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Fannie Mae’s Focus Will Not Change with New Administration, CEO Says

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The attainment of President Trump has not altered Fannie Mae’s skeleton for 2017, generally a importance on programmed loan validation and other customer-focused innovations, CEO Timothy Mayopoulos pronounced Friday.

“The change in administration hasn’t influenced a proceed to a business,” Mayopoulos pronounced in an talk after a company’s fourth-quarter media call. “We’ve been in conservatorship now for over 8 years, and it’s really transparent to us what a business objectives are.”

The government-sponsored craving is “focused on enhancing a housing financial complement and bringing creation to a market, things like [the loan-validation product] Day 1 Certainty that we consider will be good for a housing financial complement regardless of whatever changes competence get done by this administration or any destiny administration,” he said.

He has nonetheless to lay down with new Treasury Secretary Steve Mnuchin. Throughout a conservatorship Fannie Mae executives have met frequently with Treasury officials, and those meetings are approaching to continue.

Fannie Mae’s fourth-quarter net gain more than doubled to $5.04 billion from a year earlier. For a full year, Fannie Mae had net gain of $12.3 billion, adult 12% from 2015.

The association does not control some of a drivers of a results, such as seductiveness rate changes and home prices, Mayopoulos pronounced during a media call.

“As today’s numbers demonstrate, these factors can means poignant sensitivity in a financial results, and they might have a certain or disastrous outcome in a entertain or year,” he said.

Fannie Mae done $9.6 billion in division payments to Treasury in 2016 and skeleton to compensate another $5.5 billion in March. With a Mar payment, Fannie will have done $159.9 billion in division payments to Treasury.

Between 2008 and 2012, it drew $116.1 billion from Treasury; given afterwards it has not done any draws. Its collateral pillow is down to $600 million from $1.2 billion a year ago, on a approach to being 0 by 2018.

The association expects to sojourn essential for a foreseeable future. Currently over two-thirds of a net seductiveness income comes from a loan-guarantee business, while reduction than one-third is from a debt investment portfolio.

This completes a change “from [back in 2004] radically being a mortgage-investment-oriented association that had a pledge price business that supplemented that to now being most some-more of an insurance-oriented association that collects a reward on any loan that we pledge opposite credit loss,” Mayopoulos pronounced in a interview.

The pushing force of Fannie Mae’s boost going forward, absent any “dramatic events” like changes in seductiveness rates or home prices or process developments, will be a guarantee-fee revenue, he said, adding that a approaching switch to a heavily squeeze marketplace in 2017 should not impact that.

Fannie Mae’s 97% loan-to-value-ratio module is approaching to grow as some-more first-time homebuyers enter a market. But a module amounted to only 2% of acquisitions in 2016, Mayopoulos said, so even with a poignant boost in volume it would still only be a medium apportionment of a sum book of business.

Credit risk transfers now paint 23% of a sum single-family guaranteed book. “We design that a incomparable apportionment of a single-family guaranteed book will be lonesome by credit risk send exchange over time,” he pronounced during a media call.

Asked about future credit risk send programs like a deeper front-end coverage a private debt insurers are advocating for, Mayopoulos pronounced in a talk that “we continue to demeanour during ways to enhance a apartment of opportunities to send credit risk to private capital. When we do that we wish to do that effectively.”

One of a hurdles with some of a models that have been put brazen is they are rarely contingent on counterparty exposure. The debt insurers are already a poignant source of credit risk transfer, subsidy loans with LTVs larger than 80% for Fannie Mae and Freddie Mac, he said.

“We are meddlesome in anticipating a extended apartment of capabilities to do this, though any of these intensity models comes with pros and cons, and one of a things we’re doing with a assistance of a FHFA is evaluating all of that,” Mayopoulos said.

Jacob Passy contributed to this article

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Bankers’ Interest in MPF Program Grows Again After Long Hiatus

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The Chicago Federal Home Loan Bank gifted a poignant burst in debt originations in 2016 due to a “re-introduction” of a normal Mortgage Partnership Finance loan product.

The bank purchased $3.1 billion in debt loans in 2016, adult 78% from a year prior. And 40% of a boost was due to normal MPF products.

“The re-introduction of a MPF normal products contributed to this estimable increase,” a bank pronounced in a minute to a members.

