Compliance & Regulation

Fannie Mae's loss mitigation policies are a "major roadblock" to restructuring mortgages, according to Neighborhood Assistance Corp. of America chief executive Bruce Marks who is urging Fannie's regulator to intervene. "We hope that you can make an immediate reversal of these policies," the NACA CEO says in a letter to Federal Housing Finance Agency director James Lockhart. According to NACA, Fannie won't reduce the interest rates below current market rates and will not reduce the principal amount to make the payments affordable. Fannie said it is starting to lower the interest rates temporarily to get borrowers back on track and extending the loan terms to make payments more affordable. Director Lockhart noted that Fannie is offering delinquent borrowers HomeSaver Advances and it is considering other innovative loan modification actions. The NACA CEO claims the HomeSaver program is "deceptive" because the arrearage is placed in an unsecured loan while nothing is done to restructure the mortgage. "It is deceptive to have the loan appear current when the payments continue to be unaffordable," Mr. Marks said.

Fannie Mae on Wednesday said it would write off substantially all of it "deferred tax assets" which could cut its capital base in half. According to a research note put out by Credit Suisse, the GSE had $20.6 billion in deferred taxes as of June 30 and GAAP equity of $41.2 billion. "Thus the write down in deferred tax assets and AOCI would reduce GAAP equity by half," writes CS analyst Moshe Orenbuch. (AOCI stands for accumulated other comprehensive income.) Mr. Orenbuch said Freddie Mac is likely to take similar action since both enterprises are in government-controlled conservatorships. "We believe that the fact that they may be run with more of a public policy motivation and less of a profit motive could have contributed to the decision to write down the deferred taxes," the Credit Suisse analyst said.

First Financial Network, Inc., Oklahoma City, Okla., is marketing a $500 million loan portfolio on behalf of the Federal Deposit Insurance Corp. It includes loans from the recently failed First National Bank of Nevada, Reno, Nev. and First Heritage Bank, NA, Newport Beach, Calif. There are approximately 585 performing and non-performing commercial real estate, commercial and industrial, gaming, Small Business Administration 504, residential and consumer loans to bid on Dec. 16. The majority of the collateralized properties are located in Arizona (44%), Nevada (35%) and California (15%). The portfolio will be stratified into pools based on performance, collateral type and geographic location. Investor due diligence materials will be available online at http://www.firstfinancialnet.com/ beginning Nov. 3. Bliss Morris, president and CEO of First Financial Network, said, "First Financial Network anticipates continued strong secondary market interest for this diverse portfolio comprised predominantly of CRE and C&I loans. We continue to see high demand for both performing and non-performing loans in all asset classes as evidenced by the successful closing of several major transactions conducted by First Financial Network in the third quarter."

The Federal Housing Finance Agency has made several key appointments in its effort to oversee Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. James Lockhart, director of the FHFA, said the new agency, which combines resources from the former Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and the Department of Housing and Urban Development's government-sponsored enterprise mission team, has great challenges amid the turmoil in the nation's housing markets. "As a new regulatory body, we will be working together to create a new and stronger regulator that will enhance market confidence in the 14 GSEs by ensuring that their oversight is both robust and authoritative," he said. OFHEO veterans Edward DeMarco has been named chief operating officer and deputy director for housing mission and goals; Stephen Cross has been named deputy director of the division of Federal Home Loan Bank regulation; Chris Dickerson has been named deputy director for the division of enterprise regulation, and David Lee has been named the FHFA's chief administrative officer.

While some argue that the uncertainty bedeviling investors and institutions that own mortgages has its roots in the subprime and alternative-A markets, "there are numerous factors to review and to understand before coming to any conclusions," Anthony Ryan, the Treasury's acting undersecretary for domestic finance, told the Securities Industry and Financial Markets Association's annual conference in New York. "Credit as a whole -- not just in the housing sector -- has been plentiful over the past decade," he said. "Today, we are experiencing the repercussions of this unbridled expansion and access to credit," said Mr. Ryan. "We needed to strike a balance between strong market discipline and regulatory oversight and we have not."

In effort to reduce mortgage rates, the Treasury Department is stressing that the U.S. government "effectively guarantees" all Fannie Mae and Freddie Mac debt and mortgage-backed securities. "The U.S government stands behind these enterprises, their debt and the mortgage-backed securities," Treasury acting under secretary Anthony Ryan told the Securities Industry and Financial Markets Association. "Their mission is critical to the housing markets in the United States and no one will deny the importance of these institutions in assisting our housing market in this downturn," Mr. Ryan said. The two government-sponsored enterprises were placed into government-controlled conservatorship on Sept. 7. Fannie Mae and Freddie Mac each entered into a preferred stock purchase agreement with Treasury "that effectively guarantees all debt issued by the GSEs, both existing and to be issued," the Treasury official said.

Financial Freedom Senior Funding Corp., Irvine, Calif., has created a partnership with the National Association of Realtor's Seniors Real Estate Specialists Council to provide educational content and instruction to the latter's members regarding the Department of Housing and Urban Development's Home Equity Conversion Mortgage program. This month SRES members have begun accessing regularly scheduled webinars and local area seminars about reverse mortgages. Additional seminars will be provided once the new HECM for Home Purchase program is implemented early next year. Once the new provisions for the HECM program are implemented, Financial Freedom and SRES will jointly create helpful tools and guidance to assist SRES members with evaluating a range of options regarding seniors' homes during retirement.

Downey Financial, which has been losing money for several quarters and recently closed its wholesale unit, is reviewing the Treasury Department's new "Troubled Asset Relief Program" to see it might help the struggling lender. Downey chief executive Charles Rinehart said in a statement that his Newport Beach, Calif.-based thrift is trying to raise capital and "we are reviewing the recently announced governmental programs to determine which programs, if any, might be available and appropriate for us." Downey, which services $10.8 billion in home mortgages, lost $81.1 million in the third quarter compared to a loss of $23.4 million in the same period last year. At the end of September Downey had $2.2 billion in non-performing assets. Downey's shares are trading at about $1.40 compared to a 52-week low of $1.06 and a high of $43.23.

The Mortgage Bankers Association saw its revenue fall by 27% in its latest available fiscal report while its departing president earned compensation of more than $1.4 million. According to the trade group's tax filing for the year ending Sept. 30, 2007 (the latest available), it took in $57.1 million in revenue against expenses of $50.4 million. Its surplus was $6.7 million compared to $9.2 million the year prior. Its form 990 tax filing is not made available for almost a full year. (MBA filed its tax form in May 2008 after requesting an extension.) At press time a trade group spokeswoman had not returned a telephone call about the filing. MBA president and CEO Jonathan Kempner, who is stepping down from the trade group in December, earned a base salary of $1.18 million for the year with additional employee benefits valued at $250,928. (For the full story see the Monday edition of National Mortgage News.

Sales of new single-family homes rose by 2.7% in September from the previous month to a seasonally adjusted annual rate of 464,000 units but the median price of a house fell to the lowest level in four years - $218,400, according to new government figures. On the surface the sales figure looks promising but the comparison is to the prior month. Compared to the same month a year ago new home sales are down a stunning 33%. The Northeast and Western regions suffered the most with declines of 65.1%, and 37.9%, respectively, compared to September 2007. The median price of a new home sold in September declined by 9.1% from the year ago. Meanwhile, the inventory of unsold existing homes remains near historic highs thanks to the huge increase in foreclosures.