The GSEs to Split from FHFA?

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Dave Towne
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The GSEs to Split from FHFA? Will the Separation Happen?

A key issue is Congress’s thirst for the income the two GSEs generate since they paid off their bailouts… Will separation happen?

I found this info in the Mortgage News Daily e-newsletter by Jann Swanson on May 19, 2020:

From the article “Fannie/Freddie Seek Financial Advisor to Help Them Exit Conservatorship”:

“Fannie Mae and Freddie Mac (the GSEs) have taken what each is calling an important step toward ending their 12 years of operating under conservatorship. Each has announced they are about to issue a request for proposals (RFP) to secure a financial advisor to facilitate that move.

In a press release, Freddie Mac said the advisor selected will “advise the company on a range of issues, from capital considerations to the company’s business plan, and may ultimately play a role in any potential recapitalization transactions in the future”

Frankly, per my slightly cloudy and scratched crystal ball, any separation from their ‘manager’ FHFA won’t happen until after the next election, and probably long after that. This topic has been discussed at least for the last 5 years. Changing the direction of the iceberg from a rowboat with one oar is difficult!

A key issue is Congress’s thirst for the income the two GSEs generate since they paid off their bailouts, and it’s lots more than can be stored in your cookie jar, or as Johnny Carson’s Carnac the Magnificent character used to say… in the mayonnaise jar on Funk and Wagner’s porch.

Will separation happen? Maybe.

When or if it does, what will happen to the ‘appraisal forms’ as we know them, including the upcoming revised ones they say they are working on? Will they keep those in place, and both independently use them? I would say yes, as that’s how the GSEs have operated since 1986 when they took over appraisal forms design.

Image credit flickr - Nicolas Vigier
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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7 Responses

  1. Avatar Dave says:

    Fannie and Freddie can not operate on their own any more than the US Postal Service. They all need tax payers to pay them for their stupidity and inability to function profitably without bailouts. No problem, the Fed has already said they have plenty of money in reserves to hand out to everyone in need. I’m glad it’s not going to add to our countries already toxic debt level. lol

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  2. Baggins Baggins says:

    https://omny.fm/shows/patriot-radio-news-hour/endless-money-printing
    http://patriotarchives.blogspot.com/

    Negative -.5% 30 year mortgage rates in Denmark. But the consumer still loses. (Somewhere in the 2/4 of the broadcast.)

    In relation to this article. If the government is involved, systems become mismanaged and get worse, not better. They may increase in scale, but the value of things they manage always takes a hit.

    It’s time to wind down the gse’s and get the taxpayer out of the business of mortgage lending. 25% of restaraunts will not re open. Major chains continue to bring forth news of massive lay offs. Class action suits on the rise. Actual unemployment may be at 40% or higher. Corporations and their for sale government minions are getting desperate. If anyone thinks we’ll simply skate out of this without missing but a beat… My status: Marketing reo providers.

    3
  3. Avatar Julio E. Sune Jr. says:

    ‘Major reallocation shock’ from coronavirus will see 42% of lost jobs evaporate:

    https://finance.yahoo.com/news/major-reallocation-shock-from-coronavirus-will-see-42-of-lost-jobs-evaporate-172558520.html

    Although the pandemic is perceived as a “one-off” event — albeit a big one — economists are warning the impending changes to the economy will result in long-term behavioral shifts, and likely to see mass bankruptcies.

    “The restaurant industry provides a salient example of intra-industry reallocation in the current crisis,” the University of Chicago study wrote.

    Using National Restaurant Association data about recent eatery closures, researchers extrapolated their findings that over 100,000 restaurants are expected to be permanently shuttered in the near-term — even as takeout and delivery options boom. “Much of this immediate reallocative impact will likely persist,” the study added.

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    • Baggins Baggins says:

      The fed hand outs and charging the losses of all their friendly corporations to the dollar, is certainly not a one off event. They just were waiting for a good cover play to let the air out of the bubble. The most valuable germ molecule in history, to the tune of what, 50 trillion? Monetizing a flue virus is actually quite genius. Because nobody can see it, nobody can prove when enough is enough. What’s happening is not about public safety or financial stability. It’s just another day for the fed and another drop in the bucket of special interest handouts. Don’t worry, the nice high end restaurants the wealthy frequent are going to be doing just fine, finally they can keep the riff raff out of there and dine in peace.

      1
  4. Avatar Carl says:

    “Here’s Why Fannie Mae and Freddie Mac Are Soaring on Thursday

    The stock market is having a very calm day on Thursday, with major averages slightly lower as of 2 p.m. EDT. On the other hand, mortgage giants Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC) are spiking higher, up by 17% and 19%, respectively.

    This move might seem counterintuitive at first. After all, earlier in the day, a report indicated that mortgage delinquencies rose by 1.6 million in April, the largest jump in history. But that’s not what is on investors’ minds.

    So what
    The holy grail for stock investors in Fannie and Freddie would be for the two government-sponsored enterprises to exit conservatorship.”

    https://www.fool.com/investing/2020/05/21/heres-why-fannie-mae-and-freddie-mac-are-soaring-o.aspx

    2
    • Baggins Baggins says:

      It’s a sure thing. At least for the time being, the taxpayers are covering every mortgage in America. The investors are going to jump in, cash out, and then get millions of properties basically free of charge as they write down the losses from the loan and the default management. Because the market is primed to crash so hard, they probably will have a lower capitalization requirement to boot. They’ll finalize that little detail after the air is let out. It’s a great time to refi! The economy as we know it is currently in free fall, it’s just nothing has hit the ground yet. Soon. Everything is just fine. The fed is going to save the little guy too, not just large corps this time around. Or so they say.

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  5. The real issue is whether they will truly be on their own or not. As long as Uncle Sugar leaves Wall Street with the impression that in another ‘too big too fail’ event that either fannie or Freddie would get bailed out, then giving them more independence is a bad idea.

    Independence needs to be complete, including the right to fail completely or to thrive. Along the same lines, FIRREA Chapter XI needs to be rescinded; TAF dissolved and state enforcement of “GSE or federally regulated” transactions needs to come to an end.

    Fannie and Freddie clearly only think of USPAP in terms of plausible deniabiliity, and prefer to insert their own interpretations of what can and cannot be done. IF they are to be truly independent ‘let them’ set their own standards, while the rest of us continue to develop MEANINGFUL standards on our own. FHA and HUD would presumably follow some form of USPAP as it exists or is rewritten.

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The GSEs to Split from FHFA?

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