to wind down the enterprises and rebuild the private mortgage sector.

Also involved in the unveiling were Sens. Mike Johanns (R-Nebraska), Jon Tester (D-Montana), Dean Heller (R-Nevada), Heidi Heitkamp (D-North Dakota), Jerry Morgan (R-Kansas), and Kay Hagan (D-North Carolina), all members of the Senate Banking Committee.

The legislation would dissolve Fannie Mae and Freddie Mac within five years of passage and transfer appropriate utility duties and functions to a “different, modernized and streamlined agency.” The transfer would be done with a fiduciary duty to maximize returns to the taxpayer as the GSEs’ assets are sold off.

In addition, the new bill requires private market participants to hold 10 percent of the first loss of any mortgage-backed security (MBS) that purchases a government reinsurance wrap.

It also sets up an infrastructure for splitting up credit investors—who are willing to take on the risk of loss—from rate investors, thus keeping mortgage rates competitive while mitigating the risk of loss to taxpayers.

Read more….

FHFA Continues to Push For a Renter-ship Nation

So the government is continuing their push to take home ownership out of the hands of private familes and individuals and to give these foreclosed-on properties to large corporations who will not sell these homes, but keep them as permanent rentals. 

96 properties were just sold in Chicago, and a whopping total of 699 properties, so far, in Florida. Other metros in Nevada, Arizona and California have fallen prey to this new government endeavor, also. It's interesting to note that there is an inventory shortage going on across the country that is driving prices up - an inventory shortage that is caused by lenders, like Fanni Mae, choosing to hold onto properties rather than put them back out into the market.

Well, now we know why they are doing this and what there long-term goal has been: To put houses into the hands of giant corporations and turn our nation slowly into a nation of renters and not private homeowners.

To read the details, click here to read the full article at DSNews.com . . .

 

California Realtors Slam FHFA Over "Highly Secretive" REO Program

By: MortgageOrb.com

The California Association of Realtors (CAR) has criticized the Federal Housing Finance Administration (FHFA) for moving ahead with its real estate owned (REO) bulk sales pilot initiative in a manner that the trade group refers to as a "highly secretive manner, despite vehement opposition from California congressional members, the negative economic impact to the state’s housing market, and cost to taxpayers."

CAR adds that it is filing a request for details through the Freedom of Information Act. The REO bulk sales pilot program calls for the sale of nearly 500 Fannie Mae-owned foreclosed homes in the Los Angeles and Inland Empire areas to yet undisclosed institutional investors.

"We are disappointed that Fannie Mae and the FHFA fail to understand that this initiative will harm the communities in which it will be implemented and are going forward with this ill-conceived plan," says CAR President LeFrancis Arnold. "Moreover, not only are Fannie Mae and FHFA moving forward with the plan, they are refusing to disclose any details, such as property locations, final property count, sales price or names of winning bidders.

"We are also greatly concerned that the FHFA used extremely outdated market data, perhaps as old as [from] 2011, to determine property valuations," Arnold continues. "Because the transactions are only now in the process of closing, these dated valuations will drag down the Inland Empire’s home prices, which have shown strong signs of stabilization. Additionally, because of this price discrepancy and the very nature of bulk sales, we believe Fannie Mae is assured to not receive fair market value for the properties, thereby saddling taxpayers with their loss."

HARP Accounts for 1 in 5 Refinances in May!

With the help of record-low mortgage rates, HARP refinances surged in May, accounting for 20 percent of all loans refinanced by the GSEs, FHFA announced Monday.

For the month of May, 67,456 loans were refinanced through HARP, and the total number of loans refinanced by Fannie Mae and Freddie Mac for the month was 341,209. The one in five ratio of loans refinanced through HARP is the largest increase since the program’s 2009 inception.

“These numbers show HARP 2.0 is accomplishing the goals set forth—to provide relief to borrowers who might otherwise be unable to refinance due to house price declines,” said FHFA Acting Director Edward J. DeMarco. “Borrowers with Fannie Mae- or Freddie Mac-backed loans who are current on their underwater mortgages are taking advantage of the opportunity offered by HARP 2.0.”

