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HomeMaking Sense of Mortgage Rates and Regulations
Posted by Larry Doyle on September 18th, 2012 6:26 AM |
The Federal Reserve has already purchased billions in mortgage-backed securities via prior iterations of quantitative easing. The “QE-infinity” announced just last week is targeted at purchasing hundreds of billions more in MBS.
There is certainly a lot going on within the world of mortgages. Not all of it is necessarily good. I remain steadfast in my defense of fair and transparent markets. That said, it should be no surprise that more regulations do not necessarily mean better regulation.
While the Fed’s QE operates from the proverbial 60,000 feet, let’s get a first hand look at what is really going on within the world of residential mortgages. To do just that I welcome highlighting the writing of a regular reader. The $avvy Borrower is the work of a pro’s pro at Independence Mortgage Company in Newport Beach, CA. (more…)
Is The Clock Getting ‘Close to Midnight’ for FHLB-Seattle?
Posted by Larry Doyle on October 26th, 2010 5:46 AM |
All financial accounting charades to the contrary, the reality of a decaying asset quality and insufficient capital position will cause any institution to quiver. With more banking institutions declaring bankruptcy each and every week, the clock has yet to strike twelve on any of our larger banking institutions. That said, the pressure is certainly mounting on a large west coast institution, that being the Federal Home Loan Bank of Seattle.
I first addressed issues within this specific institution 18 months ago when writing, Putting Perfume on a Pig. I highlighted at that time:
Who gets this? Charles Bowsher, who resigned just last week as chairman of the Federal Home Loan Banks Office of Finance. Bloomberg’s Jonathan Weil does yeoman work in profiling Mr. Bowsher and the joke that is FHLB accounting: (more…)
12th Street Capital Provides Perspective on the Foreclosure Fiasco
Posted by Larry Doyle on October 22nd, 2010 11:23 AM |
What the hell is truly going on within the entire mortgage foreclosure fiasco? There are seemingly more angles to this mess than there ever were choices of mortgage products themselves. Where can we turn to make some ‘sense’ of this madness? Let’s check in with the crowd on the cutting edge of this sinkhole, that is our friends at 12th Street Capital. Today they write,
Not surprisingly the ones that look to be best positioned during this mortgage foreclosure/put back fiasco are the lawyers. As reported by HousingWire.com late yesterday, “A spokesperson for the New York law firm Quinn, Emanuel Urquhart & Sullivan confirmed to HousingWire it has been hired by the Federal Housing Finance Agency, a move some say means the government-sponsored enterprises are going after bad mortgages it bought from originators.” Guess what, the GSEs have ALWAYS pursued repurchases. (more…)
Mortgage Servicers Are Hugely Conflicted
Posted by Larry Doyle on July 23rd, 2010 12:57 PM |
Information is everything. Those who control the information have immense power. The allegiances of those in control of the info obviously have an enormous impact on how the information is processed and dispensed. The potential for conflicts of interest are significant. Standard business fare, correct? Have these conflicts played out on Wall Street? All too often. How so?
I have repeatedly highlighted the conflicts within our financial regulatory structure. We also know that the credit rating agencies have been enormously conflicted. Anywhere else? Let’s enter the world of mortgage servicing, ….. (more…)
Are Fannie and Freddie Going to Sue Wall Street?
Posted by Larry Doyle on July 12th, 2010 3:21 PM |
Are there some dark legal clouds beginning to hover over the Wall Street landscape? How so? The threats of impending lawsuits are never a forecast any individual, entity, or industry care to entertain. Like it or not, Wall Street is beginning to get some ground cover in the forms of pending legal actions.
While a large mortgage investor, Cambridge Place Investment Management, recently filed a complaint against virtually every firm on Wall Street in the Massachusetts courts, today we see none other than our ‘wards of the state’ Fannie Mae and Freddie Mac preparing the initial steps to bring suit against Wall Street. Could it be possible that Fannie and Freddie would sue Wall Street? Is a potential lawsuit political cover for Uncle Sam? Who knows? (more…)
Fannie and Freddie Ordered to Delist from NYSE
Posted by Larry Doyle on June 16th, 2010 11:28 AM |
Fannie and Freddie don’t live here anymore.