The boost in direct is essentially due to a successful selling debate that helped a bank net new members final year, according to a mouthpiece for a bank. She also credited appealing pricing and servicing income that members can acquire as assisting a increase.

Alex Pollock, a then-president of a Chicago bank, launched it in 1997 to emanate a delegate debt marketplace for members of a Home Loan Bank system. But a Chicago bank stopped charity a module in 2008 in a midst of a housing predicament due to a vast thoroughness of debt products on a change sheet.

With home prices rising again, evasion rates descending and banks looking for additional sources of price income, a MPF normal products was re-introduced in 2015.

“As a bank’s members find ways to boost their non-interest income, a volume in a normal MPF products has continued to grow as well,” a Chicago Home Loan Bank pronounced in an Oct. 27 outline of a third entertain financial results.

Under a normal MPF program, a imagining member sells a loan to a Chicago bank and a seller earns a price for providing a credit encouragement formed on a opening of a loans.

“In formulating MPF, we put a member in a purpose of Fannie Mae. Instead of profitable Fannie Mae a pledge fee, a member bank provides a credit encouragement and receives a pledge fee,” pronounced Pollock, who is now with a R Street Institute, in an interview.

During 2016, participating FHLB members warranted $2 million in credit support income. “It gives them a clever seductiveness in imagining high-quality loans. And they are removing non-interest income in a form of encouragement fees,” Pollock said.

For some time, a Chicago FHLB gifted an erosion of a MPF portfolio as MPF debt balances paid down. In a third quarter, MPF loan volume helped “offset” a paydowns.

MPF loans hold in portfolio increasing to $5 billion by yearend 2016 compared to $4.8 billion in 2015, a Chicago FHLB reported, as “new MPF loan purchases began to overtake paydown and majority activity.”

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Freddie Focusing on Credit Risk Transfers as Portfolio Winds Down

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Freddie Mac is ramping adult a use of credit risk transfers, completing $215 billion in single-family transfers final year, adult to $600 billion given 2013.

Donald Layton, a government-sponsored enterprise’s CEO, has embraced a transfers, where investors bid on holding a first-loss position on mortgages guaranteed by Freddie that go into default. So distant a deals have generated $25 billion in detriment insurance opposite debt defaults.

In evaluating these transactions, Freddie executives have to decider how most loan income they can give adult and still get a detriment insurance they need.

Freddie is “re-engineering a pledge businesses to heavily occupy credit risk transfers and to tumble divided from a ancestral buy and reason business model,” Layton pronounced Thursday in releasing Freddie’s 2016 annual and fourth-quarter gain report.

Freddie also has finished $180 billion of risk send exchange involving multifamily mortgages given 2013, including $51 billion in 2016.

“As a result, new multifamily loans entrance on Freddie’s change piece poise small residual risk to taxpayers,” Layton said.

The Freddie CEO also reported swell in shortening a GSE’s investment portfolio, that hold $737 billion in mortgage-related resources behind in 2008.

The investment portfolio declined by scarcely $50 billion in 2016 to $298 billion. That’s removing closer to a $250 billion top underneath a conservatorship agreement with a sovereign government. Layton remarkable that Freddie has strong on offered a “less liquid” resources in a defended portfolio.

Freddie now has a net value of $5.1 billion and is slated to compensate $4.4 billion to Treasury in March. Under an agreement with a Treasury Department and Federal Housing Finance Agency, a GSE contingency spin over all boost to a government. It is not authorised to lift additional capital.

“That will leave us with a net value of $600 million as a collateral buffer,” Layton said.

So distant Freddie has done $106 billion in payments to a Treasury, about $35 billion some-more than a association has perceived in Treasury assistance given it was placed in conservatorship in 2008.

Despite a risk pity and downsizing, Freddie reported $513 million in loan pledge price income for 2016, adult from $396 million in 2015. The boost was essentially a outcome of multifamily pledge fees.

Layton pronounced g-fee expansion should continue to reinstate mislaid income from a disappearing investment portfolio. Such income is approaching to boost going brazen as a incomparable share of single-family loans is impacted by a g-fee travel implemented a few years ago.

Freddie Mac also pronounced it expects a debt fad marketplace to concentration some-more on squeeze debt lending than refinancings in 2017.

“We will be focused on operative with the lending business so they can attain in this altered market,” Layton said.

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