The number of underwater borrowers who found relief through HARP also saw a significant increase. Year-to-date through May, 78,273 refinances were completed for underwater borrowers compared to 59,991 refinances for underwater borrowers for the entire year of 2011.

Since the program began, Fannie Mae and Freddie Mac have refinanced 1.3 million loans through HARP.

In March 2012, the GSEs launched HARP 2.0, which allowed mortgages with a loan-to-value (LTV) ratio of 125 percent or higher to be eligible for refinancing.

Following this change, the percentage of those with high LTVs who received refinancing doubled. In May, borrowers with LTVs greater than 105 percent accounted for 32 percent of HARP refinances, up from the 15 percent average in 2011.

The percentage of those who opted for shorter term 15- and 20-year mortgages increased to 19 percent in May compared to the 10 percent average in 2011. Choosing shorter term mortgages over a 30-year mortgage helps build equity more quickly.

In Nevada, Arizona, Michigan and Florida, HARP refinances accounted for 40 percent of all refinances in those states compared to the 20 percent nationwide average.

In Nevada and Arizona, underwater borrowers represented more than half of those refinanced through HARP, and in Florida, Idaho, and California, underwater borrowers represented 40 to 50 percent of HARP refinances.

By: Esther Cho

Expanding HARP to Prevent Defaults and Stimulate Economy

By: Esther Cho

While seeming to recover, the housing market is still undoubtedly fragile, and there are millions of underwater borrowers who continue to struggle with making payments. While HARP proposes to address these concerns, the program has been limited in its ability to reach the masses.

Through the Responsible Homeowner Refinancing Act of 2012 introduced by Democratic Sens. Bob Menendez (D-New Jersey) and Barbara Boxer (D-California), a new HARP 3.0 would break down barriers preventing millions more from refinancing.

During a hearing on Thursday before a senate subcommittee, industry experts and leaders offered testimony on how the proposed legislation could impact the economy.

Mark Zandi, chief economist for Moody’s Analytics, delivered a testimony in which he said, “Policymakers should act to substantially increase mortgage refinancing activity.”

When first introduced, the Obama administration expected HARP to refinance between 4 and 5 million homeowners, but FHFA estimates show that since its 2009 inception, the program has refinanced close to 1.1 million borrowers as of February 2012.

In late 2011, HARP underwent an expansion to allow borrowers with loan-to-value (LTV) ratios higher than 125 percent to apply, among other changes.

Acknowledging that it takes time for servicers to implement new changes, Zandi said in his written testimony that HARP refinancings in early 2012 appear to have run close to 50,000 per month, up from 30,000 per month since the program began. Zandi also noted reports from the Mortgage Banks Association showing a pickup in applications for refinancing.

While these changes have helped to encourage more activity, Zandi expressed his support for more changes.

“More refinancing will mean fewer borrower defaults and more money in the pockets of homeowners, supporting the recovery through a quick and sizable cash infusion at no meaningful cost to taxpayers,” he said.

If the proposed expansions are fully implemented, Zandi said the legislation would increase eligibility to nearly 21.5 million borrowers.

Under the Responsible Homeowners Act, borrowers with LTVs lower than 80 percent and non-GSE loans would be eligible for the program. Currently, HARP only includes Fannie Mae and Freddie Mac loans.

Overall, Zandi said the broader economy, taxpayers, and homeowners, who are expected to save $2,500 to $3,000 a year, will benefit from refinancing.

Though, Zandi does acknowledge a loss for one segment: investors in mortgage backed securities.

“While the agencies would lose some interest income on their $1.2 trillion in mortgage securities and whole mortgage loans, under reasonable assumptions that would be offset by lower default rates on refinanced loans,” he said.

In a calculation, Zandi said HARP refinancings totaled 4.2 million, private investors would receive about $6.5 billion less in annual interest income.

While investors may not be pleased with their return due to low interest rates, Zandi said, “they were aware of this prepayment risk when they purchased their securities.”