FNMA & FHLMC Bond Price Fixing Claims
Are the profits being reported by Fannie and Freddie being skewed because of price fixing?
In an article released on CNBC by Reuters, US District Judge Jed Rakoff ruled investors can pursue antitrust claims against banks for conspiring to fix prices of bonds from Fannie Mae and Freddie Mac. According to the article, there are transcripts of chat room discussions that prove a conspiracy to price fix mortgage backed bonds from Fannie and Freddie between January 2009 and January 2016.
The chats unmistakably show traders, acting on behalf of those defendants, agreeing to fix prices at a specific level before bringing the bonds to the secondary market.
GSE Reform is on the forefront of President Trump’s agenda. Much of the reform is based on the profits of Fannie and Freddie. That being said, are the reported profits real or a result of price fixing?
See the article here.
Now add a few logs to the raging fire.
Bifurcation and Waivers have not been well received by appraisers, and rightfully so. Appraisers who are paying attention know the value of their service and understand not what could happen, but understand what is happening. Rightfully so, appraiser are concerned.
Well it is not just appraisers that are concerned. It now appears Loan Officers have a growing concern over bifurcation and waivers. In Rob Chrisman’s Daily Mortgage News and Commentary on September 7th. A loan officer is reporting issues with discrimination within Fannie Mae and Freddie Mac’s waiver program. VaCAP has shared several articles expressing concern for discrimination within algorithms , so this really is no surprise.
Well, price fixing and discrimination are illegal. The banks, Fannie Mae and Freddie Mac are right there in the middle of it.
See Rob Chrisman’s Newsletter here.
To say this will be an interesting ride, would be the understatement of the century. There are lots of major caveats happening in the mortgage world and none, and we do mean none, appear to be in favor of consumer protection or the safety and soundness of the economy.
Our advice to appraisers:
First, make sure your appraisals are rock solid. Don’t take shortcuts because an amc or lender states it is OK. Follow USPAP and State Law to keep yourself out of trouble.
Second, diversify your business. Lender work right now is questionable and when the market comes crumbling down, make sure you have the resources to survive; both professionally and personally.
Third, get involved with your state coalitions and other appraisal groups. Appraisers, regardless of location and business focus, need to stick together.
To join or renew your VaCAP membership, clickhere.