The year started with a big surprise — the Jan. 3 announcement that Bank of America [stock BAC][/stock] had reached an agreement with Fannie Mae and Freddie Mac on “substantially” all currently outstanding repurchase requests on loans sold by Countrywide to the government-sponsored enterprises.
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On Dec. 8, Nick Timaraos and Alan Zibel at The Wall Street Journal ran a story about the FHA Short Refinance program under the headline “Fannie, Freddie pressed on mortgages.”
A couple weeks ago I was having a beverage with a former comrade from the trenches of mortgage research (He’s now a big money manager). My comrade took me to task for criticizing outgoing Federal Housing Finance Agency Acting Director Edward DeMarco’s performance at a September congressional hearing on the GSEs. What did I expect? he asked. Congressional Banking Committee leadership had just sandbagged DeMarco for courageously going after the banks that issued the private-label mortgage securities rotting in Fannie and Freddie’s portfolios.
Just before Thanksgiving Freddie Mac raised
Even though a foreclosure remains on an individual’s credit history for seven years, the credit score can recover in as little as two years, but there’s a hitch.
Last week, the Federal Deposit Insurance Corp. and the Federal Reserve System sponsored a two-day symposium: “Mortgages and the Future of Housing Finance.” This is the second of my eye-witness reports on the event, where two topics dominated: what to do with the government-sponsored enterprises and how to get private lenders get back in the game. Although the proceedings were dominated by the discussion of academic papers delivered by economists with doctorate degrees, the symposium was extremely well attended.
Earlier this week the FDIC and Federal Reserve System jointly sponsored a symposium on Mortgages and the Future of Housing Finance. One look at the agenda, and I knew I had to be there: two full days of panels devoted to what welcoming speaker Federal Reserve Chairman Ben Bernanke described as “policy-oriented research” from a host of PhD economists and a handful of lawyers.
If you search the Internet, congressional testimony, academia or the media for insight into how lenders price residential mortgages you’re likely to turn up a mountain of discussion of the yield spread premium paid to brokers by lenders. Maybe a little about the fact that mortgage rates reflect where mortgage securities trade in the bond market, but not much that explains loan pricing for retail customers. Nothing that explains what banks make if they originate the loan internally and don’t pay a broker or correspondent to do it for them.
Right around Labor Day, the sleepiest time in mortgage markets, Institutional Investor published it’s All American Fixed Income Research Team results.
How I long for the days when MBS research was about dry, specialized stuff like prepayments and relative value, projecting cash flows, building data bases and models of prepayment and yield curve processes. Dull matters you would be careful not to mention at a dinner party or drinking with pals in a bar. Tedious topics that could put Main Streeters to sleep. Conversation stoppers.
Paul Jackson is on vacation. His column ‘Lies, Damn Lies and Statistics’ will resume next Monday. In his absence, market veteran Linda Lowell takes on Hank Paulson’s recent assertions on the GSEs. Everyone wants a say on what happens to the GSEs, especially Hank Paulson. After all, he has standing in the matter. He’s the guy who designed (with Congress) the mechanism of their “bailout” and put them into conservatorship (though the Federal Housing Finance Agency, FHFA, was the fall guy).
Last week, various corners of the mediamonde asserted that the Dodd-Frank Act’s repeal of Rule 436(g), under the Securities Act of 1933, caught Nationally Recognized Statistical Rating Organizations (NRSROs) like Standard and Poor’s, Moody’s Investors Service and Fitch Ratings by surprise.