FHFA headquarters in Washington, D.C.

FHFA issues capital rule, previews next steps on plan to release GSEs

The Federal Housing Finance Agency has finalized a rule imposing higher capital requirements for Fannie Mae and Freddie Mac to take effect once the companies exit their federal conservatorships.

The capital framework, released Wednesday, is a prelude to steps the FHFA is expected to pursue to allow the mortgage giants to retain all of their earnings, senior FHFA officials said. However, the FHFA must agree with the Treasury Department on a new retained-earnings plan soon or it could face pushback from the incoming Biden administration. (Read full story here.)
Mnuchin Drops Trump-Favored Payroll Tax Cut To Get GOP Agreement

Treasury and Fed are at odd over CARES Act expiration

Treasury Secretary Steven Mnuchin called on the Federal Reserve Thursday to let several of its emergency lending programs expire at yearend, and return unused funds appropriated by the Coronavirus Aid, Relief and Economic Security Act to backstop the facilities.

But in a statement, the Fed argued for letting the programs continue.

“The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy,” the central bank said. (Read full story here.)

FHFA lowers multifamily cap, increases affordable housing requirements

The Federal Housing Finance Agency reduced the size of the multifamily caps for Fannie Mae and Freddie Mac in 2021, while increasing the share of lending dedicated to mission-driven affordable housing.

Fannie and Freddie will each be able to help lenders finance up to $70 billion of multifamily loans for a total of $140 billion combined in 2021. That’s down from $100 billion each or $200 billion combined in 2020.

The FHFA also recently released its annual performance and accountability report from the Government Accountability Office. The report found that it met its targets for 16 out of 22 or 73% of criteria.

It fell short of its targets in five areas (23%), and lacked enough data to be measured in one area: an employee viewpoint survey it plans to complete in 2021. (Read full story here.)
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New Residential announces IPO for its mortgage business, NewRez

New Residential Investment confidentially filed a draft registration statement with the Securities and Exchange Commission on its intention to spin off its NewRez subsidiary in an initial public offering, the company announced.

"Management had discussed this possibility on its third quarter earnings call so this filing is not a surprise," said Bose George, an analyst with Keefe, Bruyette & Woods in a note on the move. "At that time, the company also noted that an IPO could be a positive for New Residential's valuation since a mortgage bank could trade at a premium to book value."

The common stock of New Residential, which is a real estate investment trust that also owns mortgage-backed securities, was trading at 80% of its third quarter book value of $10.86 per share before the market opened on Nov. 20, George pointed out. (Read full story here.)

Zest, Freddie Mac officially testing AI use in underwriting

Freddie Mac will use Zest AI’s machine learning tools as a means of improving models the government-sponsored enterprise uses to assess mortgage risk, according to an announcement issued by the technology vendor on Wednesday.

The move follows a report last year that the GSE was looking into using technology from Zest, a provider of artificial intelligence-driven risk models previously known as ZestFinance.

Lenders are cautiously optimistic about the use of AI in credit decisions and underwriting. More variables can be included when using it, potentially expanding the universe of borrowers that can be qualified. The software makes quick decisions and is designed to speedily digest new information, so that it can adapt to changing conditions — a particularly valuable skill in 2020. (Read full story here.)

Senator and Cannae remove three CoreLogic directors

Though Senator Investment and Cannae Holdings dropped their hostile bid for CoreLogic, the investors were successful in electing three of their preferred candidates to the mortgage technology company's board.

According to a preliminary analysis, more than 86% of the votes cast by shareholders supported adding the three Senator and Cannae nominees — W. Steve Albrecht, Wendy Lane and Henry "Jay" Winship — to the board at Tuesday's special meeting. (Read full story here.)

Home sales blast off for record month in October, hottest of 2020

The widening chasm between housing supply and demand drove record sales growth and caused prices to hit a seven-year high in October, according to Redfin.

Home sales surged 23.9% year-over-year — the largest annual spike since Redfin started tracking the data in 2012 — while rising 3.8% from September. The high level of activity pushed median prices to $335,900, up 14.2% from the year before — the second largest growth since 2012 — and 0.9% month-over-month.

For-sale inventory plummeted 22.1% and 1.4% from year-ago and month-ago rates, respectively, to a total of 1.66 million units. (Read full story here.)

Appraisal exception for higher-priced mortgages unchanged for 2021

The exemption from the special appraisal requirements for higher-priced mortgages with balances at or under $27,200 will remain unchanged in 2021, federal regulators announced.

A higher-priced mortgage loan, sometimes also known as a high-cost mortgage, has an annual percentage rate that exceeds the annual prime offer rate by 1.5 percentage points for a first lien loan and 3.5 percentage points for a junior lien.

Under this exception, created in the 2013 rulemaking for the Dodd-Frank Act, loans under the threshold do not have to comply with appraisal rules that are specific to these loans. (Read full story here.)

Housing starts reach highest point of the pandemic era

The momentum of construction activity continued in October as single-family housing starts hit their highest points since February, according to the Census Bureau and the Department of Housing and Urban Development.

Residential starts grew 4.9% from September and 14.2% year-over-year to a seasonally adjusted annualized rate of 1.53 million. Broken down by region, the South led in annual growth, jumping 24.3%, with the Midwest right behind at 23%. The West increased by 5.4%, while the Northeast dropped 32.8%. The overall rise could potentially quell the surge in home prices by helping to increase housing inventory, which recently hita 13-year low. Homebuilder sentiment also reached its all-time high in November, fueled by robust consumer demand. (Read full story here.)
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Mortgage credit rises as more lower score loan products offered

Lenders increased their product availability in October for only the second time since last November, helped by the economic recovery and improved labor market, the Mortgage Bankers Association said.

"There was an overall increase in credit availability for low credit score and higher loan-to-value loans, with conventional credit supply increasing 5.1%, and government credit staying essentially flat," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "Despite October's slight turnaround, credit availability remains constrained to near a low last seen in 2014." (Read full story here.)