trunkmonk
13 hours ago
Even though GSE is full of children like me, I refer to no one specifically in investing or in GSEs, not even Ps.
I say child, only a child can get to heaven, only a child is open enough to not be partially or totally bias, angry, arrogant, egotistical, nor is into or understands the destructive nature of self awareness. the young and the old are the most childlike, one can learn almost anything, the other can accept almost anything they used to avoid or condemn.
The corrupt, lying, deceptive, hate filled gov officials and people like KTCarneyConMen have already seen all their rewards they will ever get. GDE common shareholders will see their day sooner or later.
trunkmonk
20 hours ago
just like that, steal from one to hand out to the other. i get affordable housing, i dont get the connection with GSE conservator, its a conflict of major proportions, your stealing from stable housing and giving to high risk housing. its how GSEs became weaker than they should be in the past, it the excuse Treasury decided to take it over and use it as an excuse. high risk has nothing and i mean nothing to do with stability in housing, and everything to do with taking capitol requirements from where they were generated and needed. she wants to screw GSEs, Obama got away with stealing GSE money for Obamacare, she should not, it will compromise the whole housing industry. she is an angry old dumb racist.
I think every democrat in congress, should give up half their pension and salary to fund affordable housing.
navycmdr
20 hours ago
Congressional lawmakers form bipartisan real estate caucus
Three of the four founding members say that their previous experiences working
in real estate are reasons for forming the group and attempting to support the industry
May 6, 2024, 2:17 pm By - Chris Clow
A coalition of four lawmakers in the U.S. House of Representatives — two Democrats and
two Republicans — have come together to found the Bipartisan Congressional Real Estate
Caucus, a group designed to “support policies that allow [the real estate] industry to prosper”
due to its overall importance to the U.S. economy.
The group, announced on Monday, includes Reps. Mark Alford (R-Miss.), J. Luis Correa (D-Calif.),
Tracey Mann (R-Kan.) and Brittany Petterson (D-Colo.). It is publicly supported by the National
Association of Realtors (NAR), the Mortgage Bankers Association (MBA), the National Association
of Home Builders (NAHB), the American Land Title Association (ALTA) and seven other trade groups.
“Real estate represents 16% of U.S. GDP, supports 2.8 million jobs, and generates $50 billion in
tax revenue,” an announcement of the caucus’ formation stated. That’s why it’s necessary to
establish a congressional group dedicated to its needs, the group explained.
Three of the four members describe their previous experience working in real estate as reasons
for helping to form the group and pursue goals designed to support the industry.
“I am proud to serve as a co-chair of the Real Estate Caucus,” Alford said in a statement. “I know
that housing is a key issue for all Americans, and especially for my constituents. Before being
elected to Congress, I owned a small real estate business, so I know firsthand the regulatory
challenges that realtors face every day. I’m honored to be able to chair this caucus and work
together to solve real estate issues.”
Correa also spoke about his time working as a real estate broker, saying that the business
helped him to see “firsthand the role real estate plays in uplifting Main Street and hard-working
American taxpayers,” he said. “Our Caucus will bridge the partisan divide and push Congress
together to deliver real estate policy that will benefit soon-to-be homeowners across the country
and help so many families get one step closer to fulfilling their own American Dream.”
Mann attributed burdensome regulations and high-cost materials as deterrents for the housing
market. He formerly served as a commercial real estate agent, which he believes should translate
well to the goals of the caucus.
“Real estate agents and developers should be empowered to provide housing options for all
Americans, generate jobs, and offer top quality services for homeowners — not handcuffed
by overreaching federal regulations from Washington, D.C.,” Mann said.
Petterson focused on the way the real estate industry can help to facilitate the American dream.
She added that she is “proud to be a founding member of this caucus as we work to champion
policies that will increase our housing supply and accessibility, make it easier to buy a first home
or leave a home you’ve outgrown, and foster a market that is beneficial for all.”
The trade groups listed as supporters praised the launch of the new caucus.
“Lawmakers from across the political spectrum are in overwhelming agreement that this nation
is facing a housing affordability crisis,” NAR said in a statement. “Homeownership is a bipartisan
issue, and we applaud these members of Congress for forming a caucus to work across the
aisle to make housing more accessible.”
MBA also applauded the creation of the caucus, saying it will help “advance housing policy” for
renters and prospective homeowners.
