BofA Cuts Ties With Fannie Mae

Bank of America announced on Thursday that it will no longer sell some of its mortgages to Fannie Mae.

Effective this month, the nation’s second-largest bank says it will no longer permit mortgages for home purchases, as well as certain refinanced mortgages, to be packaged into Fannie Mae loan securitizations.

The move follows a dispute Bank of America and other banks are having with Fannie on who should take responsibility and endure the costs for past mortgages that ended up in default. Fannie, as well as some investors, want the banks to buy back past loans they made that defaulted.

Bank of America says it will continue to sell its loans to Freddie Mac. It also will continue to sell Fannie Mae loans refinanced through the Making Home Affordable program.

Source: “Bank of America Stops Selling Some Loans to Fannie,” Reuters News (Feb. 23, 2012)

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Fannie Mae Gains More Short-Sale Authority

Five mortgage insurers have granted Fannie Mae mortgage servicers the authority to complete a short sale or deeds in lieu of foreclosure without getting their separate approval, HousingWire reports.

Traditionally, mortgage insurance groups have had to give the OK before a short sale can be processed on a property with a guaranteed loan.

Now, without that extra step, Fannie mortgage servicers may be able to speed up short sale approvals on Fannie-backed loans.

The PMI Group, which filed for bankruptcy in November, is the latest mortgage insurer this week to grant Fannie the authority to no longer wait for its approval on short sales. The other four mortgage insurers also giving Fannie the authority are: Genworth, MGIC, Republic Mortgage Insurance Co., and Radian Guaranty.

Regardless, Fannie has instructed its mortgage servicers to make sure a short sale does not conflict with any existing mortgage insurance coverage before approving it.

Source: “PMI Group Latest Mortgage Insurer to Give Fannie Mae Short-Sale Authority,” HousingWire (Feb. 2, 2012)

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Fannie Mae CEO to Resign

Michael Williams, the CEO of Fannie Mae, announced on Tuesday that he plans to step down as CEO, but he will continue on in his role until a successor is named.

“The time is right to turn over the reins to a new leader,” Williams said in a statement, not providing a specific reason for his departure. Williams became CEO in 2009 of the financially struggling mortgage giant, which reported a $5.1 billion third-quarter loss in November.

Williams’ announcement follows a few months after Charles E. Haldeman, the CEO of sister company Freddie Mac, announced plans to step down as CEO sometime this year too.

Williams, Haldeman, and other executives at the GSEs have faced increased scrutiny on Capitol Hill in recent months over their hefty paychecks and bonuses, which have come at a time when the mortgage giants have continued to ask for more bailout money from taxpayers, CNNMoney reports. Williams and Haldeman’s paychecks in 2011 were expected to total about $6 million a piece.

The mortgage giants continue to face steep losses due to the foreclosure crisis. To date, Fannie Mae and Freddie Mac have received about $150 billion in bailout money, but that number could grow to $259 billion, according to the Federal Housing Finance Administration, the mortgage giants’ government regulator.

Source: “Fannie Mae CEO to Resign,” CNNMoney (Jan. 10, 2012) and “Top Executive Announces Plan to Leave Fannie Mae,” The New York Times (Jan. 10, 2012)

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Fannie Mae Halts Foreclosures for the Holidays

Fannie Mae says it will suspend evictions for single-family foreclosures and two- to four-unit properties during the holiday season, from Dec. 19 through Jan. 2, 2012.

“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards, executive vice president of Credit Portfolio Management for Fannie Mae, said in a statement. “No family should have to give up their home during this holiday season.”

While the holiday moratorium is in place, legal and administrative proceedings for evictions may continue, but “families living in foreclosed properties will be permitted to remain in the home,” Fannie Mae announced in a statement.

Source: Fannie Mae

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Watchdog Highlights Fannie, Freddie Staffing Shortfall

A study by the Federal Housing Finance Agency’s Office of Inspector General finds that regulators lack the staff to effectively oversee Fannie Mae and Freddie Mac and consequently have dialed down scrutiny of the government-sponsored enterprises.

The report singles out the FHFA’s monitoring of housing inventory owned by the GSEs.  Despite a surge in foreclosures that has boosted Fannie Mae’s inventory sixfold in the past four years, the study states that “FHFA has yet to conduct a targeted examination” of how the companies manage seized properties.

Source: “Staffing Woes Harm Fannie and Freddie Oversight, Government Watchdog Says,” Bloomberg (09/23/11)

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Fannie Mae Revises Growth Estimate

Fannie Mae has revised its economic growth forecast to 1.4 percent this year, down from a July estimate of 2.4 percent, and to 2 percent for 2012, down from its prediction of 3.1 percent last month. The firm expects housing activity to weaken, except for the rental sector. The housing market and overall economy, it said, will be impacted by lower business and consumer confidence and a slowdown in hiring.

