|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||20.51 - 20.51|
|52 Week Range||8.00 - 25.00|
|Beta (3Y Monthly)||0.47|
|PE Ratio (TTM)||891.74|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Sep.30 -- Fannie Mae and Freddie Mac will be allowed to boost their capital by billions of dollars to protect against potential losses, a key step in the Trump administration’s push to free the mortgage giants from U.S. control. Bloomberg's Jesse Westbrook has more on "Bloomberg Markets."
Sep.16 -- Federal Housing Finance Agency Director Mark Calabria discusses the outlook for Fannie Mae and Freddie Mac with Bloomberg's Vonnie Quinn on "Bloomberg Markets."
The comment came during a congressional hearing regarding the Trump administration’s housing finance reform plans.
(Bloomberg) -- Fannie Mae and Freddie Mac’s regulator, facing scrutiny from Democrats about whether freeing the companies from U.S. control might enrich hedge funds, said he would be willing to wipe out shareholders of the mortgage giants if circumstances called for it.“I work for the taxpayers,” Federal Housing Finance Agency Director Mark Calabria said Tuesday at a House Financial Services Committee hearing on the Trump administration’s proposal for releasing the companies.Calabria was responding to heated questions from Representative Bill Foster, an Illinois Democrat, about whether hedge funds including Paulson & Co. stood to reap windfalls under the plan released by the Treasury Department last month. Calabria said that while it isn’t his objective to wipe out or enrich shareholders, he will do what’s needed to ensure taxpayers don’t have to bail out the companies again.Billionaire John Paulson’s firm is among a group of hedge funds that have been fighting for years to end the net-worth sweep that sends Fannie and Freddie profits to the Treasury. Shares have rallied this past year on optimism that the Trump administration will move to end that policy.Fannie fell 3.1% to $3.39 as of 1:54 pm in New York Trading Tuesday, while Freddie dipped 2.9% to $3.18.Read More: Fannie and Freddie Died But Were Reborn ProfitablyFannie and Freddie have been under U.S. conservatorship since 2008, when they were seized as the mortgage market imploded. Treasury’s proposal suggests dozens of reforms to protect against another housing crash, shrinking their dominant market shares and creating new competitors to the two companies, which backstop about $5 trillion of home loans.Foster said that he would like to see shareholders of Fannie and Freddie wiped out, though as a politician he doesn’t have that power. Calabria noted that it was his view when he worked on Capitol Hill in the wake of the 2008 financial crisis that the companies’ investors should lose everything.Democratic lawmakers such as Foster have insinuated that Treasury’s blueprint for overhauling Fannie and Freddie could be a boon for hedge funds that undermines access to affordable housing for lower-income buyers.Democrats are concerned because Treasury and FHFA could theoretically bypass Congress to let Fannie and Freddie build up their capital buffers and then release the companies from federal control. Such a process, known as recap and release, would likely enrich preferred shareholders including Paulson.Read More: Trump Fannie-Freddie Plan Urges Ending Decade of U.S. ControlTreasury Secretary Steven Mnuchin reiterated Tuesday that it’s “by far” his preference to work with Congress on an overhaul of Fannie and Freddie. Mnuchin and Calabria both said during the hearing that no decision has been made on how exactly Fannie and Freddie might be released.Mnuchin said that all options, including putting Fannie and Freddie through a process called receivership that is akin to bankruptcy, is still on the table. Receivership is potentially a bad outcome for shareholders because it could wipe them out.Calabria wouldn’t commit to supporting recap and release, adding that he opposes releasing Fannie and Freddie if they end up operating in the same way as they did before the 2008 crisis. As part of the administration’s blueprint, Treasury and the FHFA are required to come up with a plan for how the mortgage giants will raise outside capital, and whether that will entail a new share sale, for example.Democrats are increasingly raising questions about whether Fannie and Freddie investors have undue influence on the Trump administration. Representative Alexandria Ocasio-Cortez, a progressive who’s a vocal critic of the financial industry, asked whether Mnuchin stands to make money if the companies are freed from federal control. Mnuchin, who was once an investor in Paulson’s hedge fund, said he would not profit because he’s divested assets since joining the government.Paulson has been a fundraiser for President Donald Trump and has a long history with Mnuchin. In 2008, Paulson and Mnuchin joined forces to invest in troubled mortgage lender OneWest, a deal that proved lucrative for both of them.(Adds comment from Acasio-Cortez in 13th paragraph.)\--With assistance from Kasia Klimasinska.To contact the reporter on this story: Elizabeth Dexheimer in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jesse Westbrook at email@example.com, Gregory MottFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A British tobacco company, Dutch paint company, California-based dermatological company, and Maryland-based regional bank were among the securities that experienced the largest trading volume increases ...
