#mortgage finance

5 02, 2024

M020524

2024-02-05T10:42:05-05:00February 5th, 2024|6- Client Memo|

Why Lower Rates Won’t Lead to More Affordable Housing

As Politico rightly pointed out last week, the inability of anyone who doesn’t already own a home to get one is turning into a significant political problem for incumbents of all persuasions.  It might also come to be one for the Federal Reserve based on a call I got from a senior senator a couple of weeks ago.  This is not exactly what the Fed needs given how hot a political potato it’s already become.

m020524.pdf

22 01, 2024

GSE-012224

2024-01-22T16:02:39-05:00January 22nd, 2024|4- GSE Activity Report|

Securitization and Systemic Risk

A new Fed staff study uses models to conclude that government-backed mortgage securitization  exacerbates financial crises, contradicting conventional wisdom that – GSE blow-ups notwithstanding – properly-regulated GSEs create a liquid, diversified asset pool for an otherwise illiquid, risky asset class.  However, our read of the study leads us to side with conventional wisdom.

GSE-012224.pdf

12 01, 2024

GSE-011224

2024-01-12T13:37:08-05:00January 12th, 2024|4- GSE Activity Report|

Bad, Bad Banks?

A new staff paper from the Federal Reserve Bank of New York assesses the tender topic of bank mortgage lending to minority borrowers.  Going beyond the usual statistics showing significant racial disparities, the paper dives into a bank-by-bank analysis of why this might be, finding significantly different and persistent fair-lending records at different banks.  Controversially, it comes up with what might be called a structural racism rationale for bank-by-bank differences when it comes to mortgage lending for African Americans.  This might not sit at all well with bankers, but it could well have political traction with progressive advocacy groups despite our methodological quibbles.

GSE-011224.pdf

8 01, 2024

GSE-010824

2024-01-08T10:15:27-05:00January 8th, 2024|4- GSE Activity Report|

Who Gives When GSEs Go

It’s not news to observe that things that change at the GSEs then change a lot of other things.  Still, the scope of the GSEs’ influence across financial markets is startling as measured by a new Federal Reserve Bank of Philadelphia study of the spillover effect of the 2020 revisions to the PSPA.  The paper looks specifically at PSPA provisions restricting GSE purchase of what the paper calls speculative mortgages (i.e., seconds and investment properties).  Push here for GSE spec loans, pull there is observed for spec loans in the private sector, all other conforming loans, jumbos, and – surprisingly – bank small-business loans.

GSE-101824.pdf

7 12, 2023

DAILY120723

2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

6 12, 2023

DAILY120623

2023-12-06T16:42:25-05:00December 6th, 2023|2- Daily Briefing|

OFR Sees Heightened Systemic Risk

Striking a considerably more somber note than the FRB (see Client Report SYSTEMIC97), OFR today concluded that systemic risk is elevated due to an upcoming economic slowdown, heightened inflation,  and geopolitical risk and global conflict.

OCC Cracks Down on BNPL Finance

Reflecting continuing CFPB concerns about buy-now/pay-later finance, the OCC today sets new risk-management standards for federally-chartered entities in this arena.

HFSC Housing Subcommittee Revisits Housing Debate

Today’s HFSC Housing Subcommittee hearing largely followed the staff memo’s outlined political playbook, with Chairman Davidson (R-OH) calling for market-based solutions and Ranking Member Presley (D-MA) arguing that expanded subsidies are necessary alongside zoning reform to make housing affordable.

Fed Proposes Market-Risk Valuation Reporting

Readying disclosures for the market-risk capital rewrite (see FSM Report CAPITAL233), the Federal Reserve has proposed new reporting standards that would require covered banks to disclose valuations of their covered positions taking into account unearned credit spreads, close-out costs, early termination costs, investing and funding costs, liquidity, and model risk.

Fed Proposes New Liquidity Risk Reporting Standards

Reflecting growing fears that banks could not actually monetize HQLAs under stress as proved the case for Credit Suisse, the FRB is also proposing new reporting standards requiring covered companies to report on qualifying master netting agreement compliance with current liquidity-risk measurement standards.

Daily120623.pdf

30 11, 2023

FedFin on: FHA’s Mission and Mishaps

2023-11-30T14:04:44-05:00November 30th, 2023|The Vault|

A new FRB-NY study confirms that 83% of loans from 2000-2022 went to first-time homebuyers, compared to 56% for the GSEs and 57% for private lenders. FHA loans of course have very high LTVs and low scores, with scores improving after 2008 when the PLS market stopped adversely selected FHA even though over half of FHA loans still have scores under 680. FHA sustainability has varied based on these and other factors, but 21.8% of borrowers from 2011-2016 still lost their homes.

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

30 11, 2023

GSE-113023

2023-11-30T12:03:15-05:00November 30th, 2023|4- GSE Activity Report|

FHA’s Mission and Mishaps

A new FRB-NY study confirms that 83% of loans from 2000-2022 went to first-time homebuyers, compared to 56% for the GSEs and 57% for private lenders.  FHA loans of course have very high LTVs and low scores, with scores improving after 2008 when the PLS market stopped adversely selected FHA even though over half of FHA loans still have scores under 680.  FHA sustainability has varied based on these and other factors, but 21.8% of borrowers from 2011-2016 still lost their homes.

GSE-113023.pdf

27 11, 2023

GSE-112723

2023-11-27T11:49:59-05:00November 27th, 2023|4- GSE Activity Report|

An Advanced View of Regulatory Capital?

The most significant thing in FHFA’s final capital rule is not what is to be done, but what FHFA left out: ending the GSEs’ advanced-approach requirement.  As a result, Fannie and Freddie can still use models for key calculations, a requirement that makes more sense for two complex organizations than it did for the regional banks also long subject to advanced-approach requirements even though the rules required them, like GSIBs, to hold the higher of the standardized or advanced approach.

GSE-112723.pdf

21 11, 2023

DAILY112023

2023-11-21T10:36:54-05:00November 21st, 2023|2- Daily Briefing|

Thompson: No Regulatory “Silos” in a Crisis

Reiterating much in FHFA’s sweeping FHLB report, FHFA Director Thompson today reinforced suggestions that FHLBs can avoid acting as lenders of last resort because there are no regulatory “silos” in a crisis.

IMF Reconsiders CBDC

On Friday, the IMF updated its CBDC work, concluding that it is prudent for most countries to consider CBDC implementation even though nations are increasingly hesitant to do so.

IMF: Nations Should Block Fintech Reg Arbitrage

A new IMF study finds that Fintechs adversely affect bank profitability, concluding that “well-designed” fintech regulations are necessary to foster a level bank-fintech playing field.

House Opens New Front vs. FDIC

Following an official HFSC investigation and a raft of letters from Democrats and Republicans, House Oversight Subcommittee on Health and Financial Services Chairwoman McClain (R-MI) along with Rep. Biggs (R-AZ) today sent a letter to Chairman Gruenberg requesting briefings, documents, and communications regarding harassment and workplace practices.

Daily112023.pdf

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