Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about The Purchase Mortgage Market is Back on Top. This week we’re bringing you:
Why isn’t mortgage industry alarmed by FHFA actions?*
Calabria continues to shrink the footprint of Fannie Mae and Freddie Mac
There is a well-known analogy about a frog and a pot of water. If you drop a frog into a boiling pot of water, the frog will leap out. But if you drop a frog into a pot of cold water and turn the heat up slowly, the frog will boil. Personally, I think the frog is in trouble either way, but that is beside the point. In the period since Mark Calabria has been at the helm of the FHFA, there has been both a steady stream of GSE executive departures as well as a plethora of policies adverse to the housing sector. The most surprising truth here is that the mortgage industry, awash with profits from the past year or so, has turned an almost blind eye toward these steps.
From CEOs to executive leadership, the exodus under Calabria’s reign has been pronounced. And why not? After all, a CEO of one of these companies doesn’t really work for his board of directors. In fact, he works for an FHFA director who controls everything from executive hiring decisions, public communications and mortgage policy.
For those who have spent their careers working in this sector and leading large organizations, I can only imagine how frustrating it might be reporting to a public official who has never actually been in the industry or managed anything close to the breadth of responsibilities of these companies.
More importantly, it is likely equally frustrating to know that the person in charge of your future, for now, has a philosophical zealousness about the company you have an executive role in.
On the policy front, the slow but steady chipping away at the programs of the GSEs has cumulatively shrunk the footprints of these two giants in financial services. This includes the new capital rule, through various policy surprises following the passing of the CARES Act, to the most recent policy proclamations quietly snuck into an amendment to the Preferred Stock Purchase Agreement (PSPA) in January. Calabria has been pursuing outcomes that he blatantly addressed a decade ago about these companies.
Brighter Outlook For Housing and Economy – Fannie Mae*
Incoming data for March has caused Fannie Mae to again revise its forecast for the year’s growth in gross domestic product (GDP). The company’s Economic and Strategic Research (ESR) team said a sharp uptick in the economy last month followed a weather-related retreat in February.
Most evident was a jump in employment to 916,000 new jobs in March from 468,000 in February, the fastest pace since August 2020. This growth is expected to continue. Auto sales were also up, and consumer confidence surveys jumped to their highest levels since the April 2020 downturn. As a result of these and other heightened indicators, Fannie Mae now sees growth reaching 6.8 percent by the fourth quarter on a year-over-year basis, up from 6.6 percent in the earlier forecast. Expectations for 2022 are unchanged at 3.0 percent.
They attribute the growth spurt to waning COVID-19 restrictions as vaccinations have increased and to higher household incomes because of stimulus payments which were paid out earlier than anticipated. There is still uncertainty “over the speed and duration of the current leg of the recovery,” they say, but they do expect brisk acceleration and second quarter growth at an annualized 9.1 percent.
Draft Housing Infrastructure and Assistance Bill Presented to FSC*
The House Committee on Financial Services (FSC) held a virtual hearing last week on ways to provide equitable and affordable housing infrastructure. The memorandum setting out the hearing’s purpose stated that, not only is affordable housing a crucial part of the nation’s infrastructure and a stable asset that boosts individuals, families, and communities’ ability to thrive, but it also generates construction activity and jobs that stimulate the economy.
Prior to the hearing the FSC published 17 draft bills centering around housing that have been introduced into the current congressional session. They deal with everything from flood insurance to lead paint abatement to housing on Native American lands. One proposal, presented as a draft for discussion, is the “Downpayment Toward Equity Act of 2021.” It is of particular interest because it builds on a much discussed housing policy set out during the presidential campaign.
As a candidate, Joe Biden proposed investing $640 billion over 10 years to assure every American “has access to housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient, and located near good schools and with a reasonable commute to (homeowners’) jobs.” He laid out four points to accomplish this:
- Ending redlining and other discriminatory and unfair practices in the housing market.
- Increasing the supply, lowering the cost, and improving the quality of housing, including through investments in resilience, energy efficiency, and accessibility of homes.
- Pursuing a comprehensive approach to ending homelessness.
The fourth point, “Providing financial assistance to help Americans buy or rent safe, quality housing, including down payment assistance,” was to include “a refundable and advanceable tax credit and fully funding federal rental assistance.” The tax credit was proposed at $15,000.
The FSC’s discussion draft differs substantially from Biden’s pre-election vision for direct assistance to homebuyers. It isn’t known if the President was consulted or had any input into its content, and there is no guarantee it will ever become a formal bill let alone law, but here is a brief summary.
CFPB begins cracking down on mortgage servicers*
The agency began sending data requests to companies on how they are handling forbearance programs
The Consumer Financial Protection Bureau (CFPB) is making good on its threats to police mortgage servicers.
In late January, the agency released a series of authority actions warning servicers that they need to do right by consumers who need access to forbearance programs. According to a new report from Reuters, the government watchdog is already actively investigating several servicers.
The agency sent data requests to mortgage servicers on how they are handling forbearance programs and whether the temporary debt relief is likely to get borrowers back on their feet, unnamed sources told Reuters. According to Reuters’ sources, the CFPB also opened a number of probes into how servicers are handling forbearance requests.
Specifically, the agency is examining how many and which borrowers are in forbearance, whether loan modifications will succeed in getting borrowers repaying, if servicers have been obstructing or delaying forbearance requests or granting only partial relief, and if some servicers have been discriminating against borrowers based on race or ethnicity, whether deliberately or inadvertently, sources said.
“We are very concerned and we’re watching closely,” said one of the people to Reuters. “Our supervision team is robustly asking for more data than ever from servicers.”
The lenders were not identified by name.
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