(Bloomberg) -- Wall Street analysts are taking note of the relative value and better extension protection afforded by 15-year MBS compared to their 30-year counterparts as rates trend near multi-year lows.Both Oppenheimer & Co. Inc. and JPMorgan Chase & Co. MBS analysts have highlighted the 15-year sector in recent weeks, with the former noting their relatively slow prepayment speeds and the latter their cheapness compared to 30-year. R.W. Baird’s Kirill Krylov said yesterday that he expects “an increasing number of investors to return to the shorter-duration 15-year sector in order to begin preparing for any reversal of rates.”Supply technicals have certainly favored 15-year conventionals, with net issuance averaging negative $2 billion per month since July compared to a positive $67 billion for the 30-year, according to Wells Fargo & Co. data. As the 15-year is primarily a creation of borrowers refinancing into a shorter maturity, this runs counter to expectations for a period of increasing prepayments, but this anomaly is likely explained in part by two factors.First, the flat yield curve reduces the ability of lenders to offer lower rates to 15-year borrowers, muting their supply. Second, the most recent 30-year vintage borrowers have been the most enthused to refinance their mortgage and there hasn’t been enough time for them to build the equity needed to make a shorter amortization mortgage such as the 15-year worth their while. It’s notable that the average size of a refinanced loan in the latest MBA report is at its highest in a month, suggesting more recent vintage borrowers continue to take advantage of lower rates.In fact, the latest prepayment speed report showed a slowdown in Fannie Mae 15-year MBS of 3%, compared to an 11% increase in Fannie Mae 30-year MBS. From the two having both paid at 11.2 CPR in April, 30-year MBS has subsequently paid faster every month, with September’s report showing them 5.8 CPR higher than the 15-year. In a world where most mortgage backed securities are priced at a premium, slower speeds benefit performance.The option-adjusted spread differential seen between the Fannie Mae 30-year and 15-year current coupon indexes has dropped below zero, meaning the 15-year is offering more spread than the longer duration 30-year. At -1.4 basis points, it is below both its trailing five-year and year-to-date averages of +13 and +5, respectively.Last, while the duration profiles of the two indexes are similar -- with the 15-year index at 2.66 and the 30-year at 2.79 years -- in the event of a rate sell-off it is the longer maturity 30-year which may see prepayments drop off more precipitously, likely leading to a greater extension in its duration profile.NOTE: Christopher Maloney is a market strategist and former portfolio manager who writes for Bloomberg. The observations he makes are his own and are not intended as investment adviceTo contact the reporter on this story: Christopher Maloney in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Nikolaj Gammeltoft at email@example.com, Christopher DeRezaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Wall Street and the news media have paid considerable attention to U.S. home mortgage modifications, but not much notice has been given to the growing problem of re-defaults on these modifications. Re-defaults are a massive problem — and endanger the U.S. mortgage and housing markets. What is a mortgage modification? In the midst of the housing collapse more than a decade ago, mortgage modifications were rolled out to enable millions of delinquent homeowners to avoid having their home foreclosed. In its latest report, the non-profit Hope Now consortium — the major source for modification data — estimated that 8.7 million permanent mortgage modifications have been implemented in the U.S. since the end of 2007.
Wall Street and the news media have paid considerable attention to U.S. home mortgage modifications, but not much notice has been given to the growing problem of re-defaults on these modifications. What is a mortgage modification? In the midst of the housing collapse more than a decade ago, mortgage modifications were rolled out to enable millions of delinquent homeowners to avoid having their home foreclosed.
