Top markets for affordable renovated housing inventory

Despite the rapidly deteriorating affordability, there is some hope for homebuyers in the form of renovated homes: properties that have been rehabbed into move-in ready condition after being purchased at auction.

HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

Back to the Future of Mortgage Lending

This webinar will be a discussion on understanding what’s to come in the future of mortgage lending by analyzing past trends in the industry, evolving consumer behaviors and demographics of the industry’s production capacity.

Logan Mohtashami on Omicron and pending home sales

In this episode of HousingWire Daily, Logan Mohtashami discusses how the new COVID variant, Omicron, will impact inflation and whether or not it will send mortgage rates lower.

Politics & Money

FHFA may use consent decrees to reduce GSE “election risk”

The method would keep Fannie Mae and Freddie Mac on the path to privatization

The Trump administration has laid out more than two dozen unilateral actions it wants to take to put Fannie Mae and Freddie Mac on firmer ground and release them from government conservatorship.

But, there’s a little thing called “election risk.” If President Donald Trump isn’t re-elected, or if the ongoing impeachment inquiry results in him either resigning or being removed from office, a new president can throw the blueprint in the trash. A court ruling last month said the head of the Federal Housing Finance Agency, the regulator of the GSEs, can be replaced without cause. In other words, FHFA Director Mark Calabria serves at the pleasure of the president.

In a note to investors obtained by HousingWire, Cowen Washington Research Group is suggesting the FHFA may resort to using consent decrees to ensure the GSEs stay on the path to privatization whether Trump is in office or not.

“A new president could replace Calabria as FHFA director,” the Friday note said. “There is no guarantee that the new director will support the same post-conservatorship structure. Having the consent decree in place would make it tougher for the new regulators to derail recap and release. As such, this would reduce election risk.”

Other federal regulators use concent decrees – sometimes called consent orders – to legally bind the companies they regulate to act in predetermined ways. For the Federal Reserve and the Office of the Comptroller of the Currency, it’s a normal way to ensure their orders are carried out.

“The bank regulators use consent decrees with banks that have become undercapitalized to lay out a plan and a timeline for them to recapitalize,” the Cowen note said. “Such orders also tend to include conduct restrictions on the banks.”

Calabria has discussed using consent decrees to facilitate the recap and release of Fannie and Freddie, the note said.

“The idea is to include conduct restrictions in the decree such as the prohibition on volume discounts as well as to specify firm dates by which each enterprise has to raise specific amounts of new capital,” it said. “We believe this could even include requiring Fannie and Freddie to reach an agreement with Treasury and junior preferred shareholders on the future of their stakes. The advantage of this approach is that it could put Fannie and Freddie on a path to recap and release next year even if they are not ready to approach new investors until 2021 or 2022.”

But, there’s a drawback, the Cowen note said.

“Our concern is that we believe FHFA cannot use a consent decree to establish permanent restrictions on an enterprise,” it said. “Eventually, consent decrees expire. This could be because the target has completed what is required in the decree or the issuer can conclude it is no longer needed. We are unsure how one could make a consent decree permanent.”

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