“MBA looks forward to working with this bipartisan group to help more Americans achieve their
dream of housing choice — be that sustainable homeownership or affordable rental
opportunities,” MBA said.
navycmdr
2 days ago
$Entire $SA article : $Fannie $Mae The Mortgage Insurer: $Long-Term $Trends
May 06, 2024 11:30 AM ET by - Gary J. Gordon
..... Summary .....
--- The Federal National Mortgage Association aka Fannie Mae's primary revenue comes from insuring the risk of owner default on single-family and multifamily homes.
--- Fannie reinsures a lot of its credit risk with private mortgage insurers, other insurers and bond investors.
--- Low current losses are due to conservative underwriting, a healthy housing market, low unemployment and low mortgage debt payments.
--- I expect only modest credit cost increases over the next 5 years.
--- Investors valuing Fannie should assume stable to modestly increasing earnings from the current $17 billion annual base.
I start with a warning label that I will not present a view on a privatization of Federal National Mortgage Association aka Fannie Mae (FNM). I do not have any information of interest on this topic. And I learned over my stock analyst career that guessing on political and legal outcomes is generally a fool’s game.
Rather, for those of you still reading this article, I will discuss how Fannie Mae’s mortgage insurance business works and a longer-term outlook for its earnings.
Fannie Mae is a mortgage insurance company
Fannie’s primary revenue driver is fee income earned by insuring the risk of owner default on single-family homes, and to a far lesser extent, apartment buildings. The beneficiaries of Fannie’s insurance coverage are investors in its mortgage-backed securities (MBS); MBS investors therefore bear no credit risk. Fannie at present insures $3.6 trillion of home mortgage loans and $0.5 trillion of multifamily mortgage loans.
Fannie’s secondary business is owning mortgage assets and short-term securities. At present, it owns $76 billion of mortgage loans and $124 billion of short-term investments. The revenue here is interest income, for which Fannie manages the risk of changing interest rates.
This wasn’t always the business mix for Fannie. While at present loans owned are 2% of loans insured, in 2007 that ratio was 27%. Back then, interest income was far greater than insurance income. But the government mandated that Fannie Mae and Freddie Mac sharply shrink their mortgage investments over time. It looks like the current level is now acceptable to Washington.
So, this is what a summary of Fannie Mae’s income statement looks like today:
Q1 '24 earnings summary ...
Fannie Mae Q1 '24 press release, my summary
Source: Q1 ’24 press release, my summary.
Fannie Mae’s role as a primary mortgage insurer
Fannie Mae is a “primary” mortgage insurer. That means it absorbs all losses on mortgage loans that default in an MBS and that were underwritten to its lending standards. Fannie’s underwriting rules cover credit scores, loan-to-value ratios, appraisals, documentation of borrower income and assets, etc. Mortgage lenders who want Fannie insurance have to guarantee that these underwriting standards have been met. If Fannie discovers after a default or other review that in fact the underwriting was incorrect, the lender has to buy the loan back and absorb the losses itself. That guarantee saved Fannie literally tens of billion dollars following the ’07-’12 housing crisis.
Primary insurance competitors
There are four primary mortgage insurers:
Fannie Mae
Freddie Mac (OTCQB:FMCC), which operates identically to Fannie
Ginnie Mae, which insures FHA and VA government loans and is itself a federal government agency.
Banks/“private label” MBS.
Banks and private label investors can’t profitably compete directly with Fannie, Freddie, and Ginnie because they benefit from being government-sponsored enterprises (GSEs). Rather, the bank/private label group insures loans that the GSEs can’t or won’t insure. The GSEs can’t insure home mortgages above $766,550 in 2024 (higher in some states); these are called “jumbo” loans. And the GSEs won’t insure loans they consider too risky; these are called “nonprime” or “subprime” loans.
Here are the current market shares of newly originated mortgages among the four competitors, as reported by Fannie Mae:
Current primary mortgage insurance market share
Fannie Mae Q1 '24 earnings presentation
Fannie Mae’s secondary insurance protection
Fannie Mae transfers some of its credit risk on its single-family mortgages to three other types of entities:
1. Private mortgage insurers (PMI). Fannie Mae’s charter requires it to get insurance coverage on any loan with less than a 20% down payment. It does so by requiring the borrower to buy PMI, which generally covers 25% of the loan amount. As of the end of Q1, 21% of Fannie’s mortgages had PMI.
