#Ginnie Mae

8 08, 2023

FedFin on: Say It’s Simple

2023-08-09T14:19:41-04:00August 8th, 2023|The Vault|

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions. In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks. Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

8 08, 2023

GSE-080823

2023-08-08T13:46:46-04:00August 8th, 2023|4- GSE Activity Report|

Say It’s Simple

Our most recent analysis of the inter-agency capital proposal focuses on significant changes to the rules for securitization and credit-risk transfer positions.  In short, super-traditional securitizations have an easier path to the secondary market, but GSEs still beat banks.  Complex ABS face often-formidable obstacles, as does CRT given or taken by banks.

GSE080823.pdf

28 07, 2023

DAILY072823

2023-07-28T17:09:55-04:00July 28th, 2023|2- Daily Briefing|

FSOC Considers Nonbank Systemic Risk, Credit-Based LIBOR Replacements

At today’s FSOC meeting, participants as usual said nothing about the closed-door agenda, which notably featured more discussion of the systemic risk that may be posed by nonbank mortgage servicers. Different agencies presented their work to address this risk, which was also flagged when FSOC finalized its new approach to identifying systemic risk (see FSM Report SYSTEMIC95).  Whether FSOC as a whole is satisfied with FHFA and Ginnie actions and even if these agencies think their work to date suffices will determine the extent to which FSOC intervenes, but the session reinforced the systemic importance accorded to nonbank mortgage firms and the potential for additional action.

Agencies Take Action to Enhance Emergency Liquidity, Whitewash Discount Window

As presaged at Chair Powell’s press conference earlier this week, the banking agencies today issued liquidity-planning guidance designed both to ensure adequate preparation for acute liquidity stress and take the stigma off discount-window draws.  The guidance deals only with liquidity planning and thus does not alter the treatment of discount-window funding for purposes of the LCR, admonishing banks to take account of the hard lessons of the March bank failures and prepare for runs and other extreme-stress scenarios.

Daily072823.pdf

19 12, 2022

GSE-121922

2022-12-19T12:55:45-05:00December 19th, 2022|4- GSE Activity Report|

Nonbanks Get Unwelcome FSOC Attention

As promised Friday when FSOC’s annual report was released, we here go into depth on its implications for residential housing.  Most notable to us in the lengthy report was its continuing concern about residential-housing price vulnerability, its new focus on MBS-market volatility, and specific action steps to address longstanding fears about nonbank mortgage originators and servicers.

GSE-121922.pdf

21 10, 2022

DAILY102122

2022-10-21T16:31:13-04:00October 21st, 2022|2- Daily Briefing|

Ginnie Gives Ground on Controversial RBC Requirements

Following its long-delayed release of eligible seller-servicers standards with FHFA, Ginnie Mae announced today that it is extending by one year its mandatory compliance date for the new risk-based capital standards. The announcement cites stakeholder feedback and evolving market dynamics –doubtless the economic downturn and concerns about procyclicality – in the agency’s decision for this extension, which sets a new RBC implementation date of December 31, 2024.

BIS Unveils Two-Tier CBDC Prototype

Reflecting the BIS’ preferred two-tier CBDC structure (see Client Report CBDC6), the BIS today announced the launch of a prototype two-tier retail CBDC called Aurum comprised of a wholesale interbank system and a retail e-wallet.  The wholesale interbank system is designed to ensure that banks do not issue more retail CBDCs than the wholesale CBDCs that the bank owns or double issue the same wholesale CBDC asset as a retail CBDC asset.  This system also tracks unspent transaction output, allowing users to prove ownership even if an issuing bank has ceased operations.

