Look elsewhere Mr. Gasparino, Mark Calabria won't be your foil

What will Mark Calabria do as head of the FHFA?
He will be a good and loyal Administration soldier

The Senate Banking Committee (SBC) has scheduled a committee vote this week on Mark Calabria’s nomination to be the new Director of the Federal Housing Finance Agency (FHFA), the GSE regulator. The vote easily should go Calabria’s way, making his full Senate approval just as smooth. No schedule for the latter, but no real reason to hold it up.

MC and I may have crossed DC paths at some point in the past dozen years or more, but I don’t remember meeting him. I have read Calabria’s written material and reviewed other positions he’s taken. My views are based more on certain existing political hierarchies and tradition than Calabria’s conservative product on the SBC or his Cato Institute work.

Calabria has indicated in the past that he wishes the 30-year fixed rate mortgage (FRM), probably 15-year, too, would go away, so do most bank lenders; MC also has indicated he thought the unprecedented all profits 2012 GSE "sweep" is bad policy (since it denies the GSEs a ton of capital which their @$290 Billion of earnings should have generated). He also isn’t a fan of the GSE’s affordable lending obligations and by extension similar rules for primary market participants. And he also hopes Congress will approve legislation to revamp the nation’s mortgage market, so he doesn’t only possess the chore.

Strong personal views, but hardly political winners in the year before the major 2020 elections.

Will President Trump campaign on ending fixed rate mortgages or affordable mortgage lending for moderate and low-income families who qualify??

And I can't see any of the Dems doing so, when all their internecine bloodletting concludes.

I may be wrong, but I don’t think questioning Calabria’s GOP loyalty quotient rises to the bizarre scare level of Fox Business News, Charlie Gasperino and his colleague Lydia Moynahan are floating, predicting a fractious dispute between Calabria and the current acting FHFA Director, Joseph Otting, Treasury’s Crag Phillips, and Treasury Secretary Steve Mnuchin.

(See the Fox News article linked below.)
https://www.foxbusiness.com/politics/fannie-and-freddie-fist-fight-brewing-amid-trump-administration-infighting

I believe this is a case of a very worried anti-GSE crowd whistling past the policy graveyard knowing this WH (and by extension Steve Mnuchin) is capable of following its own GSE drummer, quietly mouthing “bipartisan cooperation” to the Hill, while simultaneously gesturing it thinks the “Congress is #1”—at least I believe that’s what that one finger salute means—but then going its own way.

So we hear from worried Gasparino, Alex Pollock, and various other Rightwing solons—not accustomed to being on the defensive--ramping up their fears this Administration might move on its own, realizing that Congress—even when it was run by the GOP—couldn’t produce GSE restructuring or reform legislation.
The Righties are trying to sow doubt and foster "black flag" fantasies
to slow what might be an effort to resolve administratively these contentious matters flowing from the GOP's 2008 Fannie and Freddie "conservatorship" declaration.

But, as one Admin GSE principal was quoted at the Pepperdine GSE conference, “If we don’t do it, who will?”

Poor Charlie—who has been savaged in various blogs, especially where GSE investors hang out—has been called a ton of angry names, with “GasBag” and related memes the most printable in a community blog.
In this piece, Gasparino was reduced to quoting ”unnamed” WH sources worrying about Calabria going off track. C’mon Charlie, name a few names?

Calabria—until he demonstrates otherwise—I think is a team player, a staffer to the SBC and former chairman Dick Shelby (R-Ala.), CATO fellow, and VP Pence’s chief economist. That’s a lot of GOP heritage against which to rebel and still hold onto his new job.

I think it would be most unlikely, and indeed uncomfortable, if Calabria leads a revolt against the WH—as Gasparino would like you to believe—given MC’s lineage.

IMO, when/if a Trump executive or regulatory action comes, it will be a Treasury-blessed event, with Calabria on board. He may even be given a starring role in a few weeks, if the White House agrees to let Fannie and Freddie keep their last quarter’s earnings to build some capital base and for Calabria to announce that fact.