News just broke that the stocks of our two government stepchildren, Fannie Mae and Freddie Mac, have been ordered to delist from the NYSE. The Washington Post reports, Fannie Mae, Freddie Mac to Delist Shares from NYSE:
The companies’ regulator, the Federal Housing Finance Agency, said Wednesday that it expects Fannie Mae and Freddie Mac shares to trade on the Over-the-Counter Bulletin Board, an electronic quotation service. (more…)
Elizabeth Warren Exposes Jamie Dimon
Posted by Larry Doyle on February 9th, 2010 8:37 AM |
Elizabeth Warren and Jamie Dimon
How is it that some people are able to aggressively promote the virtues of truth, transparency, and integrity within our financial system while others would seem to talk a good game but do not truly walk the walk? The key, in my mind, is that the former are not beholden to a constituency focused on short term maximization of profits and revenues. Who is distinguishing herself as a leader in this category? Elizabeth Warren, the current chair of the Congressional Oversight Panel to investigate the U.S. banking bailout.
Warren writes in today’s Wall Street Journal of Wall Street’s Race to the Bottom. This race is very much a function of implementing strategies and developing products that have served to maximize the short term revenues of these firms, while eroding the very foundation of the financial system itself. (more…)
Sleepless in Seattle . . . FHLB-Seattle, That Is
Posted by Larry Doyle on November 10th, 2009 4:28 PM |
Having broached expectant difficulties in the Federal Home Loan Bank system last spring, I try to keep a close eye out for news of note on this largely unknown – but critically important – system of banks. To a large extent, the FHLBs have been flying under the radar despite some serious problems within their investment portfolios and loan books.
High five to KD for pointing out that the folks at FHLB-Seattle probably are not getting much sleep these days. Why is that? Insufficient capital will do it to you every time. As the American Banker offers, FHLB Seattle Still “Undercapitalized,” Regulator Says:
The Federal Housing Finance Agency said late Friday that the Federal Home Loan Bank of Seattle remains “undercapitalized” and will not be allowed to redeem or repurchase stock or pay dividends.
At the end of 2004, as the bank struggled with the size of its mortgage purchase program, it said members who wish to redeem their stock must wait five years before receiving their money.
But with that time period almost up, the Finance Agency said it would not allow the bank to begin redeeming stock, fearing it could lower its capital base. (more…)
All Is Quiet On the Freddie Mac Front
Posted by Larry Doyle on October 23rd, 2009 12:03 PM |
The twists and turns along the landscape of the Uncle Sam economy remain ever challenging. How so?
What is an investor to do if he desires to sue an entity that is now part of Uncle Sam’s portfolio? If that is not challenging enough, how does one proceed with the process of discovery if those who could and want to share information have a gag order imposed upon them? What is going on here? Welcome to the world of Freddie Mac investors circa 2009.
In the process of failing, did Freddie Mac’s management engage in illegal and fraudulent activities by misrepresenting the overall health of the company? Did they misrepresent the risks embedded in the portfolio? Many investors believe that to be the case and are considering bringing suit. Who possesses a lot of very useful information? Former employees. Not unlike former employees of many companies, Freddie Mac employees were required to sign departure agreements which compelled them to not share company information. If the employee does speak, he runs the risk of losing his severance. This experience is very common in corporate America. That said, Freddie Mac’s failure hardly represents corporate America. The New York Times addresses this legal and financial entanglement by writing, Freddie Mac’s Secrecy Pacts Face Court Test:
One year after the government took over and bailed out Freddie Mac, the giant mortgage finance company, federal regulators are blocking former employees from revealing information to investors who are suing the company for fraud, lawyers for shareholders say.
