A long-awaited study from the Federal Reserve says Fannie Mae's and Freddie Mac's role in the marketplace reduces mortgage rates for conventional borrowers by just 7 basis points and questions whether their existence has any real role in increasing homeownership. Released on Monday, the study (in draft form) also concludes that shareholders in the two companies receive a federal "subsidy" valued at between $50 billion and $97 billion. "Under my 'middle-of-the-road' assumptions, the GSE shareholders retain roughly 52 percent of the gains from their ambiguous government relationship or about $72 billion," writes Federal Reserve analyst Wayne Passmore. The report also says that if the two were private, they would hold "far fewer" of their own mortgage-backed securities. David Seiders, chief economist for the National Association of Home Builders, an ally of Fannie and Freddie, said Mr. Passmore's conclusion that the GSEs only lower rates by 7 bps is "highly questionable and contrary to a number of previous studies." Fannie said in a statement: "At first blush, the findings in the discussion draft appear to be highly theoretical and bear no resemblance to the reality experienced in the housing industry and capital markets every day. However, we will study the paper and provide Dr. Passmore with a complete set of comments."
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According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.
4h ago -
Leaders of ORNL Federal Credit Union are piloting Zest AI's new artificial intelligence-powered assistant to ensure equitable underwriting practices and measure performance against similar institutions.
6h ago -
McCargo stabilized the agency at a crucial time as she helped navigate it through both a pandemic and subsequent dramatic interest-rate cycle change.
7h ago -
The quasi-public entity's plan to buy certain closed-end seconds would constitute "unnecessary government encroachment," the Structured Finance Association said.
9h ago -
The mortgage subsidiary of Hilltop Holdings posted another quarterly loss and volume slipped, but management also sees signs of optimism.
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The increasing frequency and severity of droughts was top of mind for panelists at AmeriCatalyst's "Going to Extremes" conference Thursday.
April 18