Tag Archives: Freddie Mac

Hedge Funds Can’t Sue Over Investments in Fannie and Freddie

Hedge funds largely failed in their legal challenge to the U.S. government’s capture of billions of dollars in profits generated by Fannie Mae and Freddie Mac after their bailout, sending shares of the mortgage guarantors plunging.

Perry Capital LLC, the Fairholme Funds and other big investors lost a bid to overturn a judge’s ruling that said they can’t sue the government over the dividend change. The change known as the “net-worth sweep” forced the companies to send almost all their profits to the U.S. Treasury, leaving shareholders with nothing. The companies have been under government control since being bailed out during the 2008 financial crisis.

The funds may still be able to pursue some contract-based claims.

Read on.

Freddie Mac selling off $759 million in non-performing loans

Earlier this week, Fannie Mae announced its first non-performing loan sale of 2017, stating that it plans to sell 10,000 delinquent loans with a total unpaid principal balance of $1.76 billion from its portfolio.

Fannie Mae’s fellow government-sponsored enterprise announced a NPL sale of its own on Friday.

Read on.

The scheme to privatize Fannie and Freddie begins

  • Mortgage Bankers Association’s plan would preserve the GSEs
  • Proposal would open door to new competitors in the MBS market

A powerful housing trade group is wasting no time in pushing the Trump administration and Republican-led Congress to address one of the last unresolved issues from the financial crisis, outlining a proposal Tuesday to overhaul mortgage-finance giants Fannie Mae and Freddie Mac.

The Mortgage Bankers Association plan would make Fannie and Freddie privately-owned utilities and cap their returns on capital. It would also turn the government’s implicit backstop of the companies into an explicit guarantee of the mortgage-backed securities they sell to investors.

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Fannie, Freddie replace HAMP with new foreclosure prevention program

(Update 1: A previous version of this article stated the Flex Modification foreclosure prevention program replaced HARP. The article is now updated to say it replaced HAMP only)

Fannie Mae and Freddie Mac announced on Wednesday their replacement for the Home Affordable Modification Program. The government sponsored enterprises revealed the Flex Modification foreclosure prevention program, which is designed to help America’s families by offering reductions to their monthly mortgage payments.

The government’s Home Affordable Modification Program is slated to end on Dec. 31, 2016, concluding a seven-year government program designed to save struggling homeowners who are behind on their mortgage, or in danger of imminent default due to financial hardship.

HAMP’s sibling, the Home Affordable Refinance Program, which was created at the same time, was extended in August until Sept. 30, 2017 in order to create a smoother transition period for a new refinance product.

“The new Flex Modification announced by Fannie Mae and Freddie Mac (the Enterprises) today was designed based on lessons learned from crisis-era loan modification programs to help borrowers stay in their homes and avoid foreclosures whenever possible,” the FHFA said in a statement.

The Flex Modification also reflects input received over the course of extensive engagement with lenders, mortgage insurers, consumer advocates, and other stakeholders, the statement adds.  By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the Enterprises and taxpayers, the FHFA said, and it will provide borrowers who face permanent hardships with a sustainable modification.

“The Flex Modification is an adaptive program that will allow us to continue to assist struggling homeowners in a changing housing environment and simplify the process for servicers to deliver those solutions,” said Bill Cleary, Vice President of Single-Family Servicing Policy, Fannie Mae. “We believe the program is flexible to adjust for regional and even local differences in housing. It provides the greatest amount of assistance to those areas in need.”

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Fannie, Freddie surge as Trump taps advisors who back privatization

Marketwatch:

Shares of Fannie are up about 63% during the week, and Freddie shares have risen about 65% in that time.

Fannie FNMA, +4.64%  and Freddie FMCC, +3.86%  were placed into federal conservatorship during the 2008 financial crisis, and in 2012 the Obama administration amended the terms of the 2008 agreement to sweep quarterly profits from the two enterprises, a move that’s been challenged in court by shareholders.

Ken Blackwell, who’s been tapped to lead the domestic transition team, wrote an op-ed in 2014 in which he called the Treasury arrangement “theft of private property.” In the piece, Blackwell noted that there is a “bipartisan consensus on how to wind down Fannie and Freddie.”

On Wednesday, the Wall Street Journal reported that hedge fund investor John Paulson had been tapped to be a Trump advisor because of his understanding of the housing market. Paulson is known for shorting the subprime mortgage market as the housing bubble inflated a decade ago.

Paulson’s company has donated extensively to nonprofits and lobbyists advocating for the release of the enterprises from government controls, according to an earlier Journal article.

Fannie & Freddie Shareholders Want Billions

HOUSTON (CN) — Shareholders have sued the Department of the Treasury and the Federal Housing Finance Agency, claiming their $195 billion “net worth sweep” of Fannie Mae and Freddie Mac in 2012 illegally sent all their dividends to the U.S. Treasury rather than shareholders.
The Federal National Mortgage Association (Fannie Mae), and The Federal Home Loan Mortgage Corporation (Freddie Mac), are government-sponsored private companies that own or guarantee trillions of dollars in U.S. home loans. They buy home loans from banks, freeing up the banks to issue more home loans.
After the financial crisis began in late 2007, as the value of securitized home loans collapsed, Congress in July 2008 passed the Housing and Economic Recovery Act of 2008, under which Fannie and Freddie received a $188 billion government bailout.
The Act also created the Federal Housing Finance Agency and authorized it to appoint itself conservator of the companies, which it did in September 2008.
Lead plaintiff J. Patrick Collins a Freddie Mac stockholder, filed the lawsuit on Oct. 20 in Federal Court.

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No privilege for feds’ memos on Fannie Mae: Judge ordered gov’t to turn over documents

(CN) — A federal judge has ordered the government to turn over documents related to its decision to permanently divert billions of Fannie Mae and Freddie Mac profits from investors to the U.S. Treasury following their $188 billion bailout in 2008.
Fairholme Funds is an investment fund run by Bruce Berkowitz. Mr. Berkowitz was named domestic equity fund manager of the decade by Morningstar Inc. in 2010, but since then his fund has massively underperformed the S&P 500 by nearly 12 percent annually, according to Seeking Alpha.
Part of the fund’s losses are due to its large holdings in Fannie Mae and Freddie Mac.
Value of preferred shares of the mortgage giants has dropped by more than half since Fairholme lost its federal lawsuit challenging the government’s 2012 amendment to the 2008 bailout terms. The amendment diverted Fannie and Freddie profits to the U.S. Treasury and eliminated dividends that normally go to private investors.
Investors described the amendment as requiring “Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each enterprise, minus a small reserve that shrinks to zero over time.”

Read on.

Here is the court document. Click here.