Posts Tagged ‘Ginnie Mae’

Government Investigating Possible Law Violations in Foreclosure Crisis

Thursday, November 11th, 2010

Feds are investigating foreclosure irregularities, searching for possible law violations. The Department of Justice has opened an investigation to determine whether banks and other financial institutions broke federal law by using deceptive court documents to foreclose on homes.  Although the investigation is just underway, it will probe whether companies deceived federal housing agencies like Fannie Mae and Freddie Mac, which currently insure a large percentage of American homes.  The investigation will also examine whether firms committed wire or mail fraud in filing false documents.

The probe is intended to send the message that banks will be held accountable for illegal foreclosures.  President Barack Obama’s Financial Fraud Enforcement Task Force is also taking a look at the foreclosure mess.  “In more than 25 years dealing with major financial crisis issues, I have never seen this many agencies focused on a single issue,” said Andrew Sandler, an attorney who specializes in government investigations.  “We are beginning to see signs of extensive governmental investigation that may also have criminal law implications.”

With reports that big banks filed court documents without proper review, federal investigators want to know if similar paperwork was submitted to housing agencies to collect insurance payouts.  Bank employees have admitted to signing documents without reading them.  If similar filings occurred at the governmental agencies, that action could constitute a violation of United States law.  Although the investigation so far has no specific target, it could center on banks, independent mortgage servicers, law firms and other companies involved in the foreclosure process.  Shaun Donovan, Department of Housing and Urban Development Secretary, is working with other regulators to assure that all foreclosures are legal.  “We are working closely with others in the administration, as well as independent regulators and law enforcement agencies, in insuring that no one loses their home as a result of a mistake or criminal behavior,” Donovan said.

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Volcker Rule Seeks to Regulate Financial Markets

Wednesday, March 31st, 2010

President Obama’s proposed Volcker Rule financial regulation bill faces an uncertain future on Capitol Hill. A draft of President Barack Obama’s financial reform legislation has been sent to Congress.  Dubbed the Volcker Rule in honor of the former Federal Reserve chairman’s  aggressive pursuit of these regulations, the five-page proposal will ban proprietary trading and mergers that give banks more than a 10 percent market share as measured by liabilities that are not insured deposits.  Passage of the bill would bar banks from owning or investing in private equity firms and hedge funds.

The rule, designed to reduce the possibility of another financial crisis, exempts mergers that exceed the market-share limit in instances where a firm takes over a failing bank so long as regulators approve.  Also exempted are trading in Treasury and agency securities, including debt issued by Ginnie Mae, Fannie Mae and Freddie Mac.

The legislation, which has been criticized by both Republicans and Democrats, would reduce banks’ ability to take risks.  It is a reaction to the more than $1.7 trillion in writedowns and credit losses that followed the subprime mortgage meltdown in late 2007.  Congressman Barney Frank (D-MA), chairman of the House Financial Services Committee, prefers a five-year transition period rather than the two years suggested in the president’s proposal.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York says the exemptions may help avoid market disruptions that could impact small investors.  “The market is made up of many unseen hands with different objectives and investment horizons, and if you pull out the speculators making short-term bets, like prop trading banks, then” the individual investor is “going to be the one who suffers.”

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Bernanke Edges Closer to Closing the Cash Floodgates

Wednesday, February 17th, 2010

The Fed needs to start paying its own bills from the financial bailout. Federal Reserve Chairman Ben Bernanke is starting to look at ways to back off from the central bank’s heroic efforts to keep the nation’s economy afloat through the financial crisis of the past 18 months. The trick to raising short-term interest rates, which have been at historic lows for more than a year, is to time them with extraordinary precision to avoid new damage to the still-fragile economy.

At present, the Fed has $2.29 trillion on its balance sheets, an increase from the $934 billion reported in September, 2008, when the financial crisis was at its worst. Bernanke plans to sell some of the Fed’s mortgages, Treasuries and debt by offering reverse repurchasing agreements.  Under these arrangements, the Fed sells its securities to a third party while agreeing to re-buy them at some point in the future.

The Fed’s next step is to sell banks and financial firms the equivalent of certificates of deposit.  In these cases, the Fed gets a portion of the bank’s reserves in exchange for paying interest at a fixed rate.  Called a “term deposit facility,” these deposits would be auctioned off and banks couldn’t count their investment in the Fed as cash or reserves.

“These programs, which imposed no cost on the taxpayer, were a critical part of the government’s efforts to stabilize the financial system and restart the flow of credit,” Bernanke said in testimony at a Capitol Hill hearing.  “As financial conditions have improved, the Federal Reserve has substantially phased out these lending programs.”

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Ginnie Mae Taking the Lead on Backing New Mortgages

Tuesday, May 26th, 2009

At a time when the CMBS market has contracted by 60 percent, a story that hasn’t gotten much attention is that fact that one slice of the securitized real estate market is doing phenomenally well.

Ginnie Mae (the Government National Mortgage Association) has provided $124.18 billion of liquidity to the secondary mortgage-backed securities market during the first four months of 2009.  $34.5 billion of that was issued during April alone.  By contrast, the government agency provided just $58 billion during the same time frame of 2008.h_sold1

Ginnie Mae helps American families own homes by securing government-insured loans to the Federal Housing Administration, the Department of Veterans Affairs, the Department of Agriculture’s Rural Development Program and the Department of Housing and Urban Development’s Office of Public and Indian Housing.

“We are stable, secure and steadily growing,” said Joseph Murin, Ginnie Mae’s president.  “Our issuance growth represents the trust that our issuers and investors continue to have in Ginnie Mae securities.  Providing a secure secondary market outlet for government-backed loans is absolutely critical as the economy continues to stabilize.”

Rebuilding the mortgage market is likely to start at the conservative end with investors looking for T-bill-type places for their money.  Ginnie Mae has become the blue chip of real estate securities.  We have to get over being a society of instant gratification because normality will return – in the words of Ginnie Mae’s Murin, “one deal at a time.”

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