The Treasury has propped up Freddie Mac with more than $50 billion in taxpayer money since the company nearly collapsed more than a year ago, and officials warn that the company will probably need additional billions in the months ahead.
Federal prosecutors in Virginia and the Securities and Exchange Commission are already investigating whether the company misled investors about the risks it was taking with securities backed by subprime mortgages and no-document loans.
But in a battle that will surface on Friday in a federal courtroom in New York, the company and its primary government overseer, the Federal Housing Finance Agency, are trying to enforce secrecy agreements that scores of former employees signed as a condition for receiving severance payments when they left the company.
In their class-action lawsuit against Freddie Mac, three big union-based pension funds charge that Freddie Mac executives defrauded investors by concealing the company’s exposure to high-risk mortgages, its mounting losses and its inadequate capital position.
At the hearing on Friday, lawyers for shareholders will argue that Freddie Mac’s secrecy agreements amount to buying silence from willing witnesses who may have crucial information about what the company’s top executives knew at the time they were assuring investors that all was well. The lawyers will ask a judge to invalidate the restrictions, a move that Freddie Mac and federal regulators will say the court has no right to do.
“Federal dollars are being used to bribe people, to buy their silence,” said David George, a lawyer representing the pension funds in a class-action lawsuit.
Wow. Our country is sinking to new depths when we have an arm of the government openly working to prevent the truth from being revealed. To this point, the blockage of the truth would typically take place behind the scenes.
For those Freddie Mac employees who would like to share the truth as to what transpired, are they wondering ‘where did my country go?’
LD
Let’s Give Barack Some Sense on Cents
Posted by Larry Doyle on June 16th, 2009 9:16 AM |
In true Washington fashion, Obama’s proposed regulatory reforms have been “leaked” to the market. Let’s review, analyze, and critique. The Wall Street Journal provides a very helpful overview of these reforms via Blueprint to Avoid Market Meltdowns:
President Barack Obama spent the first five months of his presidency trying to make sure the worst financial shock in 70 years didn’t push the U.S. economy into a depression. He will spend the next five months or so trying to redo the rules of finance so we don’t go through this again.
Enough of the Obama plan has leaked to see how Treasury Secretary Timothy Geithner and chief White House economist Lawrence Summers propose to protect the economy from the vulnerabilities now so painfully evident: Plug the gaps; don’t redo the organization chart. Rely heavily on the sagacity of the Federal Reserve; the alternatives are inferior. Craft a plan that has a chance of getting through Congress.
Will there be real “change” involved in Obama’s plans or a mere reshuffling of the deck chairs along with a healthy dose of Monday morning quarterbacking? Will the Wall Street-Washington cabal be exposed or solidified? Let’s navigate the landscape of Obama’s proposed reforms using the WSJ’s blueprint:
Problem: Several financial firms were so big and intertwined that their failure threatened the entire system, and they weren’t all banks.
Solution: Pump up the Fed’s role in overseeing all big “financial holding companies,” giving it explicit authority to match its responsibility. Tell it to protect the system, not only the sturdiness of the banking units of these firms. Brace for controversy: Some in Congress already think the Fed is too powerful.
So propose a “council” of regulators to share some duties, but make the Fed the heavy. (Retain the Fed’s ability to lend to anyone in a crisis, as it did to Bear Stearns and American International Group, but require it to get the formal OK of the Treasury secretary.)
Sense on ¢ents: the Fed is already charged with these responsibilities within the banking industry. I highlighted these points the other day in my post “The All Powerful Federal Reserve”:
What are the Federal Reserve’s responsibilities?
-supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
-maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
The Fed failed to perform. Why give it more power? Obama is specifically addressing the risks within the insurance industry in designating the Fed as the authority in overseeing the entire economic system.
I believe our risks are increasing dramatically via this move. Why? Not enough checks and balances. Not enough eyes and ears and “teeth” to monitor and promote accountability. Merely because the Fed is “all powerful” does not mean that it is “all knowing,” “all capable,” and “all encompassing.” (more…)
