Saturday, July 4, 2015

Sand (and sun I hope), Here We Come


(This will be a very brief blog, as I head off for a week at the beach with my wife, oldest son and his wife, and 5 grandkids, two of which are from west coast son #2 and his wife.)


My Fourth of July  Declaration 

Going forward I want to reiterate my support for the GSEs staying prominent in the nation’s mortgage finance system— albeit not as heavily handcuffed—based on my heavy interaction  with financial service interests and regulators while working on the Hill, at the  Home Loan Bank System, the Fed, as well as my two decades with Fannie.  

Simply put, if properly regulated, F&F represent the best model for the nation’s consumers and the many finance professionals in the mortgage finance system.

Those experiences reinforced my belief the pre-conservatorship F&F secondary mortgage model—hands down--produced the most efficient, effective, equitable, and fair system for consumers and major commercial mortgage market participants.

At bottom, it’s the GSEs informal but real regulatory function (won’t accept loans which don’t meet their tough underwriting requirements which discourages their creation) combined—when they had them—with their profit incentive.  

Their public mission--when combined with profit for achieving it produced--the ideals which are paramount for risk/reward necessities. 

The fact that F&F, in turn, today are tightly regulated by the FHFA, gives a belt and today suspenders approach to the way GSEs should be overseen.  

Looking ahead, simply stated, rather than disrupt and crush the mortgage GSEs, the federal government and Congress should recognize their value and strengths and re-enforce them.  

We’ll see.


Major News of the Past Week—NYT

The leader is the New York Times’ request to Judge Margasret Sweeney to open the depositions of Ed DeMarco and Mario Ugoletti to the public.  

The paper’s high profile position adds to all of the rumors associated with the depos and the suggestion of possible conflict with previously understood circumstances, some created by those very gentleman in their official capacities at head of the FHFA (DeMarco) and a senior Treasury official working on the “Third Amendment” (Ugoletti).

Judge Sweeney already gave Treasury two weeks to respond to a similar demand from the Fairholme lawyers.  

Here’s hoping the Times financial columnist, Gretchen Morgenson, gets her journalistic hands on the material, since her column about the original government slow walking and obfuscation brought huge attention to DoJ and Treasury hijinks in the “Third Amendment” court cases, when she exposed it in her weekly column about three months ago.

(See the NYT request story from Inside the GSEs, a publication in the Inside Mortgage Finance Group, Guy Cecala publisher.)

New York Times Pushes for Access to FHFA Testimony

The New York Times Company filed a motion

this week and is intervening in a case to have access to

testimony pertaining to Edward DeMarco, former

acting director of the Federal Housing Finance

Agency, stating the government has failed to show

good cause for sealing the documents.

DeMacro, along with Mario Ugoletti, are both

witnesses in the Fair Holmes Funds v. The United

States case and each testified in May.

Ugoletti was a senior official with the

Department of Treasury during the government bailout

of the GSEs and is now special advisor to FHFA

Director Mel Watt.

The plaintiff in the case, Fairholme Funds, moved

to have the “Protected Information” designation

revoked or to have the redacted versions of the

transcripts de-designated.

The New York Times argues that it has a right to

intervene as a news organization on behalf of the

public to access documents that arose from discovery.

Court documents stated that every circuit court

that has considered the question has come to the

conclusion that nonparties may permissively intervene

for the purpose of challenging confidentiality orders.

In the motion, The New York Times said that the

party seeking a protective order has the burden of

showing that good cause exists for issuance of that


But it added that it is equally apparent that the

obverse also is true, i.e., if good cause is not shown,

the discovery materials in question should not receive

judicial protection and therefore would be open to the

public for inspection.

“The public’s interest in the underlying facts of

this case is undeniable,” the motion stated.

“The government should not be able to hide from

the public, voters and taxpayers, the facts that were

central to the decisions that the government made as

part of the far-reaching effort to safeguard the U.S.


The court motion goes on to say that by providing

access to the evidence, the public will be able to better

understand the government’s decision. 
Here Comes Tim Howard, the real one!  

Former Fannie Mae CFO Tim Howard will file an amicus brief on Monday, July 6, in support of Perry Capital, plaintiffs asking for review of Judge Lamberth’s original decision to dismiss Perry claims.   

One of the principal arguments made in the Perry appeal was that in dismissing the case, Lamberth relied on a factual record that was both incomplete and improperly supplemented by assertions made by the government with no opportunity for response by the plaintiffs.  

I’m told Howard’s brief will highlight facts relating to Fannie Mae’s and Freddie Mac's conservatorship and subsequent treatment that are highly relevant to the case but were either misrepresented or ignored in the factual record put forth by the government.   

(Shhh. He’s saying our government sometimes distorts and sometimes lies!!)   


What Others Are Saying


Inside Mortgage Finance’s John Bancroft reports on Fannie/Freddie second quarter business volumes.  

By John Bancroft
Fannie Mae and Freddie Mac saw a robust 22.3 percent increase in their single-family business during the second quarter of 2015, according to a new Inside Mortgage Finance ranking and analysis.
The two government-sponsored enterprises issued a combined $232.36 billion of single-family MBS during the second quarter. It was their strongest quarterly production level since the third quarter of 2013, and it lifted year-to-date issuance 55.8 percent above the volume generated during the first half of 2014.
However, at $422.28 billion in MBS issuance for the first half of the year, the GSEs would have to see a huge gain over the next six months to break the $1 trillion mark for all of 2015.

A Welcome, New Voice Enters the GSE fray 


Rep. Eva Clayton (D-NC.) has some advice for the White House and her former North Carolina congressional colleague, Mel Watt, in a Huffington Post column



Jeb Bush says the Stars and Bars is a “Racist” standard.  


Logan Beirne in the National Law Review  



Maloni, 7-4-2015


Anonymous said...

Thanks for the post. Very nice.

Didn't William Isaac -ex FIDC chairman- also filed an amicus brief supporting Perry? Or was it supporting Fairholme?

Bill Maloni said...

Just got back form our vacation and saw your question.

You are correct, Bill Isaac did file an amicus as part of a group of four people (one brief), the ICBA, the Association of Mortgage Investors and Robert Hartheimer, I believe.

The brief was prepared by Tom Vartanian, a former General Counsel at the old Home Loan Bank Board and more recently a lawyer involved in a variety of financial services matters.