Fannie and Freddie are doing their best to remain integral to housing finance.  Let me save you a lot of money that you’d spend going to conferences just to hear Fannie & Freddie folks speak. Both are going to compete and be around for many, many years, helping in the primary and secondary markets. Freddie “re-imagining” the loan process and pushing the single securitization platform & risk sharing, Fannie pushing Day 1 Certainty and operational efficiencies. And yes, the lending industry is pushing for smart GSE reform, as it should, but GSE reform will take a long time, and even when a plan in decided upon, it will take years to implement.

Freddie and Fannie, Conventional and Conforming

The FHFA tells us that F&F could need nearly $100B in bailout money in the event of a new economic crisis. This comes from an FHFA stress test. Some supporters of proposals to recast or eliminate the two government-sponsored enterprises and yet retain government support for mortgage assets don't seem to fully consider the complexities of transitioning to a future without one or both. For the severely adverse scenario, for the GSEs with additional Treasury draws expected at $34.8bn to $99.6bn depending on the treatment of the deferred tax assets of the GSEs.

Certainly, their role is changing gradually. For example, looking at earlier this year, the GSEs transferred $5.5 billion of credit risk in the first quarter. F&F transferred $5.5B of credit risk on $174B of mortgages in their portfolios to buyers with an appetite for that.

Few deny, however, that reform is badly needed to end the government's conservatorship of Freddie Mac and Fannie Mae and to eliminate taxpayers' risk exposure concerning the housing giants. And regarding another agency, some believe that HUD Secretary Ben Carson must act to reduce the FHA's footprint in the mortgage market and to secure taxpayers' money.

Last week the California Association of Realtors (C.A.R) issued a statement in response to comments made by Freddie Mac CEO Don Layton that Freddie Mac is looking to work with institutional investors in the single-family home rental market. C.A.R. President Geoff McIntosh stated, "While C.A.R. is waiting on details, we are concerned with Freddie Mac moving forward to partner with institutional investors to use what is essentially a government guarantee to compete with homebuyers. While Freddie has hinted a potential deal may include affordable housing, the deal announced earlier this year by Fannie Mae did not, and there are no requirements that any future deals by the GSEs must promote affordable housing...This move forces homebuyers to directly compete with government-backed institutional investors who are buying a large portion of homes directly off the MLS."

The FHFA's role is fairly transparent, and easily researched. Earlier this summer the FHFA submitted its 2016 Annual Report to Congress. Yes, the FHFA submitted its annual Report to Congress for 2016, which describes the actions undertaken by the agency to carry out its statutory responsibilities. The report summarizes the findings of FHFA's 2016 examinations of the GSEs as well as FHFA's actions as conservator of the GSEs during 2016. The report also describes FHFA's regulatory guidance, research, and publications issued during the year.

Their stock prices reflect their outlook. They rose, for example, after the New York Times reported that newly unsealed documents showed federal officials the two mortgage finance agencies would produce more profits than the original terms of their bailout stemming from the subprime mortgage crisis. Remember that profits from the GSEs have been going to the Treasury even after they repaid the government for their $187 billion bailout.

Loans underwritten to Fannie Mae's student loan cash-out refinance feature are now eligible for purchase by Wells Fargo Funding when supported by Desktop Underwriter: Version 10.1 (or later), Approve/Eligible recommendation, Special Feature Code (SFC) 841. A note pertaining to Fannie Mae's student loan cash-out refinance feature has been added to the cash-out adjusters on page 2 of the Best Effort rate sheet and page 2 of the Mandatory rate sheet. Please note, loans secured by owner-occupied homestead properties in Texas and underwritten to Fannie Mae's student loan cash-out refinance feature are considered cash-out refinances under Texas Section 50(a)(6) and are ineligible for purchase by Wells Fargo Funding.

As part of the upgrade to DU 10.1, Franklin American Mortgage has raised LTV/CLTV/HCLTV percentages 5-10% on all conventional adjustable rate loans.* These new requirements reduce the necessary down payment for primary residences, secondary homes, and investment properties, allowing you to qualify even more borrowers. *Applicable to all new home purchases and refinances approved through DU 10.1.

In response to the recent release of Fannie Mae^TM Desktop Underwriter® (DU®) version 10.1 and to provide additional clarification, effective immediately, NewLeaf has updated NewLeaf 1 & NewLeaf 2 Conventional matrices.

Freddie Mac is making changes to its rental income qualification requirements and guidance which will become effective February 9, 2018, as announced in Single-Family Seller/Servicer Guide (Guide) Bulletin 2017-12. The revisions focus on housing market trends that impact the analysis of stable monthly rental income. Customers may implement the updated requirements immediately, but they must apply the revised requirements in their entirety. The Bulletin also includes additional Guide updates related to self-employed income new effective date for changes and Multi-Lender swap posting information and Forms 15A and 15C.

The Fannie Mae Servicing Guide has been updated to simplify property inspection and preservation requirements for servicers. For a summary of key updates in this Servicing Guide Announcement, view the video presented by Jenise Hight, Director of Servicing Policy.

Effective Sept. 9, the Cash Remittance System (CRS) will undergo several user interface changes to make it easier to navigate. Enhancements include updates to the Contact Information and Drafting Instructions sections, extended submission time for updating or creating banking instructions, and more. Review the Fannie Mae Release Notes to find out more.