(Bloomberg Opinion) -- Climate change poses risks to real estate that homebuyers may not be able to predict. As sea level rises, coastal properties, for example, may be subject to increased flooding and intensifying storm surges. First-time homebuyers often lack the expertise to evaluate these new risks, and thus tend to underestimate them and overpay for increasingly exposed properties.Unfortunately, the risks they accept are not borne by themselves alone. Rather, our research has found, it is shared by mortgage lenders and, through the operations of Freddie Mac and Fannie Mae, American taxpayers.Consider how most home purchases are arranged with long-term mortgages. While the conditions vary, a buyer of a $400,000 home may arrange a 5% fixed-rate, 30-year mortgage on $320,000, and agree to pay it back by making 360 monthly payments of about $1,700. If the lender holds this loan on its balance sheet, and climate change creates new expenses — from flooding, storms or wildfires — the borrower becomes more likely to default on the loan.Consider that lenders originate an estimated $60-100 billion in mortgages on coastal properties, and it’s clear the potential aggregate impact of default due to climate change is significant.Lenders can lower their risk, however, by exercising their option to sell loans to Fannie Mae and Freddie Mac, the government-sponsored enterprises that were created by Congress to improve access to mortgage lending. Fannie and Freddie have an important public mission, but lenders’ ability to sell them mortgages means that the risk of climate-related real estate expenses is easily relayed from homebuyers to taxpayers.To gain some insight into the scope of this problem, we examined what happened in mortgage markets after 15 “billion-dollar” disasters, including Hurricanes Katrina ($119 billion) and Sandy ($73 billion). We found that natural disasters significantly raise the number of delinquencies, defaults and foreclosures. This is probably a consequence of the decline in flood insurance: When fewer homes are insured, less of the damage from storm surges and the like is repaired. Fewer homes are rebuilt. And many more homeowners default on their loans.These mortgage defaults and payment delinquencies affect both lenders and Fannie Mae and Freddie Mac. In areas where natural disasters hit, we found, bank lenders transfer substantially more mortgages to the government-supported enterprises. And this increase is largest in neighborhoods where floods are “new news” — that is, where flooding has only recently become a regular occurrence. Indeed, lenders quickly learn where not to hold loans in their portfolios.The existing rules of the mortgage-lending game actually maximize this risk to taxpayers, as Fannie and Freddie’s guarantee becomes a substitute for flood insurance. Simple reforms could discourage lenders from leaning so hard on the government-supported enterprises to absorb climate risks. The securitization fees (also called guarantee fees) that Fannie Mae and Freddie Mac charge lenders to take on their loans should be higher for properties at relatively high risk of flooding. And the fee structure should be designed to shift along with changes in risk and improvements in forecasting, as new climate-change scenarios materialize.At the same time, when homebuyers neglect to buy the insurance that’s federally mandated in flood hazard areas, Fannie Mae and Freddie Mac should exercise their existing authority to transfer losses back to the lenders.To make sure federal mortgage-market regulators have an accurate picture of flood risks, they should encourage the private-sector data-science industry to compete to provide the best possible forecasting algorithms. If mortgage lenders can steadily improve their understanding of climate risks, they can increasingly work those risks into their loan calculations, by asking for larger down payments and charging higher interest rates to borrowers buying vulnerable houses.The risks of climate change keep growing, and homebuyers may never develop the expertise required to recognize them. But mortgage lenders have a responsibility to see what’s ahead. They should ensure that their customers know what they’re getting into, and that taxpayers are not unwittingly exposed.To contact the authors of this story: Matthew E. Kahn at firstname.lastname@example.orgAmine Ouazad at email@example.comTo contact the editor responsible for this story: Mary Duenwald at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Matthew E. Kahn is a Bloomberg Distinguished Professor of economics and business and the director of the 21st Century Cities Initiative at Johns Hopkins University.Amine Ouazad is an associate professor in the Department of Applied Economics at HEC Montreal.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Fannie Mae and Freddie Mac will be allowed to boost their capital by billions of dollars to protect against potential losses, a key step in the Trump administration’s push to free the mortgage giants from U.S. control.Fannie will be permitted to retain earnings until its capital buffer hits $25 billion, while Freddie will be allowed to hold $20 billion, the Treasury Department and the Federal Housing Finance Agency announced Monday. Last year, Fannie reported net income of $16 billion and Freddie made $9.2 billion, signaling it could take more than a year for the companies to reach the administration’s new goal.Treasury and FHFA, Fannie and Freddie’s regulator, also committed to making more changes to the bailout agreements that were struck after the companies were rescued with taxpayer funds at the height of the 2008 financial crisis.The agencies said they may make additional tweaks to Fannie and Freddie’s capital structures, as well. The moves are all part of an effort -- outlined in a plan released by Treasury earlier this month -- to end the companies’ decade long conservatorships and return them to the private market.Read More: Trump Fannie-Freddie Plan Urges Ending Decade of U.S. Rule“These modifications are an important step toward implementing Treasury’s recommended reforms that will define a limited role for the federal government in the housing finance system and protect taxpayers against future bailouts,” Treasury Secretary Steven Mnuchin said in a statement.Fannie rose 3.3% to $3.80 in New York Trading, while Freddie