July 31, 2008
Filed under: Foreclosure Prevention Act, Housing and Economic Recovery Act — admin @ 11:15 am
Ruth Lee
H.R. 3221, the “omnibus” housing package has finally been passed and signed into law. The House passed the legislation on July 23rd with a vote of 272-152. In a rare weekender for the Senate, they met and passed the bill on Saturday July 26th by a vote of 72-13. The President signed the bill today July 30th, just shy of a year since the bill was introduced.
The omnibus bill is a patchwork compromise of a number of initiatives in Congress over the last year. Some of the titles of the incorporated legislation include:
- Building American Homeownership Act of 2008
- Clean Energy Tax Stimulus Act of 2008
- FHA Manufactured Housing Loan Modernization Act of 2008
- FHA Modernization Act of 2008
- Mortgage Disclosure Improvement Act of 2008
- REIT Investment Diversification and Empowerment Act of 2008
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July 29, 2008
Filed under: Credit Crunch, Mortgage Industry Trends — admin @ 2:57 pm
Think only mortgage and homebuilding industries are affected by the current mortgage market situation? Think again. The effects just keep spreading.
For example, students in Massachusetts are being denied college loans due to the current market. As BlownMortgage reports:
“The Massachusetts Educational Financing Authority is unable to grant loans to college students this year as it is unable to secure financing due to the condition of the capital markets. More than 40,000 college students will be locked out of financing for their college education due to the beating taken on Wall Street.
This is where it gets really unfortunate folks. Taxpayers bear the burden of a Fannie and Freddie bail out while the companies can still pay out dividends, bear the burden of a Bear Stearns bail out, bail out irresponsible policy and practice and then be shut out of opportunity. Can you imagine explaining to the parents of those kids that your child won’t get an opportunity at college because of the mortgage mess and their taxes will go towards bailing out those very same people who took away that opportunity?”
Click here to read the full post.
So how do we revive the market and restore investor confidence? Tony Garritano weighs in from the technology side here.
Filed under: Fannie Mae, Freddie Mac, GSE Bailout — admin @ 2:32 pm
Fannie, Freddie update from today’s MBA NewsLink:
“The resurgence of Fannie Mae and Freddie Mac’s share prices has been aided by the Treasury’s plan to prop up the companies and the Securities and Exchange Commission’s rule to restrict short selling. However, the moves by the federal government do not solve the underlying problems of Fannie Mae and Freddie Mac, including their low levels of capital compared to other financial firms. Critics of the government-sponsored enterprises have spent the past decade arguing that they need to boost their capital to guard against a collapse, which would cause serious problems for the financial markets. Fannie Mae and Freddie Mac face the challenge of building up their capital reserves, but it leaves them with less money to fulfill their mission to support the mortgage market.”
Read the full article from the Washington Post.
July 24, 2008
Filed under: GSE Bailout — admin @ 8:00 am
Ruth Lee
The Congressional Budget Office announced its findings on the Congressional housing legislation set for a reluctant vote this week. While the CBO had previously estimated that the housing package would earn income for the government, their estimates have changed to a whopping $25B price tag for the federal government over the next two fiscal years.
Why? The Treasury Department and Paulson are pushing to include language in the legislation allowing the Treasury to buy an unlimited amount of GSE debt to ensure liquidity for Fannie and Freddie in cases of emergency. While the CBO argues that there is a better than 50% chance that the expanded authority of the Treasury would never be used (it expires December 2009), even they can’t argue for best case scenario. Pimco manager Bill Gross even doubts that it won’t be exercised.
July 23, 2008
Filed under: Housing Reform, Mortgage Industry Legislation — admin @ 1:45 pm
Ruth Lee
In the eternal death march of progress on capital hill, the housing reform and rescue bill is once again set for a vote on Wednesday. However, negotiations have again stalled as the White House threatens to veto the bill over an allocation of $4b to allow state and local governments purchase foreclosed properties for resale. This is despite an inclusion of the changes to the legislation that Treasury Secretary Henry Paulson sought on the Hill last week, allowing increased authority for the Treasury to purchase unlimited amounts of debt and equity from the GSEs and offer the Fed a role in GSE regulatory authority. Despite opposition from the Administration, most insiders expect President Bush to sign the bill.
