- ACLU: “Here We Go Again: Communities of Color, The Foreclosure Crisis, and Loan Servicing Failures”
- Federal Housing Finance Agency – HPI Calculator – projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area.
- Federal Reserve Bank of New York Interactive Home Price Index – Maps changes in home prices each month compared with prices one year earlier, by county, based on CoreLogic overall house price indexes.
- Joint Center for Housing Studies Harvard University: “Racialized Recovery: Post-Forclosure Pathways in Distressed Neighborhoods in Boston”
- National Association of Realtors – Realtors Confidence Index Reflects on Positive Trends in Home Sales for January
- Urban Institute’s Housing Finance Policy Brief “The U.S. Treasury’s Credit Rating Agency Exercise: First Steps Out of the Private Label Securities Desert”
Tag Archives: FHFA
Washington’s Farewell
President Washington had this to say in his farewell address:
The unity of government which constitutes you one people is also now dear to you. It is justly so, for it is a main pillar in the edifice of your real independence, the support of your tranquility at home, your peace abroad; of your safety; of your prosperity; of that very liberty which you so highly prize. But as it is easy to foresee that, from different causes and from different quarters, much pains will be taken, many artifices employed to weaken in your minds the conviction of this truth; as this is the point in your political fortress against which the batteries of internal and external enemies will be most constantly and actively (though often covertly and insidiously) directed, it is of infinite moment that you should properly estimate the immense value of your national union to your collective and individual happiness; that you should cherish a cordial, habitual, and immovable attachment to it; accustoming yourselves to think and speak of it as of the palladium of your political safety and prosperity; watching for its preservation with jealous anxiety; discountenancing whatever may suggest even a suspicion that it can in any event be abandoned; and indignantly frowning upon the first dawning of every attempt to alienate any portion of our country from the rest, or to enfeeble the sacred ties which now link together the various parts.
We should heed these words as much today as in Washington’s own time. And while they should guide us in many areas, I would focus on what they mean in the context of housing finance reform.
Democrats and Republicans have not found common ground on the future of Fannie Mae and Freddie Mac. And yet the nation is likely to be made worse off by leaving them in limbo for so long, with a variety of crises lurking just over the horizon. I hope Congress can hear Washington’s advice to his fellow citizens and commit to placing the reform of these two gargantuan financial institutions at the top of its agenda for the coming year. Seems like a good way to truly commemorate his contribution to our country.
Friday’s Government Reports
- FHFA House Price Index up .08% in November 2014
- HUD’s Worst Case Housing Needs 2015 Report to Congress
- New York Comptroller’s Report Finds Empire State Development Corporation Lacking in Accountability and Transparency
- Consumer Financial Protection Bureau Releases Report On Reverse Mortgage Complaints
Reiss on $191B for Fannie & Freddie
GlobeSt.com quoted me in About that $191B Profit from the GSEs. It opens,
Last week when the White House released its budget for fiscal year
2016, it included one eyebrow-raising line item: it assumed that Fannie Mae and Freddie Mac could return $191.2 billion in profits to the US Treasury over the next decade if they continue operating under federal conservatorship.
The item gave the commercial real estate industry pause for a few reasons. This number 1) assumes the GSEs will remain under federal conservatorship 2) it assumes that the lawsuits filed by GSE shareholders disgruntled by the government’s decision to sweep all profits from the GSEs back to the US Treasury will go nowhere 3) it assumes the GSEs will continue to bring in record profits.
Of all of these, the latter supposition is the least controversial.
The two GSEs have paid back more than what their received in federal aid; Fannie Mae has sent back the government $134.5 billion in payments compared to $116.1 billion it received, while Freddie Mac has sent $91 billion compared to $72.3 billion it received in rescue funds.
This cash flow is one reason why some in the industry quietly speculate that the government has little intention of cutting the GSEs loose to be privatized—despite the stated intention of the Obama Administration to do so.
Also, consider that the government can basically set the GSEs’ profit levels, David Reiss, professor of Law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School, tells GlobeSt.com.
“Their regulator, the Federal Housing Finance Agency, sets the amount of their guarantee fee. If the FHFA raises it, it tends to raise profits for the two companies,” he notes.
The FHFA also sets, within limits, the types of mortgages the GSEs can buy, thereby increasing the size of the total market and the market share of the two entities, Reiss continues. “For instance, the FHFA recently lowered the down payment requirements for Fannie/Freddie loans. This action will increase the total number of loans made and will also increase Fannie and Freddie’s market share because they can now operate in a part of the market that had been off limits.”
Thursday’s Advocacy & Think Tank Round-Up
- American Bankers Association Urges CFPB to Take Down Mortgage Calculator
- Enterprise Community Partners: Enterprise’s Comprehensive Overview and Budget Chart of Affordable Housing and Community Development Proposals in the FY 2016 President’s Budget
- National Association of Realtors Pushing for Commercial Use of Drones
- National Low Income Housing Coalition: Housing Wage Calculator
- Urban Institute: FHFA’s Federal Home Loan Bank Members Proposal Overshoots the Mark
The GSE Litigation Footnote Everyone Is Talking About
Judge Pratt (S.D.Iowa) ruled against the plaintiffs in the GSE shareholderr litigation, Continental Western Insurance Company v. The FHFA et al. (4:14-cv-00042, Feb. 3, 2015). The Judge’s order is mostly an analysis of why this case should be dismissed because of the doctrine of issue preclusion, which bars “‘successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment . . .'” (6, quoting Supreme Court precedent). The relevant prior judgment was Judge Lamberth’s (D.D.C.) opinion in a similar case that was decided last October.
While Judge Pratt did not reach the merits because he dismissed the case, he stated in a footnote
The Court notes that even if it were to reach the merits of Continental Western’s claims, including the allegedly new claims, it would agree with the well-reasoned opinion of the very able Judge Lamberth in Perry Capital that the case must be dismissed. Specifically the Court agrees that: (1) FHFA and Treasury did not act outside the power granted to them by HERA (see Perry Capital, 2014 WL 4829559 at *8–12); (2) HERA bars Continental Western’s claims under the APA (see id. at *7); (3) Continental Western’s claims for monetary damages based on a breach of contract and breach of the implied covenant of good faith and fair dealing against FHFA must be dismissed because they are not ripe and because Continental Western’s shares of the GSEs do not contractually guarantee them a right to dividends (see id. at *15–19); and (4) Continental Western’s claim for breach of fiduciary duty by FHFA is barred by HERA because it is a derivative claim and HERA grants all shareholder rights, including the right to bring a derivative suit, to FHFA (see id. at *13–15). The Court shares in Judge Lamberth’s observation that “[i]t is understandable for the Third Amendment, which sweeps nearly all GSE profits to Treasury, to raise eyebrows, or even engender a feeling of discomfort.” Perry Capital, 2014 WL 4829559 at *24. But it is not the role of this Court to wade into the merits or motives of FHFA and Treasury’s actions—rather the Court is limited to reviewing those actions on their face and determining if they were permissible under the authority granted by HERA. (19, n.6)
As I have noted before, this is not a surprising result. What remains surprising is how so many analysts refuse to see how these cases might be decided this way.
This is not to say that the plaintiffs’ cases are dead in the water. Appeals courts may reach a different result from those of the trial courts. But so many of those writing on this topic refuse to see any result other than a win for plaintiffs. Time for a reality check.
