navycmdr
1 hour ago
Federal Mortgage Insurer to Lay Off About Half Its Workforce
Feb. 18, 2025, 3:43?PM PST
Trump team to cut 40% of Federal Housing Administration staff
FHA among the largest mortgage insurers in the world
The Trump administration is planning to lay off at least 40% of the workers at the federal agency that provides mortgage insurance on loans for people who otherwise wouldn’t qualify for one, according to two sources familiar with the agency’s plans.
Federal officials are preparing to cut employees at the Federal Housing Administration, the office that helps certain homebuyers secure a loan if they can’t afford a down payment or have below-average credit scores, the sources said. It also protects lenders against losses on those loans. The FHA is one of the largest mortgage insurers in the world and has insured more than 40 million home loans since 1934, according to the agency’s website.
The FHA is one of the largest mortgage insurers in the world and has insured more than 40 million home loans since 1934, according to the agency’s website. The insurance is a key resource for many first-time buyers and low-income Americans, and can help protect lenders as well. That’s opened up more credit to buyers who might not normally be able to snag a home-purchase loan.
The Trump administration cut thousands of employees in recent days, after President Donald Trump directed agency heads to do so. He told officials to focus on firing workers who “perform functions not mandated by statute,” including “diversity, equity and inclusion programs.”
The FHA returns billions of dollars each year to the US Treasury through what is known as the negative credit subsidy. Congress does not appropriate funding to the FHA’s Mutual Mortgage Insurance Fund; instead, loans guaranteed by the agency generate a positive return for the fund. The MMI Fund grew from $145 billion to $173 billion in capital over the last fiscal year, with a capital ratio of 11.47%. One staffer described the agency as the goose that laid the golden egg.
“None of the functions that support FHA would work,” says Ethan Handelman, former HUD deputant assistant secretary for multifamily housing programs, referring to cuts planned across the department.
The US Department of Housing and Urban Development, the parent agency for the FHA, plans to discharge 50% of its workforce, Bloomberg Law previously reported.
Antonio Gaines, president of AFGE National Council 222, said Tuesday those cuts will also hit the FHA. AFGE National Council 222 is the union that represents more than 5,000 employees at HUD. The agency employs 9,600 people, according to its website. It’s unclear how many are detailed to FHA work.
HUD did not respond to Bloomberg Law’s request for comment.
The FHA is by far the largest agency within HUD, accounting for about three-quarters of its personnel. Even if FHA staff jobs were somehow spared, cuts to other divisions will necessarily affect its work due to the interdependencies of federal housing policy. For example: the Office of Policy Development and Research, slated to lose much of its staff in the coming months, conducts market studies that help to determine loan activity at FHA.
The Federal Deposit Insurance Corp. eliminated employees on Monday. The FDIC insures deposits in US banks.
—With assistance from Prashant Gopal and Kriston Capps.
navycmdr
2 hours ago
What is Trump’s Plan for Privatizing Fannie Mae and Freddie Mac?
February 18, 2025 by Marco Santarelli
What is Trump’s Plan for Privatizing Fannie Mae and Freddie Mac?
Donald Trump's renewed interest in privatizing Fannie Mae and Freddie Mac has reignited a long-standing debate about the future of the U.S. housing market. In short, the plan to free Fannie Mae and Freddie Mac likely means increased risk and potential instability in the housing market, at least in the short term. The impact on homeowners, buyers, and the overall economy could be substantial depending on how privatization is executed. Let's dive deeper into what this could entail.
What is Trump's Plan Regarding the Privatization of Fannie Mae and Freddie Mac?
Why Should You Care About Fannie and Freddie?
Before we get into the nitty-gritty, let's understand why Fannie Mae and Freddie Mac are so important. Think of them as the unsung heroes (or villains, depending on your perspective) of the mortgage world. They don't directly lend money to you and me, but they buy mortgages from lenders, package them into mortgage-backed securities (MBS), and sell them to investors. This process does a few crucial things:
Keeps money flowing: By buying mortgages, they replenish lenders' funds, allowing them to issue more loans.
Makes mortgages more affordable: Their guarantee reduces the risk for investors, which translates to lower interest rates for borrowers.
Standardizes mortgage lending: They set guidelines for the types of mortgages they'll buy, which encourages consistent lending practices across the country.
