By now you've read the story on the National Mortgage News website about Freddie Mac working on a "credit security" where part of the bond will not be government guaranteed. That's not a misprint. A certain tranche of this experimental MBS (due in the first quarter) will take the first credit loss and will yield much more than the going rate of 4%. The question is how much more? 10%? From what we understand, all the parties working on the project have signed nondisclosure agreements (NDAs) and have been sworn to secrecy. Given the pedantic nature of Fannie, Freddie and FHFA this should not surprise anyone. We can't even get Fannie to confirm that it bought MSRs from Bank of America. Anyway, if you'd like to discuss the credit security more, drop me a line at
As for the real reason this experimental bond is coming to market, try this on: FHFA knows that GSE reform is permanently stalled and is looking toward the day when Fannie/Freddie turn a profit, sans the Treasury dividend…
MONGO LIKES FHA: One of these days someone in Congress may ask this basic question about government guarantees: We have Fannie, Freddie and FHA and they are all government guaranteed. Right? Answer: Yes. OK, so why do we need three? Why can't we just have one? Discuss this one among yourselves. As many of you read on the NMN website this past week, Congress hiked the FHA loan limit to $725K while leaving the GSEs at $625K. Obama signed the bill Friday morning. (NMN's Brian Collins broke the story with Lew Sichelman.) It doesn't take a genius to learn that this will result in more volume for FHA and less for the GSEs. Congress is apparently somewhat happy that the FHA insurance fund is still in the black, though barely. Fannie and Freddie, on the other hand, have cost Uncle $170 billion, though some of that has been plowed back into the Treasury…
One former Fannie Mae executive (who shall remain nameless) told us he was joining the Occupy Wall Street protestors in Washington on Thursday afternoon. Not sure if he was going to identify himself to fellow protestors as a former GSE honcho. Of course, this official hasn't worked at Fannie for two decades. Then again, this executive may've been joking…
IN CASE YOU MISSED IT: Dan Mudd's shop, Fortress, recently bought a large chunk of MSRs from Freddie Mac. NMN broke the news last week. Fortress, of course, owns Nationstar Mortgage. Mudd used to head Fannie and was at the helm when the GSE went gaga over alt-A and was sleeping with Countrywide…
We understand that a least one top mortgage executive recently bolted MetLife Mortgage for Freedom Mortgage, Stan Middleman's shop. MetLife is on the auction block…
In last week's column we asked for comments about GSE pay. A number of readers emailed in comments about whether the current chiefs of Fannie and Freddie are overpaid and deserve bonuses. This comment from mortgage consultant Kent Willard stood out: "Are F&F executives overpaid? Probably, since they defer all major decisions to their regulator/conservator. But if Congress wants to blame someone, they should look in the mirror. After three years they have made absolutely no progress in a resolution or successor, except for some untenable, grandstanding proposals."
POLITICAL COMMENTARY: Has anyone actually tried Godfather's pizza?
WASHINGTON NEWS: Some lenders are already champing at the bit on HARP 2.0 and plan to hit the ground running to refinance Fannie Mae/Freddie Mac-backed mortgages when the application process commences in December. But did the big boys get an early peek at the program's details? We're hearing yes.
DATA NOTE: NMN is in the process of collecting its third quarter surveys. If you would like to participate in our survey, send an email to
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LAST WORD: The Redskins will somehow manage to beat the Cowboys.