Daily102122.pdf

22 08, 2022

GSE-082222

2023-01-04T10:56:18-05:00August 22nd, 2022|4- GSE Activity Report|

Forbear to Forget

A new Federal Reserve Bank of Cleveland study validates forbearance as a mortgage-market buffer, reinforcing the likelihood that policymakers and servicers will turn quickly to it if current mortgage-market conditions turn ugly under the combined stress of higher rates and slow to no growth. If bank regulators also reinstate regulatory forbearance on forborne loans, the regulatory-capital cost of higher-risk loans gets a nice counter-cyclical boost, perhaps encouraging banks to tread softly back into at least some of this sector if parallel calculations under the all-powerful stress capital buffer prove propitious.

GSE-082222.pdf

 …

17 08, 2022

GSE-081722

2023-01-04T11:52:12-05:00August 17th, 2022|4- GSE Activity Report|

Booting Up for 2.0

FHFA and Ginnie Mae today let loose their long, long delayed standards for eligible seller-servicers.  These will require more from almost all large nonbanks but not demand nearly as much as feared from them and from all small servicers.  Pain is also postponed, facilitating compliance at a time when it might be particularly challenging for firms to tap markets to meet new capital, liquidity, and stress-test standards.

GSE-081722.pdf

18 07, 2022

m071822

2023-01-06T14:55:15-05:00July 18th, 2022|6- Client Memo|

A Pragmatic Vision of a Purposeful Home Loan Bank System

Although a new paper by former FRB Gov. Tarullo and Fed staffers on the FHLB stirred considerable consternation across the Federal Home Loan Bank System, it’s a crushing and persuasive critique of a giant GSE that has long preferred to go unnoticed.  That’s not unreasonable since the System has evolved from an essential small-bank funding source for mortgages into a taxpayer-subsidized capital-markets investment option.  When public wealth is not allocated for public welfare, resources are misallocated and market integrity is compromised.  But, unless the Home Loan Banks blow themselves up, they are here to stay.  Thus, the policy challenge is not how to abolish them, but how best to redirect an established funding channel back to servicing the public good.  Traditional single-family mortgages don’t need the Banks anymore, but much else does.

m071822.pdf

18 07, 2022

Karen Petrou: A Pragmatic Vision of a Purposeful Home Loan Bank System

2023-01-06T14:56:42-05:00July 18th, 2022|The Vault|

Although a new paper by former FRB Gov. Tarullo and Fed staffers on the FHLB stirred considerable consternation across the Federal Home Loan Bank System, it’s a crushing and persuasive critique of a giant GSE that has long preferred to go unnoticed.  That’s not unreasonable since the System has evolved from an essential small-bank funding source for mortgages into a taxpayer-subsidized capital-markets investment option.  When public wealth is not allocated for public welfare, resources are misallocated and market integrity is compromised.  But, unless the Home Loan Banks blow themselves up, they are here to stay.  Thus, the policy challenge is not how to abolish them, but how best to redirect an established funding channel back to servicing the public good.  Traditional single-family mortgages don’t need the Banks anymore, but much else does.

The paper’s criteria for considering taxpayer subsidies are a very helpful guide for moving forward and thus worth quoting at length:

“There is, of course, nothing inherently wrong with government subsidies. But subsidies should meet two conditions if they are to be sound public policy. First, they must be shown to be correctives for identified market failures or instruments of targeted redistribution policies.  Second, there must be governance mechanisms to ensure that the subsidies are used to achieve the ends specified by the legislature or regulator, and not for other purposes.”

I suspect the authors would agree with a third point:  if a credible, forward-looking case for the subsidy cannot be made by virtue of demonstrable public benefits …

17 05, 2022

FedFin on: CRA Regulatory Rewrite

2023-02-21T14:50:17-05:00May 17th, 2022|The Vault|

Following much talk about the need to update Community Reinvestment Act (CRA) rules since this was last done in 1995, federal banking agencies have finally agreed on a proposed redesign of standards essential to banks that wish to expand or acquire as well as those seeking strong community ties and the policy and political benefit these afford.  Much of the complexity in the NPR results from the agencies’ decision to allow only partial credit for activities (e.g., mortgages) largely assumed in the past…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

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