Saturday, August 21, 2010

Mortgages – future of Fannie/Freddie ·; Mortgage Repurchase Demands

Mortgage Repurchase Demands – a new overhang for the banks · Reps Frank and Kanjorski on Fri afternoon sent a letter to the White House calling on the FHFA (which regulate Fannie and Freddie) to make sure that it uses "all of its powers to recover money from companies that used fraud and deceptive practices to shift losses on to Fannie Mae and Freddie Mac…. FHFA must continue its efforts to protect taxpayers by recouping funds from the underwriters of faulty mortgages and the issuers of underwater securities purchased by Fannie Mae and Freddie Mac" · this letter didn’t get too much attention on a quiet Fri afternoon (it hit w/about 20 min left in trading), but in the coming weeks if Congress makes more noise about this issue (making a political point of forcing Fan/Fred to aggressively try to put back mortgages to their originators), then it could become more of a negative for the banks.

Mortgages – future of Fannie/Freddie · The Treasury Dept held a long awaited conference discussing the future of Fannie and Freddie on Tues; on the whole the most interesting takeaway was what wasn’t announced – there had been speculation leading up to this event that the Treasury, via FNM/FRE/FHA, would unveil a massive automotive refinancing for all mortgages backed by the government agency (no such announcement was made however). Bill gross, who was one of the panelists at Tues’ event, did argue that a large refinancing plan could be helpful – Gross called for refinancing all mortgages backed by Fannie/Freddie/FHA that are paying more than 100bp above the current 4.5% market rate (that is 60% of all the total). Such a move would lift home prices ~5-10% according to Gross and provide a ~$50-60B stimulus to the economy. The Treasury will make a formal recommendation on the future of the mortgage market in Jan

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