I keep returning to a major reality. The reason it has been so difficult--for the past 10 years to blow up the GSEs and start over, whatever the scheme-- is they work and have worked in the past. Plus, the nation’s largest financial institutions--which for years have begged Congress to do away with Fannie and Freddie--are not reliable stewards of both the nation’s primary, which they run now, and also the secondary mortgage markets for which they yearn.

The banks just can’t be trusted.

Fannie and Freddie succeed too much—even with their FHFA shackles--first and foremost for consumers who aspire to own a home of their own. The two also produce for system professionals, i.e. Realtors, builders, lenders of various types and sizes, who populate the mortgage finance system and rely on those GSE  borrowers.

And, while I am on it, no Democrat in the Congress will oppose making mortgage finance more available to qualifying lower-income families.

Charlie and friends, don’t go back to your erroneous pre-2008 GSE beliefs since you really don't understand what Hank Paulson did to the GSEs and why? It wasn’t about Fannie and Freddie having losses and not being able to access the domestic and foreign debt markets.

It was ideological, not structural! The facts are there for all of you to read.

Maloni, 2-25-2019

Will MC present a big GSE present bought/wrapped by another??

Next from Treasury and Mark Calabria?

"Blue 280, Blue 280, set, hut, hut, hut"

In my last blog, I engaged in humorous license—at Mark Calabria’s expense (sorry MC!)—putting my own congressional nomination hearing thoughts “in his mind,” based on my four decades of seeing these Washington events and understanding what goes on in nominee’s psyche when they are being grilled or, pu-leeze,” treat me gently Senators.

OK, joke’s over!

Calabria showed—from a financial services and GSE perspective--he could walk and chew gum at the same time, didn’t insult any sitting Senator, and showed no (public) apostasy.

The Fannie-Freddie regulator’s job is his.

There is no reason why Calabria should not get approved by the SBC and the full Senate and become the latest Federal Housing Finance Agency (FHFA) Director, probably in a few weeks.

But, as I suggested--and some of the analytic weasel words, public/media commentary which followed confirmed--there was a certain amount (possibly a great deal of) discussion in Treasury among Steve Mnuchin, likely, Craig Phillips, and acting FHFA director Joseph Otting prior to MC’s hearing about some sort of executive/regulatory plan to alter the current Fannie and Freddie arrangement.

All of the self-identified GSE experts—me, too--have their fantasy GSE revamp schemes in mind, when dreaming of what this “Trump Admin cabal” might be planning. But most of us will be wrong…if only because the preparations likely aren’t complete—and even those could be jeopardized temporarily by an unrelated DJT “national emergency” jaunt into unchartered Constitutional authority land.

Just stay tuned, buckaroos. Shouldn’t be too long before we see evidence of the fire creating all of the GSE smoke signals.

Calabria will be invited to sit in the extensive ownership suite and may already have started his initiation. But when all is said and done, this will be Treasury’s plan with Calabria having a good perch, but a junior investor’s 40-yard line seat, not a principal’s location exactly at midfield on the 50!

Goose and Gander 

I want to repeat an idea I’ve broached before and hope to hear from those who think it’s a good one or not? 

Dick Bove wrote a very useful GSE review (along with a Buy recommendation), that I blog-linked last week, in which—IMO--he established a valid economic argument on why skillful freeing up housing finance (and Fannie and Freddie) would stimulate GDP, boost the national economy as it inevitably starts to slow, create good jobs in associated industries—which don’t require heavy technology skills—and carry out a societal good, to which I added, (paraphrasing)..”With major political benefits flowing to those responsible, just as the nation starts to focus on the 2020 presidential and congressional elections.”

Let me get back to my own thought, which should be adopted for practical and equity reasons if policymakers chose to follow Bove’s thinking.

As most people know, with the seminal 1992 GSE legislation creating a new safety and soundness regulator (then the Office of Federal Housing Enterprise Oversight, OFHEO, and now the Federal Housing Finance Agency, FHFA) and a new risk-based capital regime. Fannie and Freddie also were handed statutory housing goals which required them to purchase/securitize low, moderate, and middle income (defined in law) single and multifamily mortgages for people “in central cities and other underserved areas.”