2. Other insurance companies provide some insurance coverage on 9% of Fannie’s mortgages.
3. Investors buy securities that share some of the credit risk on 20% of Fannie’s mortgages.
Fannie doesn’t clearly state the loss reduction it receives from secondary insurance each period, but the clues it leaves show the income can be significant. For example,
“The amount by which our estimated benefit from mortgage insurance reduced our total loss reserves was…$4.1 billion as of December 31, 2014” (2015 annual report, page 137).
Long-term earnings issues
OK, we now have an idea of what Fannie Mae does for a living. And the income statement summary above says that Fannie earned $17 billion annualized recently. What should the general direction of earnings look like over the next, say, five years? To address that question, here are the issues I deem the most critical:
The growth rate of Fannie Mae’s MBS
Fannie’s underwriting standards
The health of the housing market
The health of the country’s home mortgage borrowers
Fannie Mae’s summary credit loss outlook.
The growth rate of Fannie Mae’s MBS
Over the last 10 years, Fannie Mae grew its MBS outstanding by 4% a year. To put that number in perspective, let’s look at the key drivers of home mortgage debt: ((A)) household income, which drives the affordability of debt growth, and ((B)) changes in Fannie market share.
Household income growth. Over the past 10 years, U.S. household income grew by 5% annualized. That was 1.5 percentage points faster than home mortgage debt growth of 3%. Forecasting household income is tricky because there are many drivers. But I’ll throw out a 4% forecast to get things rolling.
Market share. Home mortgage debt outstanding grew by 3% a year over the past decade, so Fannie took some market share. But a history of Fannie’s market share shows that it grew from ’14 to ’21, but decreased a bit since then. I believe the reason for the recent decline is that housing affordability declined due to high home prices and the rise in mortgage interest rates. Homebuyers therefore had to move to riskier loan products to qualify for a mortgage, and Fannie has maintained tight lending standards, as you shall see. Going forward, I assume flat to slightly declining market share for Fannie over the next 5 years.
Looking forward, I guess that Fannie’s MBS growth rate will average 2-3% a year over the next 5 years. Not exactly a growth business.
Fannie’s underwriting standards
This chart neatly summarizes Fannie Mae’s underwriting standards. It shows the history of a mortgage underwriting risk index:
Fannie Mae and total mortgage industry underwriting quality index
The Urban Institute
Source: The Urban Institute.
The chart tells us that Fannie’s underwriting standards are:
Consistently tighter than average.
Much tighter than they were during the ’02-’07 housing bubble. Two quick examples. First, subprime loans were 23% of Fannie’s new business in ’06. They are 0% today. And the average FICO score rose from 716 in ’06 to 753 in ’23.
Looking forward, my base case is continued conservative lending standards for Fannie. But the political risk exists of efforts to loosen Fannie and Freddie’s standards to help homebuyers qualify more easily for mortgages.
The health of the housing market
For those of you who have read my articles on PMIs (the most recent is here), the following picture looks familiar. The health of the housing market can be summarized by its vacancy rate – the more vacancies, the riskier, and vice versa. Let’s look:
Housing supply/demand history
The Census Bureau
Source: The Census Bureau.
The U.S. clearly has a housing shortage. This excess of demand over supply keeps home prices up, even with higher mortgage rates, as the last year has taught us.
Looking forward, I expect the shortage of housing to persist, primarily because of new construction limitations and continued immigration. I therefore see a material decline in home prices as a small possibility.
The health of the country’s home mortgage borrowers
Can America’s homeowners keep paying their mortgages? The two primary variables important to that question are the unemployment rate and the “mortgage debt burden” (mortgage payments as a percent of household income). Two charts summarize those variables. First, a history of the unemployment rate:
Unemployment rate history
St. Louis Federal Reserve
Source: FRED.
The current 3.9% unemployment rate is one of the lowest since WWll.
A mortgage debt burden history is here:
Mortgage payments as a percent of household income
St. Louis Federal Reserve
Source: FRED.
Again, at all-time lows.
Looking forward, both the unemployment rate and the mortgage debt burden are likely to trend up. But slowly. The unemployment rate is supported by still-strong employer demand (check out the “JOLT” survey on FRED), while those 3% mortgage originated during ’20 and ’21 will stay on the books for a long time. If so, relatively few mortgage borrowers are likely to default.
Fannie Mae’s summary credit loss outlook
Here is a history of Fannie Mae’s loan charge-offs:
Loan chargeoff history
Fannie Mae 10-K's
Sources: Fannie Mae 10-Ks.