Source: “Fannie Mae Revises Growth Estimate,” TwinCities.com (08/23/11)

Congressman Introduces Bill to Scale Back GSEs

Rep. Jeb Hensarling, R-Texas, introduced a bill on Thursday to scale back Fannie Mae and Freddie Mac and privatize the government-sponsored enterprises within the next five years.

“What we’re trying to do is have a market-based system that doesn’t put people into homes that ultimately they can’t keep,” or require taxpayers to do pricey bailouts, Hensarling says.

Hensarling’s bill calls for eliminating the government’s role in Fannie Mae and Freddie Mac and the mortgage market. It also calls for the maximum size of loans across the country backed by Fannie and Freddie to drop to $417,000; loans, in general, currently range from $417,000 to $729,750.

Last month, the White House called for the phasing out of Fannie Mae and Freddie Mac and proposed three options on how. Congress has differed on its approach and the Hensarling bill is the first shot at legislation to wind down the GSEs, which is likely to spark other legislation in the coming months.

The Hensarling bill isn’t expected to go far, though, according to industry experts. Even if it does pass the GOP-led House, analysts say it’s unlikely the Democratic-led Senate will take up the bill.

Fannie and Freddie guarantee about $5 trillion in mortgages and were taken under government conservatorship in 2008.

Source: “Hensarling Unveils U.S. Bill to Wind Down Fannie, Freddie,” Dow Jones International News (March 17, 2011)

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Fannie, Freddie Probe Focuses on Disclosure

The Securities and Exchange Commission has notified several former Fannie Mae and Freddie Mac officials that it will recommend civil enforcement actions for their roles in corporate misconduct leading up to the financial meltdown.

The probe is focusing on disclosures by the firms regarding subprime loan exposure, which critics say was played down. It remains to be seen whether the companies themselves will be included in the enforcement action, given that U.S. taxpayers will bear the burden of any charges.

Source: “Fannie, Freddie Probe Focuses on Disclosure,” The Wall Street Journal, Nick Timiraos and Jean Eaglesham (03/14/11)

Fannie-Backed Loans to Get Costlier

Borrowers with Fannie Mae-backed loans will face higher borrowing costs and interest rates, even if they have a perfect credit score, starting on April 1.

The agency is imposing a “loan-level price adjustment” on several mortgages, in which borrowers will be charged more in cost or higher interest rate based on how much down payment — or if they’re refinancing the amount of equity in their home — as well as their credit score, explains mortgage expert Bill Gassett in the Massachusetts Real Estate News.

Prior to the adjustment, a buyer with a 700 credit score and a $160,000 mortgage who was purchasing a $200,000 home may pay an additional $800 in these fees. That cost would now be doubled: The loan’s risk-based pricing would equal $1,600, said Cameron Findlay, chief economist for LendingTree.

Borrowers who don’t have large down payments or who have low credit scores will see higher rates. But even borrowers with good credit scores will have to pay more too.

For example, Gassett explains that a buyer with a credit score over 740 who has a 25 percent or lower down payment will now pay about 0.125 percent more in rate.

For any buyer or refinancers of a condo (excluding detached condos) who have less than a 25 percent down payment will face an increase in rate of nearly 0.5 percent.

“It certainly says that even with a great credit score, they still see some risk in you,” Findlay told The Wall Street Journal.

Some lenders have already started incorporating the higher fees.

Not all loans will be subjected to the fees, experts note. For example, not all lenders sell all mortgages to the secondary market and loans insured by the Federal Housing Administration also will be immune.

Source: “Fannie Mae Mortgage Interest Rates & Costs Rising,” Massachusetts Real Estate News (Jan. 30, 2011) and “Mortgage Fees on the Rise Again,” The Wall Street Journal (Jan. 25, 2011)

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People Still Want to Own a House: Fannie Mae

The desire to own a home hasn’t been diminished by the downturn in the industry, according to a survey by Fannie Mae.

51 percent of owners and renters say that the housing crisis has not affected their overall willingness to buy a home. About 27 percent said they are more likely to buy since the crisis, presumably because of lowered prices, and 19 percent said they are more likely to rent.

In the short term, Americans are nervous about buying. About 33 percent say they would be more likely to rent their next home than buy, up from 30 percent in January. Among renters, 59 percent said they would continue to rent in their next move, compared to 54 percent in January 2010.

Other findings include:

· 66 percent of respondents say they believe that housing is a safe investment – as safe as an IRA or a 401(k) plan.
· About 50 percent say they believe that owning is a good idea, even if they plan to stay in the home less than three years.
· 86 percent identify tax benefits as a reason to buy, even though tax benefits are small or non-existent for many homeowners.

Source: Fannie Mae (12/15/2010)

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