It was designed as a method to force very reluctant primary market lenders to make loans to minorities and others who had been shutout of the conventional (non-FHA and VA) mortgage market.

Fannie went after those loans with a vengeance, hiring significant numbers of new employees, creating a number of new and ancillary business units to find and make those loans---even when the HUD officials raised those goals to the maximum 55% of GSE annual business.

As I often remind people, shortly after the legislation became law Fannie started simplifying its business and marketing materials; producing them in 11 different foreign languages, including two dialects of Chinese; conducted major housing fairs around the nation; partnered with the National Basketball Association (NBA) and ran its Fannie Mae Foundation “how to qualify for a mortgage loan” advertising, opened nearly 50 new Partnership Office around the US, and much more to facilitate its new efforts.
Fannie succeeded virtually every year because it was the law and its executive leaders wanted to prove they could.
(Sorry, but Freddie, without the executive zeal or culture, always lagged and trailed Fannie’s effort, as the Northern Virginia company regularly claimed a variety of excuses, seeking several HUD-granted relief mechanisms. i.e. getting one and a half units of credit for every multifamily unit financed when Fannie only got one for one.)

And for those about to say “and that’s what produced the 2008 meltdown” ---don’t go there.

Just read the last year’s (2018) Federal Deposit Insurance Corporation (FDIC) report looking back at 2008, that blamed the debacle not on the GSEs (which did play a part) but on the nation's major banks  and the hundreds of billions of big bank produced “private label--non-GSE--mortgage-backed securities (PLS),” which were shoddily underwritten, poorly rated, thinly guaranteed, but which the big guys profitably sold throughout the world.

https://www.fdic.gov/bank/historical/crisis/

The ersatz big bank PLS quickly failed leading up to 2008 as US residential real estate values softened .

The bank losses were three times what Fannie and Freddie were alleged to have lost (GSE issues still being contested in federal courts) and cost the US taxpayers over $500 Billion in Troubled Asset Relief Payments (TARP) in 2009.

But it can be done--therefore 10 plus years later--I call for housing goals in the primary market, too.

With my magic wand--and an assist from Congress--I would require every mortgage lender, banks, mortgage companies, non-banks, varied for size, to have statutory numeric housing goals similar to what guided Fannie and Freddie.

I would tier those obligations so that the GSEs still had higher ones than the primary market lenders. And I would ensure that Fannie and Freddie’s future mission was to securitize those loans (thus removing the originator’s primary financial risk) with GSE guarantees of timely payment to attract capital market investors.

Any GSE future regulator—as its current regulator now does—would set those minimum underwriting standards to prevent a return to the temptation lenders would have to try and repeat their PLS subprime escapades, with appropriate oversight from their federal bank regulators.

Before those knew jerk critics start screaming, “Fannie and Freddie are rushing to the bottom” and financing people who can’t afford to own a home or finance a mortgage.”

Naysayers should note the last 10-year history of high-quality underwriting and very low GSE credit losses—far lower than all primary matter lenders,
What I am describing is not far off from today's Qualified Mortgage (QM) rules that exist today in the conventional mortgage market, save the statutory obligations.

But the anti-GSE Amen Chorus still will shrill their belittling scorn, ignoring that shoddy secondary market underwriting lending doesn’t fit with the two companies which have paid the Treasury more than $290 Billion in profits since 2013, including some $4.7 Billion for 4Q 2018 just last week.

My suggestion requires legislation, but I hope both Senate and House Banking committees look at the idea and not wilt when the big banks start saying they can’t possibly make those mortgage loans to those (in their minds non-credit worthy?) borrowers.

My bank response before they bitch is, you sure have made a lot of money in the past several years and this is a solid way to put it back into the economy and help a new generation of homebuyers and create a ton of jobs for those to build, decorate, paint, provide electricity, carpeting, furniture, roofing, landscaping, and even buy that house or the older one from which those new owners move!!

Maloni, 2-19-2019

Yawn, yawn--I'm in!

Too many chefs spoil the (GSE) soup…

Please, move faster clock, move faster

Watching the Senate Banking Committee Mark Calabria nomination hearing this morning—and listening about the nominee being raised by a single Mom who couldn’t count on receiving her monthly support check from ex-hubby with its impact on paying the mortgage (or rent)—I know from experience (and prepping dozens of congressional witnesses) how quickly Calabria wanted all this shit to end.

