True Stories: Hybrid, eNote and RON Implementation

Join expert panelists that will discuss the status of federal legislation, trends in digital adoption and how best to prepare your organization for the next generation of lending processes.

Spruce’s Patrick Burns on innovation in title technology

In the season finale of Housing News season 5, Spruce CEO discusses heightened investor interest in title tech, innovation and fintech adoption.

Top CFPB official “hates” QM rules, jeopardizing safe harbor

A top CFPB official in charge of the rule-making process has heavily criticized the agency's own qualifying mortgage rule, jeopardizing safe harbor.

Fraud risk factors at closing increased almost 90% last quarter

A variety of risk factors could be contributing to the drastic increase in wire and title fraud risk factors in mortgage and real estate closings – for example, compliance issues and an increase in transaction data errors.

Politics & Money

If Biden wins, what happens to Fannie and Freddie?

Three possibilities are continued conservatorship, a utility model, or nationalization, Cowen says

If former Vice President Joe Biden wins the White House, it will derail the Trump Administration’s plans to release Fannie Mae and Freddie Mac from conservatorship.

What, then, would happen to the world’s two largest mortgage financiers? Most likely, it means more time in conservatorship as the Biden administration grapples with the COVID-19 crisis, said Jaret Seiberg, managing director of Cowen Washington Research Group in a note to clients on Friday.

“The question becomes whether those inside the administration who want to move beyond the status quo will have enough influence to disrupt a system that is effectively delivering low-cost mortgages to consumers,” Seiberg said. “We believe that is unlikely in the short-term as the Biden administration will focus on more pressing priorities such as a COVID-19 recovery bill.”

After the pandemic is over, the companies that back about half of the residential mortgages in the U.S. could be released as regulated utilities, he said. That would cap their profits, potentially keeping mortgage rates cheaper than if they were private companies aiming to maximize returns for shareholders, he said.

“Democrats are likely to want to preclude a future Republican White House from deciding the fate of Fannie and Freddie,” Seiberg said. “The best way to do that is likely to release them from conservatorship under a utility-like structure. That would mean limits on GSE profitability and pricing.”

It’s a model suggested more than a year ago by Harvard University Senior Fellow Donald Layton, who was the CEO of Freddie Mac until June 2019. Treating them like utilities would reduce profit pressures that could cause Fannie and Freddie to hike the guarantee fees they charge for backing loans and packaging them into securities, he said.

“Some observers of GSE reform have suggested treating them like utilities, such as a local electric or water utility,” Layton said in a July 2019 paper. That approach with other companies “has worked adequately (if not perfectly) throughout the United States for about a century now. To me, that classifies as tried and true!”

A June decision by the Supreme Court on a case that involved the director of the Consumer Financial Protection Bureau has made it even less likely Federal Housing Finance Agency Director Mark Calabria will be able to complete the Trump administration’s goal of returning the companies to the private sector.

The fallout from the ruling that allowed the firing “at will” of the head of a single-director agency meant that Calabria’s position is uncertain in a Biden administration.

And, if the election puts both the House of Representatives and the Senate in the hands of Democrats, it means Congress can address the issue, said Stephen Myrow, managing partner of Beacon Policy Advisors in Washington, D.C.

“If Biden wins, he’ll appoint a new director, and then it will be up to Congress to figure out what to do,” Myrow said. “If Trump wins reelection, Calabria will have the pathway to go ahead and do what he wants.”

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