Fannie Mae's open platform for data vendor participation provides choice for customers participating in the Desktop Underwriter® (DU®) validation service. Avantus, CoreLogic®, PointServ, and SharperLending, new verification report suppliers for tax transcript data, have been approved and are available to provide verification of income via their 4506-T Tax Transcript reports. The reports verify Social Security, self-employed, retirement, and commission income types.

M&T Bank is announcing the retirement of the Agency UES for Correspondent business channel effective August 15th, 2017; applicable only to Fannie and Freddie products. Going forward, lenders will be expected to underwrite loans compliant with Fannie Mae or Freddie Mac selling guides, their AUS findings, and when delivering to M&T Bank, following the requirements of the individual M&T product pages. The process for M&T Treasury products will remain intact.

Fannie Mae posted new Flex Modification FAQs for answers to common questions about the Flex Mod announced in December. Answers provide clarity on evaluating and responding to Borrower Response Packages based on when borrowers submit their packages, solicitation requirements, and more. Flex Mod will replace the current Fannie Mae Standard and Streamlined Modification with a single modification program on Oct. 1st, 2017.

HousingWire Magazine recognized two Fannie Mae leaders as 2017 Women of Influence in its August issue, the seventh annual edition celebrating female leadership. Vice President for Credit Risk Transfer, Underwriting, Pricing, and Capital Markets, Laurel Davis , was named to this year's list for her role in moving U.S. housing finance forward through her contributions to development of the newly created credit risk transfer market. Nadine Bates, Senior Vice President and Treasurer, leads a team that increased mortgage liquidity for more than 350 small and medium-sized lenders through $400 billion of mortgage-backed securities transactions in the past year.

Capital Markets

The U.S. economy continues to motor along, for the most part doing pretty well. Longer-dated Treasuries ended Thursday on a higher note while the 2-yr note saw some intraday volatility, but settled little changed. Given their propensity to repay, 30-year MBS don't track 30-year bonds, by the way. What's driving stocks and bonds seems to be the tension between North Korea and the United States.

The international situation has moved the volatility needle, not helped by the President saying we're "locked and loaded." A look at a map shows North Korea halfway between Japan and Beijing - a consideration of nuclear fallout. Yesterday the 10-year improved .250, the 5-year rallied nearly .125, and mortgages did zip. Of interest was the NY Fed releasing tentative MBS reinvestments covering the August 11 to September 13 period in addition to the latest FedTrade schedule covering the August 11 to 24 periods. MBS reinvestments over the coming four-week period are estimated at $28 billion, which is $7 billion a week, or nearly $1.5 billion a day it will be buying.

But that was so... yesterday. This morning we've seen the July Consumer Price Index: tame at +.1%, core rate +.1%. Coming up are several Fed speakers who will pretty much be saying the same thing as they've been saying for a couple months, so don't look for much new information. As of 5:35AM PT the 10-year is yielding 2.19% and agency MBS prices are a shade better versus Thursday's close.

Jobs, Personnel, and Products

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Leading industry experts will gather in the Chicago area August 29-30 to launch the National Association of Independent Home Builders and Remodelers (NAIHBR - get it?), a national organization created to promote home construction and lending opportunities, which are critical to driving economic strength. National Mortgage Insurance Corporation (National MI), a primary operating subsidiary of NMI Holdings, Inc., has joined with US Bank, Associated Bank, Compass Mortgage, Freedom Title, BKD, LLP and others to support NAIHBR. National MI was the first corporate sponsor of NAIHBR. "Even with over 1.2 million in new home construction starts this year, we are still facing a 50-year low in homeownership," said Jim Pippin, director of National MI. "New construction is a significant contributor to the housing market. Our sponsorship demonstrates our leadership and commitment to the construction of new homes."

Pacific Union Financial is excited to announce that Rich Johnson has joined the Retail channel as the Pacific Northwest Regional Vice President covering Oregon, Washington and Idaho. Rich brings more than a decade of experience with him to the Pacific Union team. He is excited about the opportunity to join a successful team and has great ideas for leading the Pacific Northwest region to the next level of success. Prior to joining Pacific Union, Rich was the Regional Production Manager for Bank of the Cascades. If you are interested in joining the growing Pacific Union Pacific Northwest region contact Rich Johnson. 

Congratulating Alight CEO, Michele McGovern, for being named one of HousingWire's 2017 Women of Influence! This is the seventh year that HousingWire has recognized the 50 women leading the mortgage and housing industry forward, and the nominations grow more and more competitive each year. Read more about McGovern here. Alight is a SaaS-based software company whose leading product, Alight Mortgage Lending, enables senior executives of independent mortgage banks to forecast the future by comparing multiple scenarios and immediately seeing the financial impact of every decision before it is made.

National mortgage lender Waterstone Mortgage Corporation announced Kerry Wirth has been promoted to chief operating officer, where she will be responsible for leading the company's operations departments and companywide initiatives. Wirth, who was recently recognized in Mortgage Professional America's 2017 Elite Women list, previously served as the company's senior vice president of loan operations.

On the flip side, unfortunately, PHH has plans to eliminate over 1,000 jobs in New Jersey. Hopefully some of those are moved elsewhere.