The bill is still in negotiation to settle the differences between the House and Senate packages, but political pressure seems to be enhancing a “spirit of compromise.”
Filed under: Fannie Mae, Freddie Mac, GSE Bailout — admin @ 1:37 pm
Ruth Lee
Bloomberg ran a great article this week giving some industry perspective and feedback on the recent Fannie Freddie Bailout initiative. Bill Gross, founder of Pimco, which has historically been a big buyer of Fannie and Freddie bonds, calls Paulson’s plan “crucial” to the GSEs and the mortgage and investment markets.
“July 21 (Bloomberg) — Bill Gross, who manages the world’s biggest bond fund, said it’s not possible for government sponsored mortgage-finance companies Fannie Mae and Freddie Mac to raise capital without the Treasury Department’s support.
“Let’s be blunt: to the extent the Treasury suggests they’ll never have to use their authority, that’s a sham,” said Gross of Pacific Investment Management Co. “It’s fallacious to suggest that the agencies could issue capital, preferred stock, without the co-participation of the Treasury. I don’t think that’s possible.”
The article later reports:
“Housing prices will fall another 10 percent to 15 percent over the next 12 months, making it a mistake for policy makers to raise borrowing costs to curb inflation, Gross said. Home prices in 20 cities dropped 15.3 percent in April from a year earlier, according to S&P/Case-Shiller, the most since the group began collecting data.”
Click to read the full article “Pimco’s Gross Says Fannie, Freddie Need Treasury”.
Gross also commented that he considers Fannie and Freddie’s mortgage products to be good investments. To see Bloomberg’s interview with Gross, click here.
July 16, 2008
Filed under: Fannie Mae, Freddie Mac — admin @ 11:44 am
Ruth Lee
The FRB took giant steps this week to rescue Fannie Mae and Freddie Mac from the current mortgage crisis and ensure the ongoing liquidity of the mortgage market. As the Wall Street Journal reported:
“Treasury Secretary Henry Paulson took the lead in crafting a rescue plan for ailing mortgage giants Fannie Mae and Freddie Mac, a move that appears to have staved off an imminent crisis but one that draws the federal government into an ever bigger role managing the American economy. ”
Read the full article in the Wall Street Journal here.
The MBA sent out a letter to their membership this week outlining the Freddie/Fannie bailout that took place over this week. Here is their summation:
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July 2, 2008
Filed under: Foreclosure, Mortgage Industry Legislation — admin @ 12:58 pm
Ruth Lee
With the impending election, Congress left for its July 4th recess unable to face constituents with any real headway on foreclosure legislation. Having started and stopped the discussion of The Foreclosure Prevention Act of 2008 several times, it is disappointing to see that Congress is faithfully endeavoring to do as little as possible even when they have a consensus. Conventional wisdom projected that Congress would be able to finalize the bill prior to the recess, following a test vote of 83 in agreement. But procedural hurdles reared, the final passage undone by a dispute over an unrelated issue for tax breaks on renewable energy, an issue also supported by 88 Senators. (By way of explanation, HR 3221 was initially an energy bill that was gutted and renamed TFPA of 2008)
Essentially, what was once a “gentleman’s” game based on philosophical and political differences is now a cutthroat gauntlet of gaming the system. While one can debate the merits and expense of what many view as a bailout bill, on some level, one would expect some kind of response after months of debate, negotiation and compromise to produce a bipartisan bill. But the fact is, it is an election year. With both sides of the aisle maneuvering for political currency, they are using the procedural rules of the Senate to gain advantage, with the ancillary disadvantage of causing any progress to grind to a halt.
HR 3221 was introduced July 30th, 2007 to the House. It passed the House August 4th, 2007. It passed the Senate April 10, 2008. The Senate bill still has to be resolved with the House version. It is now July again… and still nothing. Other bills like HR 3915 and S 2452 which address predatory lending, have been mostly tabled for partisan concerns, most likely to be revisited post-election. The problem is… we have a consensus, the bill has been voted on and ready to go, so what is the holdup?
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