You can see that Fannie’s losses are now minor because of the factors we reviewed above:
Good lending standards
A healthy housing market
Healthy home mortgage borrowers.
Looking forward, my summary of those factors is positive, only a little less than they have been. So loan loss expenses should remain low.
Wrapping up
Fannie Mae’s earnings 5 years from now shouldn't look much different from the $17 billion annualized pace of Q1. The MBS portfolio should be 10-15% larger, but loan losses will be somewhat higher. Whatever your outlook for Fannie Mae’s political status is, I’d factor roughly flat and relatively stable earnings into your valuation.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
navycmdr
5 days ago
Paul Mampilly ....
For example, $FNMA $FMCC pre conservatorship was the natural buyer of last resort of MBS in place of the Fed. But they can no longer do this by law. Also, they can't borrow the money they need to replace the Fed. That's also prohibited by law. And they'll definitely need to borrow to do this. Or hire the skill sets to restart this activity.
In many ways things are almost exactly to where they were in 2008. $FNMA $FMCC are in rude health. Their credit is pristine. A clean release from conservatorship will draw debt, stock investors into buy in to these "new" versions of $FNMA $FMCC.
Right now things sit at an impasse in Washington DC where the decision has to be made to do this. The recent price action in $FNMA $FMCC suggests something is happening at government levels to unknot this tangle. What could it be?
Markets seem to be speculating that after 15+ years of conservatorship, the end of it maybe near. If that is right, $FNMA $FMCC have to be some of the best speculation opportunities for spectacular, rapid gains in sudden, shocking and surprising fashion.
We've owned, tracked, monitored $FNMA $FMCC and several of their preferred stocks in the Gold tier @atgdigital_ model portfolios since 2018. These investments are starting to show modest gains now, but in success mode, these could be 📈🚀🚀❗️
Time will tell. Not financial investment advice. Just my opinion take on things.
$FNMA $FMCC thoughts. Something is going to happen because of the new politics around mortgage rates. Mortgage rates bottomed out in August 2021 with the 30 yr mortgage at a bit under 3%. Low rates surged real estate prices and home buying.
Rates are now at 7.5% & the market… pic.twitter.com/4ABw7p0aFB— 🇺🇸Paul Mampilly (@MampillyGuru) May 3, 2024
navycmdr
6 days ago
FHFA Issues Report on Enterprise Single-Family Guarantee Fees in 2022
FOR IMMEDIATE RELEASE - 5/2/2024
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/GFee-Report-2022.pdf
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today issued its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises). Guarantee fees are intended to cover the expected credit losses, administrative costs, and cost of capital that the Enterprises incur when they acquire single-family loans from lenders. The report analyzes loans acquired by the Enterprises in 2022 by product type, risk class, and lender delivery volume, including a comparison to similar data from loans acquired in 2021.
Significant findings in the report indicate:
For all loan products combined, the average single-family guarantee fee increased by 4 basis points to 61 basis points in 2022. The upfront portion of the guarantee fee, which is based on credit risk attributes (e.g., loan purpose, loan-to-value ratio, credit score), increased by 3 basis points to 17 basis points, on average, in 2022. The increase in upfront fees was driven by a shift from a predominantly refinance market to a predominantly purchase market.
?The average guarantee fee in 2022 on 30-year fixed-rate loans rose by 3 basis points to 63 basis points, while the average guarantee fee on 15-year fixed-rate loans was unchanged at 42 basis points.
The Housing and Economic Recovery Act of 2008 requires FHFA to submit a report to Congress annually on the guarantee fees charged by the Enterprises.
navycmdr
6 days ago
Short Takes: GSEs Revise Guides - bivey@imfpubs.com
The government-sponsored enterprises incorporated the new reconsideration of value
standards from the Federal Housing Finance Agency in updates to their guide books
Wednesday. The GSEs made a number of other changes to their guides, as well.
For example, Freddie Mac will now allow attorney opinion letters instead of title insurance
for mortgages on condo units. And both GSEs established a formal definition for mortgages
to first-generation homebuyers, which could eventually include new reporting requirements
for lenders...
*****************************************************************************************************
FHFA, FHA Set New Standards for Reconsideration of Value
bivey@imfpubs.com
In a coordinated move, the Federal Housing Finance Agency and FHA issued new guidelines
Wednesday for borrowers to challenge appraisals.
