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.
- We the People… - April 9, 2023
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
“Protecting the Public Trust”…It’s not just a harmless lie anymore.
“the PIW or Freddie’s ACE (Automated Collateral Evaluation) are great things but are discriminatory, and that roughly 10% of loans are receiving them. Some receive it and some don’t. One of our MLOs had two great borrowers with high income and high credit going for $400,000 loans. One was a 79.9% LTV loan. The MLO did not expect to receive a PIW and received it via DU. The other loan was a 40% LTV but received no PIW. It made no sense. There is hearsay that PIWs are based off of other appraisals in the area.”
Didn’t Andre Perry pin the label of racism on the appraisal profession and claimed computers don’t recognize race???
How bout them apples?
Neither CU, ACE or PIW’s are ‘great things’ (I assume that was hyperbole). The mortgage industry needs to speak with MISMO about irregularities in systems they have advocated for.
There is no credible AVM or automated risk rating program in America today. There are over-hyped programs which when coupled with drinking very large amounts of Kool-aid, give ignorant Mortgage Banking executives the illusion of plausible deniability.
Thats the only risk rating they are concerned with.
“Everyone should have equal access to mortgage lending instruments on the consumer level.”
It’s important when volunteering to get fleeced, you don’t take all the action for yourself. Releasing what private property rights which may be left is not something which should be reserved for only well to do people.
Tapping into DU waivers has as much to do with a persons larger credit profile as it does the ltv’s of the home itself. Also, with no detailed information if both of those loans were funded by the same funding entity, or had similar debt loads and with whom, the comparison is purely anecdotal with no real substance. Different companies apply different risk management standards and instruments of debt can have substantially varied contractual terms.
Credit analysis standards can change from one loan to the next, depending on how much capital funding they have left. Probably are also influenced by the specific rate of default or proportion of a vs b paper loan performance in that specific locale, that sort of thing.
Who knows? Nobody, because credit qualification criteria is a moving target which also can change daily, like if someone at trans union spills their coffee or something along those lines.
DU waivers look great on paper. All the way until there is a hint of repurchase risk. Then it’s suddenly manual underwriting for everyone all day long.
FNMA insiders and former insiders tell us that FNMA has strongly discouraged (as in refused to allow) repurchases or repricing on many poorly supported appraisals. SO the question is “What repurchase risks?”
Separate e race. ALL AVMS and big data ‘valuations’ tie to geographic locations as small as census tract areas. Look at a FNMA HEAT Map sometime.
Algorithm rating/scoring systems have already been identified that capture prohibited demographic data such as RACE, marital status, gender, age, etc. Demographics are weighted in the algorithm.
It will be extremely unlikely anyone without subpoena power and the authority of state or federal authorities behind them will ever be able to find the smoking gun of racism in an AVM for a specific loan… although published articles have already conceded demographic scoring is an integral part of these models. Race-based automated ‘decisions’ are virtually guaranteed in AVMs. Merely living in a particular neighborhood may now be counted against a borrower.