Monday Morning Cup of Coffee

A look at the stories across HousingWire’s desk during the holiday break…with more coverage to come on bigger issues: All eyes are on the GSEs as the government will soon pull money out of the secondary markets and information on new, more taxpayer-friendly executive pay packages becomes available. HousingWire’s Wall Street connection, Linda Lowell, is on the beat with the sentiment surrounding recent changes in legislation for the secondary pass-through market. Washington DC is lining up big plans for securitization and the way in which assets are treated in bonded pools. The hot topics are changes to accounting, as well as concerns regarding changes in the rate of prepayment following modified mortgages. Also, things at the GSEs remain in a state of flux. The end is in sight for the Fed’s role as big buyer of mortgage-backed securities as well… more on the technicals in Lowell’s article: GSE Pass-through Players Gird for the New Year. Recent SEC filings from Fannie Mae [stock FAN][/stock] and Freddie Mac [stock FRE][/stock] reveal that CEOs Michael Williams and Charles Haldeman Jr., respectively, stand to earn up to $6m in compensation for their efforts in 2009. Pay packages in full can be downloaded via 8-K forms from Fannie and Freddie. While already drawing criticism, the news is part of a wider initiative to use cash incentives to retain highly qualified personnel, according to federal regulators. Indeed, the Federal Housing Finance Agency (FHFA) defended the packages and said that executive compensation for Fannie and Freddie are significantly reduced (on average 40%) from pre-conservatorship levels: “The enterprises must attract and retain the talent needed to accomplish [its] objectives,” said FHFA Acting Director Edward J. DeMarco. “We have worked with the enterprises’ boards and sought the guidance of the special master of TARP executive compensation, to develop competitive compensation packages that benefit from the structural standards created for the TARP-assisted firms.” A press release added that “the new structures provide immediate reform of pay practices not aligned with taxpayer interests.” The Treasury also released an update to its progress with initiatives initiated under the Housing and Economic Recovery Act. As mentioned by Lowell, purchases of mortgage-backed securities, from the GSEs will end by December 31. The Treasury expects to hold $220bn of the debt, with various maturities, by the end of the year. The report concludes with a positive note on the future of the GSEs:

Recent announcements on the tightening of underwriting standards by Fannie Mae, Freddie Mac, and the Federal Housing Administration, demonstrate a commitment to prudent housing finance policy that enables a transition to an environment where the private market is able to provide a larger source of mortgage finance.

The FHFA also reported on Christmas Eve that the average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less decreased 1 basis point to 5.09% in November. The average interest rate on 15-year, fixed-rate loans of $417,000 or less increased 1 basis point to 4.63% in November. The FDIC reports no bank closures over the weekend, but failed to update this list as of last Wednesday. And media reports suggest that Warren Buffet is looking to buy troubled residential mortgage company Residential Capital, a unit of GMAC Inc [stock GJM][/stock]. The New York Post broke the news. Spokespeople on either side decline comment. GMAC lost $767m in Q309, compared to a net loss of $2.5bn in Q308, due primarily to legacy assets in mortgage operations. In the soon-to-be-released January issue of HousingWire magazine incoming president of the Commercial Mortgage Securities Association, Lisa Pendergast, a fixed income managing director of Jefferies Group [stock JEF][/stock], proposes widespread improvements necessary for helping improve credit for the commercial real estate market. Among the proposals, Pendergast discusses the possibility of investors taking a percentage of risk retention for 2010. Finally, well wishes to all of HousingWire’s valued and dear readers. May the holiday season be one of joy and comfort…and the editorial department here hopes 2010 will be a year of prosperity for your businesses. Write to Jacob Gaffney. Disclosure: the author holds no relevant investments.

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