His name had been bandied about for months as a possible successor to Mel Watt (what has happened with that suit against former Director Watt??), with the usual shots at Calabria by foes (generally those who wanted the job to go to someone else) and praise from his allies--which mandatory in the process.

The R’s still controlled the Senate and Calabria finally gets the nomination but the committee drags its feet on a hearing date. Curiously, the White House names Joseph Otting--who is the Comptroller of the Currency (overseer for all national banks), a good buddy and former colleague of Treasury Secretary Steve Mnuchin--as “acting-FHFA Director” while Calabria waits.

Then Otting, either wittingly or unwittingly, tells his temporary FHFA charges—in a well-reported meeting—about the Admin’s plans to remove Fannie and Freddie from the 2008 “Conservatorship,” which made the GSEs wards of the government (FHFA but really Treasury) and turn them into their old selves, something less, something greater, or none of the above, since Otting provided no details, which is standard Admin operating procedure.

In the meantime, investors swoon, stock prices rise, and everybody waits for the now set, 2-14-Calabria hearing, in which Calabria wants nothing more than to be asked, “Who is your favorite professional baseball team?” and “Which fruit pie does your Mom make better than all of her other excellent baking??”

(Mark Calabria thinks: “Please Senators, just go easy and let me out of here, don’t you have a vote or somewhere else to be this morning?”)

He gets asked the obvious, bathed in skepticism question, “Given your past positions, why do would you want this job?” Left unsaid was the Senator’s real thought, i.e. “Why do you want this lousy low profile job?”

I’d ask Calabria the same, but I believe everyone should work somewhere.

Those Senators know, after all of the shopworn and hackneyed congressional obeisance Calabria paid to his family, his career history as an SBC employee, his name dropping of still present Senators in the chamber, his role in shaping (not as much as he claims) some of the agency he will command, etc. etc. “You don’t get to be Arch Bishop by running the FHFA!!”

It ain’t that important and Calabria’s desire to make the FHFA a “world class regulator” ain’t in the OMB’s cards, no matter how much MC bloviates about the importance of the 30-year fixed rate mortgage and the GSEs’ role in making that loan prevalent.

It’s clear, too, that many of the Senators still don’t understand what and how the GSEs do what they do, but they—and importantly—their staffs have heard all of the rumors about the White House’s desire—again, despite all the of contrary Admin rhetoric—to move expeditiously on something that has minimal congressional approval.

Worse, it’s clear that Mnuchin, his aide Craig Phillips, and likely Joe Otting have constructed a GSE executive/regulatory relief package, which might have Calabria’s name added to it, but which won’t have much of his DNA in it.

So why is he here?

(MC: Kill time, kill time, and don’t be topical, too dangerous.)

(MC: Maybe crack an insider joke? “Hey, Senator, did you hear about the mortgage banker passing the vacant lot and a Realtor/developer comes out of a trailer with a snake around his neck and asks….?”)

Mark Calabria looks at his notes as often as he can, reads from them, and sneaks a peek at his watch, mentally screaming,...and then, “Why yes Senator I commit to rural housing forever in whatever state you are from and for the rest of my natural born days."


(MC. Come on, you &amp,*%$#@^ clock!”)

Between (soft) grilling, MC ruminates to himself, (MC: “Why do I want this stinkin’ job. I don’t get no badges! Maybe if I stutter a little bit, I can stretch out my answers or recite facts about the Housing Act of 1964, let alone the 1992 legislation which first created the agency I am seeking to run about which none of these guys/women know anything?”)

11:53 AM, Chairman Crapo (R-Idaho) bangs the gavel, "Hearing concluded."

His prayers answered, Calabria gets his wish, breathes out “slam dunk,” shakes hands, kisses loved ones, and quickly enters men’s room to change underwear and pants!!

Good luck, Mark!