Essentially, they make sure there's enough money available for people to buy homes and that those homes are reasonably priced. They currently back around 70% of the mortgages in the US.
A Quick History Lesson: The 2008 Crisis and Conservatorship
To really grasp what’s at stake with Trump's plan, we need to rewind to the 2008 financial crisis. Fannie Mae and Freddie Mac were major players in the subprime mortgage market. When the housing bubble burst, they were holding a ton of risky loans that went bad. To prevent a complete collapse of the housing market, the government stepped in and placed them into conservatorship.
This meant the government took control, injected billions of dollars to keep them afloat, and essentially guaranteed their obligations. Since then, they've been operating under government oversight, slowly rebuilding their capital reserves.
What's the Plan Now?
Deeper Dive
Now, let's get to Trump's plan. While the details remain a bit hazy, the basic idea is to end government control and return Fannie and Freddie to private ownership. This could involve:
Releasing them from conservatorship: Letting them operate independently without government oversight.
Recapitalizing: Allowing them to raise capital from private investors to build up their financial strength.
Adjusting their business model: Potentially limiting their role in the mortgage market to focus on specific types of loans.
The motivation behind this push seems to be a desire to reduce the government's role in the housing market and promote a more competitive environment. It is aimed at removing the implicit government backing that the entities currently have.
However, the mechanics of how this will work are not clear, especially since previous attempts to legislate this have failed.
What Are the Potential Impacts? The Good, the Bad, and the Uncertain
Privatizing Fannie and Freddie is a complex issue with potentially far-reaching consequences. Here's a look at some of the key areas that could be affected:
1. Mortgage Rates:
The Concern: Without government backing, investors may demand higher returns for investing in mortgage-backed securities (MBS). This could lead to higher mortgage rates for borrowers.
The Optimistic View: A more efficient, privately-run Fannie and Freddie could potentially innovate and reduce costs, which could offset some of the upward pressure on rates.
My Take: I think mortgage rates will likely increase, at least initially. It is very difficult for private players to replicate the same guarantees without increasing the costs, and this increased costs will likely be passed on to the homeowners.
2. Mortgage Availability:
The Concern: A more cautious, privately-owned Fannie and Freddie might tighten lending standards, making it harder for some people to qualify for a mortgage.
The Optimistic View: Private companies may be more willing to take on innovative lending products that could help more people access homeownership.
My Take: I think the initial reaction will be conservative, as lenders become more risk-averse.
3. Housing Prices:
The Concern: Higher mortgage rates and tighter lending standards could cool down the housing market, leading to slower price growth or even price declines.
The Optimistic View: A more stable and predictable mortgage market could lead to more sustainable home price growth in the long run.
My Take: While a dramatic crash seems unlikely, I expect a period of price stabilization or modest declines in some markets.
4. Taxpayer Risk:
The Concern: Without government backing, Fannie and Freddie could potentially fail again, requiring another taxpayer bailout.
The Optimistic View: Privatization could eliminate the risk of future bailouts, shifting the risk to private investors.
My Take: This is the biggest potential benefit. If done right, privatization could protect taxpayers from future losses. But it also means the housing market is more exposed to market forces.
5. The Role of Community Banks:
The Concern: Smaller community banks may find it harder to compete with larger, private institutions, potentially reducing access to credit in some areas.
The Optimistic View: A more diverse mortgage market could create new opportunities for community banks to specialize in specific types of loans.
My Take: This is a valid concern. Regulations need to ensure that smaller lenders can still participate in the market.
Here's a quick summary in table format:
Impact Area Potential Concern Potential Benefit
Mortgage Rates Higher rates due to increased risk Lower rates due to efficiency gains
Mortgage Availability Tighter lending standards More innovative lending products
Housing Prices Slower growth or price declines More sustainable price growth
Taxpayer Risk Potential for future bailouts Elimination of bailout risk
Community Banks Reduced access to credit in some areas New opportunities for specialized lending
Who Benefits, and Who Loses?
Privatization will likely create winners and losers:
Winners:
Private investors: Could profit from investing in a privatized Fannie and Freddie.
Taxpayers (potentially): Could be shielded from future bailouts.
Losers (potentially):
Homebuyers: Could face higher mortgage rates and tighter lending standards.