gained 3.2% to $3.59.Monday’s changes, which have been telegraphed by FHFA Director Mark Calabria and Mnuchin for weeks, mark some of the biggest for Fannie and Freddie since they were made wards of the state. Under the companies’ current bailout agreements, they are restricted from holding more than $3 billion in capital apiece, much less than they would need to survive outside government control. Instead of retaining earnings, they send their profits each quarter to the Treasury -- a process known as the net worth sweep.But even at the levels outlined in Monday’s statement, Fannie and Freddie would still be far short of the capital cushions that most everyone agrees are required. Calabria and Mnuchin have both said the companies will need to raise private capital, potentially through a share sale. One way to interpret Monday’s announcement is as a suspension of the net worth sweep.With much still to be sorted out, it’s unclear how soon hedge funds and other investors that own Fannie and Freddie stock might make windfalls on their stakes. And if a Democrat beats President Donald Trump in the 2020 election next November, Calabria and Mnuchin’s plans would likely be scrapped.‘Significant Challenges’“There are still some significant challenges to recapitalization," KBW analyst Brian Gardner said in a note earlier this month. “Recapitalization is unlikely to happen until after the 2020 election and then it will obviously be dependent to a large degree on the outcome of the election."Still, Fannie and Freddie shares have rallied this year on Wall Street optimism that the Trump administration is making progress.Fannie and Freddie don’t make loans. Instead they keep the mortgage market humming by buying loans from banks and other lenders and packaging them into securities. Bond investors consider the companies’ mortgage securities to be extremely safe because they have guarantees in case homebuyers default on their loans. The process provides liquidity for home purchases and keeps borrowing rates low.Read More: Fannie and Freddie Died But Were Reborn, ProfitablyThe government took control of Fannie and Freddie when the housing market tanked in 2008, eventually injecting them with more than $187 billion. Their bailout agreements originally called for Fannie and Freddie to pay 10% dividends each quarter to the Treasury, but in 2012 the government changed the terms to sweep nearly all of the companies’ profits. In 2017, Treasury and FHFA amended that agreement to allow the companies to retain $3 billion in earnings apiece.Under the agreement announced Monday, the amount of a senior preferred stock of Fannie and Freddie that is owned by Treasury will increase by $22 billion and $17 billion respectively, according to the statement.The change announced Monday in some way kicks the can down the road until FHFA and Treasury are prepared make more sweeping changes. Calabria has indicated that the process of ending the companies’ conservatorships will take some time. In a Bloomberg Television interview earlier this month, he predicted that the companies probably won’t be ready to seek private capital until early 2021.“The enterprises are leveraged nearly 1,000-to-1, ensuring they would fail during an economic downturn -- exposing taxpayers once again,” Calabria said in a Monday statement. The revised agreement with Treasury is “an important milestone on the path to reform.”(Updates with closing share prices in sixth paragraph.)To contact the reporter on this story: Elizabeth Dexheimer in Washington at email@example.comTo contact the editors responsible for this story: Jesse Westbrook at firstname.lastname@example.org, Gregory MottFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Housing giants Fannie Mae and Freddie Mac will be permitted to retain a total of $45 billion in earnings going forward, as an initial step toward exiting government control. In a joint statement released Monday, the Treasury Department and Federal Housing Finance Agency, which regulates the pair, said the new policy will allow the two to rebuild capital reserves. "This letter agreement between Treasury and FHFA...is an important milestone on the path to reform," said FHFA Director Mark Calabria in a statement.
Fannie Mae and Freddie Mac , the mortgage guarantors under government control, will hold higher levels of capital, according to an agreement between the Treasury Department and their regulator. The enterprises had been required to send all their profits to Treasury after a 2012 agreement, but an amendment in 2017 allowed them to retain a slim capital buffer of $3 billion each. The additional capital is one of several steps recommended by Treasury as a way forward for the housing finance system and may be a precursor to a new capital raise for the enterprises. Fannie will retain $25 billion and Freddie $20 billion. Shares of both companies are up more than 200% in the year to date.
Since former hedge fund manager Whitney Tilson made a bullish call on Federal National Mortgage Association (OTC: FNMA) and Federal Home Loan Mortgage Corp (OTC: FMCC) on Sept. 5, the two stocks are each up more than 40%. Since 2012, every cent of earnings by Fannie and Freddie have gone directly to the Treasury as part of their ongoing conservatorship. Earlier this month, however, an appellate court overturned a previous ruling upholding the legality of the Treasury’s “net worth sweep” of Fannie and Freddie’s profits.
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Over a third of the multifamily loans the two firms purchase must now be directed toward affordable housing.
Millennials are famous for their skinny jeans and avocado toast. But they've had pretty good luck picking some top stocks this year, too.
Creating competitors to Fannie Mae and Freddie Mac, and loosening mortgage regulations are among the proposed reform.
The Federal Housing Finance Agency said on Friday it revised the limits on what Fannie Mae and Freddie Mac buy for their multifamily business into the end of 2020 in an effort to address a shortage in affordable housing. The new multifamily loan purchase caps for the two government-sponsored enterprises will be $100 billion each for a total of $200 billion for the five-quarter period through the final quarter of 2020, FHFA said. The new limits apply to all multifamily business with no exclusions, the regulator said.