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.
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.
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.
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.
Brickman takes to helm of one of the largest mortgage companies in the U.S. today, and while times at the government-sponsored enterprise are filled with uncertainty, Brickman sees nothing but excitement for the future of Freddie Mac.
When buying a home, many Americans consider a 20% down payment to be the norm, the ideal amount of money to put down to get a conventional mortgage with no private mortgage insurance and to keep monthly payments reasonably affordable.