“Consistent standards for lenders and appraisers, coupled with a well-understood process
for consumers to challenge appraisal findings, will help ensure that consumers are treated
fairly,” said FHFA Director Sandra Thompson.
Leaders of FHFA and FHA noted that the new standards for reconsideration of value were
part of an effort to address appraisal bias.
The standards, which apply to mortgages set for delivery to the government-sponsored
enterprises along with FHA loans, establish policies for reconsideration of value and other
requirements for lenders regarding appraisal issues.
navycmdr
6 days ago
Freddie Mac Surpasses Analyst Revenue Forecasts w Strong Q1 2024 Performance
GuruFocus Research - Wed, May 1, 2024, 6:01 PM PDT3 min read
Net Income: Reported at $2.8 billion, marking a 39% increase year-over-year, surpassing the estimated $2.3 billion.
Revenue: Achieved $5.8 billion, up 19% year-over-year, exceeding the estimated $4.877 billion.
Provision for Credit Losses: Recorded at $0.2 billion, primarily due to a modest credit reserve build in Single-Family.
New Business Activity: Increased to $62 billion from $59 billion in the prior year's first quarter.
Mortgage Portfolio: Grew to $3.0 trillion, a 2% increase year-over-year.
Delinquency Rate: Improved to 0.52% from 0.62% as of March 31, 2023.
Loan Workouts: Completed approximately 21,000, aiding in the management of delinquencies.
On May 1, 2024, Federal Home Loan Mortgage Corp (FMCC), also known as Freddie Mac, released its 8-K filing, revealing a significant increase in net income and revenue for the first quarter of 2024. The company reported a net income of $2.8 billion, marking a 39% increase from the previous year, and net revenues of $5.8 billion, up 19% year-over-year. These figures substantially exceeded analyst expectations, which had forecasted a net income and revenue of $0.00 million and $4877.00 million respectively.
Freddie Mac Surpasses Analyst Revenue Forecasts with Strong Q1 2024 Performance
Freddie Mac, a cornerstone of the American housing finance system, plays a pivotal role by purchasing, guaranteeing, and securitizing mortgages. It operates primarily through its Single-family and Multifamily segments, with the majority of revenue derived from the Single-family sector. This quarter's performance highlights the company's effective management and operational efficiency, particularly in a challenging economic environment characterized by high interest rates and affordability issues.
Key Financial Highlights
The first quarter saw Freddie Mac's total mortgage portfolio rise to $3.5 trillion, with a notable increase in net interest income to $4.8 billion, up 6% from the previous year. This growth was driven by an expanding mortgage portfolio and higher investments net interest income due to increased short-term interest rates. Non-interest income also surged to $1.0 billion from $0.3 billion in the prior year, primarily due to net investment gains in the Multifamily segment.
The provision for credit losses was $0.2 billion, a slight increase attributed to a modest credit reserve build in the Single-family segment due to new acquisitions and rising mortgage interest rates. Despite these challenges, the company's serious delinquency rate improved, dropping to 0.52% from 0.62% a year earlier, reflecting strong credit performance and effective risk management.
Operational Achievements and Market Impact
During the quarter, Freddie Mac financed 194,000 mortgages and supported 85,000 rental units, with a significant focus on affordability. 54% of the single-family homes and 90% of the rental units financed were affordable to families earning at or below 120% of the area median income. This underscores Freddie Mac's commitment to its mission of making home ownership and rental options accessible to more Americans, particularly low- to moderate-income families.
The company's efforts to enhance liquidity and stability in the housing market are evident in its new business activities, which totaled $62 billion, up from $59 billion in the same quarter the previous year. Additionally, Freddie Mac's strategic use of credit enhancements covered 61% of its mortgage portfolio, further securing its financial footing and protecting against potential losses.
Looking Ahead
As Freddie Mac continues to navigate the complexities of the housing market and broader economic conditions, its strong first-quarter performance provides a solid foundation for future growth. The company remains focused on its mission to stabilize the housing market and provide continued support to homeowners and renters across the United States.
For more detailed information on Freddie Mac's financial results and operational strategies, investors and interested parties are encouraged to review the full earnings report and supplementary materials available on the company's website.
Explore the complete 8-K earnings release (here) from Federal Home Loan Mortgage Corp for further details.
Trade like a pro: Leverage real-time discussions and market-moving ideas to outperform.
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