Tag Archives: Bailouts

Times haven├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ót been too swell for the Federal Housing Administration. That was apparent, by some accounts, when the agency raised insurance premiums for lenders of single-family mortgages in February, a choice it made to shore up its crisis-weary Mutual Mortgage Insurance Fund. Now, according to Fitch Ratings, a new tide of mortgage delinquencies and price declines may tip the fund back toward troubled waters ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and possibly insolvency. A down-payment requirement on its may well worsen matters for the FHA.

On Friday, after years of bills from lawmakers to reform Fannie and Freddie, the Treasury Department unveiled a plan to finally ├â┬ó├óÔÇÜ┬¼├àÔÇ£wind down├â┬ó├óÔÇÜ┬¼├é┬Ø the mortgage giants. According to a release, the Treasury Department will end a past ├â┬ó├óÔÇÜ┬¼├àÔÇ£circular├â┬ó├óÔÇÜ┬¼├é┬Ø arrangement with Fannie and Freddie that allowed the companies to repay the agency with the very funds it received in the first place. The new agreement requires that Fannie and Freddie divert any new quarterly profits back to Treasury in order to repay taxpayers for their losses.

Three bank failures took place Friday, raising the national tally this year to 31 as fewer community banks fall under, compared with recent years. State regulators shuttered Palakta, Florida-based Putnam State Bank, Marietta, Georgia-based Security Exchange Bank, and Lynchburg, Tennessee-based The Farmers Bank of Lynchburg. The cost to the FDIC: $100 million. With the bank failure tally at 31 this year, the numbers mark a gradual decline in the rate of closure for community banks compared with every year since the financial crisis.

The crisis of confidence in Europe once again drove mortgage rates to record lows this week, with real estate Web site Zillow reporting that the 30-year fixed-rate mortgage slammed into 3.56 percent, the lowest it has recorded since it started surveying rates. Zillow said that the 30-year loan initially rose to 3.62 percent this week after euro zone authorities decided to bail out Spain with favorable terms. The rate for a 15-year loan hovered at 2.95 percent, while interest rates for 5-year and 1-year adjustable-rate mortgages averaged 2.68 percent.

The Dodd-Frank Act fell under scrutiny at a hearing of the Senate Banking Committee Wednesday, with lawmakers from the right charging that the reform law will impose arbitrary rules that limit consumer choice and prevent an economic recovery. Much of the light fell on interagency efforts to finalize the controversial Volcker Rule, a rulemaking requirement under Dodd-Frank that bans short-term proprietary trading by systemically important financial institutions like Chase. Witnesses included Consumer Financial Protection Bureau chief Richard Cordray.

After suffering from bad loans during the financial crisis, Ally Financial looks to close the books on its share of ownership in the mortgage business. Executives with Ally took to the phone with investors Tuesday to explain a filing for bankruptcy protection Monday by subsidiary Residential Capital LLC. The consensus: Residential mortgage loans are out for Ally and auto finance is back in the center. Ally will still subservice loans via ResCap while it serves as counterparty to Fannie Mae and Freddie Mac.

Three federal regulatory agencies finalized stress-testing guidance Monday for financial institutions with total assets worth more than $10 billion. The Federal Reserve, FDIC, and Office of the Comptroller of the Currency released the guidance after receiving 17 comment letters from banks, financial advisory firms, and trade groups. The agencies stressed the importance of capital and liquidity, saying that systemically important financial institutions should apply stress tests to these areas on a regular basis as the rule moves forward.

Residential Capital LLC, the embattled mortgage subsidiary of Ally Financial, filed Chapter 11 Monday, with Nationstar Mortgage Holdings Inc. set to acquire it. The Detroit-based company framed the move as a way to shave losses, repay taxpayers, and preserve its position as an auto lender. Lewisville, Texas-based Nationstar said in a separate announcement that it would acquire ResCap, with the purchase including $374 billion in mortgage servicing assets and $201 billion in primary residential mortgage servicing rights.

Fannie Mae revealed that it produced $2.7 billion in net income for the first quarter this year, enough to prevent another draw from the Treasury, a first for the mortgage giant since it entered federal conservatorship in 2008. The favorable results offer a significant difference to a net loss of $6.5 billion from the same quarter last year, along with a net loss of $2.4 billion by the fourth quarter. Despite net income for the first quarter, Fannie Mae sustains a debt for more than $180 billion in taxpayer funds it has received with Freddie Mac since 2008.

Solvency issues re-emerged for the Federal Housing Administration in a hearing convened Tuesday by the Senate Banking Committee, with HUD Secretary Shaun Donovan calling for lower loan-to-value thresholds and more servicer competition to expand refinance opportunities. The hearing follows a bill by Sens. Barbara Boxer and Robert Menendez to roll back refinancing barriers for homeowners with GSE-held mortgages and featured the legislation as lawmakers discussed solutions to the housing crisis. The hearing quickly turned to servicer competition.