#LTV – Page 2 – Federal Financial Analytics

5 01, 2023

GSE-010523

Eliza Allen2023-01-05T12:37:19-05:00January 5th, 2023|4- GSE Activity Report|

End-Game Standards in the End-Time

As we previously noted, the U.S. banking agencies will finally, finally, finally get around to proposing their version of the Basel IV capital rules more recently dubbed the “end-game” standards. These will come with new, unique U.S. fillips due to the tough approach to big-bank capital announced by Fed Vice Chairman Barr strongly supported by Acting Comptroller Hsu and FDIC Chairman Gruenberg along with staff at all three agencies who have been doing this a long time and seen more than a financial crisis or two. This report identifies key mortgage-finance issues with strategic impact along with what’s to become of them in the end-game.

GSE-010522.pdf…

11 04, 2022

GSE-040722

Eliza Allen2023-03-02T11:39:00-05:00April 11th, 2022|4- GSE Activity Report|

Capital and CRT

FHFA has finalized new capital rules for the GSEs designed to accelerate the credit-risk transfer the
agency now deems essential for a fast-acting conservatorship exit. We continue to think that, for as
long as CRT requires first-loss tranches backed by the GSEs, the GSEs will be wards of the state
because a broad market for other forms of CRT cannot exist without bank participation. In 2018, we
reviewed the Basel IV rules that might make this possible. With the U.S. banking agencies now finally
readying to propose these standards for U.S. adoption, we review their terms, conditions, prospects,
and housing-finance implications.

GSE-040722.pdf…

25 02, 2022

Daily022522

Arezou Rafikian2023-04-04T15:08:38-04:00February 25th, 2022|2- Daily Briefing|

CFPB Targets Auto Lending for Competition Make-Over

Late yesterday, the CFPB outlined the steps it plans to take to ensure that auto lending is fair and competitive. This initiative mirrors others (see FSM Report CONSUMER38) in which the Bureau seeks to deploy its consumer-protection powers to reshape markets.

Basel Plans Broad Digital, Crypto, Climate Work Plan

The Chair of the Basel Committee, Spain’s Pablo Hernández de Cos today reiterated that Basel now plans to press its final capital changes and work with other regulators to finalize climate risk standards. An array of “deep-dive analyses” are planned on fintech and cryptoassets, publishing initial conclusions on these topics and AI in “coming months.”

Fed Finds Financial Stability Just Fine, But That Was Then

The monetary policy report that Chairman Powell will deliver next week includes a slightly revised discussion of financial stability which does not take current geopolitical hazards into account.

FHFA Eases GSE Capital to Increase CRT

FHFA followed up sweeping action yesterday on mortgage servicers today with a finalized capital rule. As promised, the rule replaces the current fixed leverage ratio with a dynamic one designed to ensure that risk-based capital is the only binding constraint for Fannie Mae and Freddie Mac.

Daily022522.pdf…

6 01, 2022

GSE-010622

Arezou Rafikian2023-04-25T15:47:20-04:00January 6th, 2022|4- GSE Activity Report|

The Cost of Equity

As noted yesterday, FHFA followed through on its heavy hints in the 2022 GSE scorecards, mandating significant hikes in upfront fees on most high-balance mortgages and those for second homes. There is little question in our mind that these price hikes will restore portfolio-based origination channels for these loans and, to a lesser degree, also give PLS a boost. How much of the market transfers out of the GSEs will determine the extent to which remaining high-balance and second-home fee business cross-subsidizes lower-fee products aimed at more affordable, lower-income market segments. If, as FHFA seems to expect, business migrates and GSE capitalization improves, then cross-subsidization might be minimal.

GSE-010622.pdf…

30 09, 2021

GSE-093021a

Arezou Rafikian2023-07-31T15:48:19-04:00September 30th, 2021|4- GSE Activity Report|

Crazy for CRT

Now that we have FHFA’s comment deadline – November 26 – we expand our initial analysis of FHFA’s capital rewrite into a more detailed assessment of its strategic impact. How key industry sectors view this new approach will very much depend on what each sector wants – those who want CRT got almost all they desired while those who want bank capital parity lost still more ground to Fannie and Freddie. Assuming the final rule advances ASAP along proposed lines – and we think it will – and combined with the liberalized PSPA, CRTs will define mortgage securitization across anything close to a conventional conforming loan and all the higher-risk products the GSEs can purchase again.

GSE-093021a.pdf…

1 09, 2021

GSE-090121

Arezou Rafikian2023-08-22T12:54:37-04:00September 1st, 2021|4- GSE Activity Report|

Swing Low, But Where’s the Chariot?

A major paper delivered at last week’s Jackson Hole Fed meeting shows – we think conclusively – that it’s not demographics that keep interest rates so, so low, but wealth inequality. Just as old-school models misread macroeconomics in an age of inequality, mortgage-affordability assumptions premised on low rates thanks to agency guarantees also need re-evaluation when rates stay lower for longer and homeownership becomes ever more the privilege of the rich. It may well be that government programs and new forms of credit enhancement aimed at increasing homeownership and thus combating both wealth inequality and racial inequity need now to battle the high cost of low rates: the increasing inability of younger and lower-income households to amass a downpayment.

GSE-090121.pdf…