Homeowners: Could see slower home price appreciation.
Smaller lenders: Could struggle to compete with larger institutions.
The Million-Dollar Question: How Will It Be Done?
The biggest uncertainty surrounding Trump's plan is how it will be implemented. There are several key questions that need to be addressed:
What kind of regulatory framework will be put in place? Strong regulation is needed to prevent excessive risk-taking.
Will there be any form of government guarantee? A limited government backstop could help stabilize the market during times of crisis.
How will they be recapitalized? The method of recapitalization could affect the value of existing Fannie and Freddie shares.
The answers to these questions will ultimately determine the success or failure of the plan.
My Personal Thoughts and Concerns
Having followed the housing market for many years, I have mixed feelings about this plan. On the one hand, I agree that reducing the government's role in the housing market is a worthwhile goal. The current system creates moral hazard, where Fannie and Freddie can take on excessive risk knowing that the government will bail them out if things go wrong.
On the other hand, I'm concerned about the potential for unintended consequences. A poorly executed privatization could destabilize the housing market, making it harder for people to achieve the dream of homeownership. The risk of higher mortgage rates and reduced access to credit are real and should not be dismissed lightly. The new entities need to be very well regulated, and given the political climate, I think that the chances of effective regulation are minimal.
Ultimately, I believe that a gradual and well-planned transition to a private system is the best approach. It is important to proceed with caution and carefully consider the potential impacts on all stakeholders.
What Should You Do?
Given the uncertainty surrounding Fannie and Freddie, here's my advice:
Stay informed: Keep up with the latest news and developments.
Be prepared: If you're planning to buy a home, be prepared for potentially higher mortgage rates.
Don't panic: The housing market is resilient, and it will adapt to whatever changes come its way.
TightCoil
3 hours ago
FNMA - Now 26 Days Above $5.00!
Except for Fri 2/1/4 last time we were above $7 was Jan 21 - $7.01 -35,380,100
Date - PPS - Volume
Feb 18 - $7.25 - 13,978,600
Feb 14 - $7.089 - 10,474,587
Feb 13 - $6.74 - 12,756,457
Feb 12 - $6.93 - 8,596,324
Feb 11 - $6.82 - 5,052,103
Feb 10 - $6.70 - 7,983,887
Feb 7 - $6.61 - 7,822,510
Feb 6 - $6.85 - 32,439,154
Feb 5 - $5.98 - 13,605,816
Feb 4 - $5.48 - 5,756,414
Feb 3 - $5.16 - 13,762,512 (oversold)
Jan 31 - $5.49 - 5,825,993
Jan 30 -$5.65 - 5,238,534
Jan 29 - $ 5.66 - 11,557,830
Jan 28 - $5.74 - 11,902,328
Jan 27 $5.46 - 17,666,323
Jan 24 $5.74 32,035,179
Jan 23- $6.50 - 9,201,548
Jan 22 - $6.85 -18,576,012
Jan 21 - $7.01 - 35,380,100
Jan 17 - $6.91 - 36,487,200
Jan 16 - $5.40 - 41,137,700
Jan 15 - $6.21 - 46,566,200
Jan 14 - $7.04 - 53,693,000
Jan 13 - $5.49 - 16,501,000
Jan 10 - $5.26 24,269,000
chxal
4 hours ago
It is money that was won by Fannie and Freddie, that FHFA went to the banks and negotiated settlements that were paid to F and F in 2019 (?)
The settlements came from GS, JPM, Citi, BOA, just about all the big banks and then some. The problem was that the settlement monies were swept to Treasury with nary a whimper, all 50 Billion of it, without even a press release....totally bizarre, unfair, illegal (you would think) that companies suffered major losses due to the fraudulent mortgages that were sold to them by all these banks, and not a single penny went to the aggrieved parties (F and F) as restitution or a little bit of a payback for the damages done to them.
All the big banks were allowed to exit TARP once they paid back their bailout amounts and interest (5%). Fannie and Freddie have paid back over $300 Billion on $190 Billion that was "loaned" to them at 10% usurious rate, and then are told "You still owe us a Liquidation Preference of over $200 Billion before you can escape Conservatorship, and shareholders have no rights whatsoever, FOREVER!" Trump we need you to intervene NOW
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