Maloni, 2-14-2019

Some GSE pluses this past week

Welcome Back Dick Bove...
with his strong GSE stock review

Richard X. “Dick” Bove has been a successful Wall Street financial services analyst for multiple decades and he’s recently gone to work for the Street’s Odeon Capital. Dick is a renowned big bank expert, but has covered the GSEs before and now has authored a new Odeon investment piece on Fannie and Freddie.

Bove and I discussed his work, shortly after it was published and I promised to feature it in my next blog.

Readers can see his positive advice, linked below, but I ask you to focus more on the logic behind his investment logic, with which I agree (but which doesn’t mean others “inside the Beltway” feel the same, although they should).

https://bit.ly/2DjNs0e

Here’s my synopsis of Dick’s GSE longer positive guidance, adding a Maloni major political belief at the end of Bove's excellent economic, financial, and demographic perspective.

Bove posits the following:

-----  Near term the U.S. is facing an economic slowdown;

-------Homeownership demands are rising among a growing and important demographic US residents aged 25-40;

----- Housing/homeownership is a critical segment of the economy and, historically, has helped boost GNP when facilitated;

-----The GSEs have been critical to the latter factor and are necessary to make that happen going forward;

-----Executive or regulatory action to loosen the GSE shackles is likely the most efficient way to make this happen;

---And I add this to Bove’s thinking: Whoever can take credit for rejuvenating Fannie and Freddie should earn major political kudos going into the 2020 presidential and congressional races, garnering major support from low, moderate, and middle-income families who would benefit the most from greater access to GSE mortgage credit. 

(I hope to add a brief “Bove one-pager” for those who want to share his newest work with colleagues, Members of Congress, policymakers, media, and others.)

Other Fannie-Freddie items worth noting:

Tim Howard’s latest blog is a three year, retrospective, a look at everything Tim's written, broken down by subject and is an excellent substantive primer for all seeking to understand—in detail—the many bizarre, audacious, and harmful machinations GSE opponents and their business, congressional, and Admin allies waged against Fannie Mae, Freddie Mac and their shareholders. (Check out the personal huzzahs from Tim’s regular readers.)

https://howardonmortgagefinance.com/

GE, subprime chickens coming home to roost in a corporate carcass? 

When the long knives came out for the GSEs more than 10 years ago, General Electric subsidiaries, especially GEMICO their mortgage insurance unit, was in the forefront financing and pushing the “FM Watch” group to attack and debase all things GSE. 

That cabal and its principals—which still operates under user-friendly names—couldn’t hurl enough diatribes and innuendo at the GSEs. 

But what goes up can also…….!

GE, the longtime gigantic financial/manufacturing conglomerate, has fallen on very hard financial times; sold off a lot of its corporate pieces; seen its stock fall precipitously; and this past week made public that it expects to pay a $1.5 Billion fine to the Justice Department for subprime lending conducted in 2005-2007 by its now-closed WMC lending subsidiary.

That dozen years ago is just about when GE was leading/financing the GSE lynch mob through FM Watch, with the help of some big banks and others.

Now, in 2019, the GSEs likely will earn near $20 Billion or more; still are breathing, experiencing stocks price increases, producing coast to coast mortgage financing through their secondary mortgage market operations; and government policymakers are making positive sounds about Fannie’s and Freddie’s future operations (without any need for a "bright line!").

This gloat is directed at the old "still workin' it" FM Watch alums..."How about them apples?" (With all due respect to Matt Damon, Robin Williams, Ben Affleck, and Minnie Driver.) 

Good Governance folks want to know, 
who's lobbying their Senators and MoCs?

Is Parrott legit or acting on the sly and for who/what?

Fair question put to me by a friend: "Why is fellow-traveler, anti-GSE Jim Parrott on the Hill lobbying Senators and Members for the old "Jumpstart bill" to help the big banks in a last-ditch effort to grab the US secondary market, when he is not registered to lobby?" 

Shouldn't responsible Hill offices and staffers ask Parrott--before engaging with him and risking personal trouble or media grief for their boss--if he, legally, is authorized to lobby and signed up with the Senate Secretary and the House Clerk? 

Shouldn't those same conscientious Hill offices also demand Parrott tell them who he represents?

And if not, why not? 

Just asking folks, Jim? Wells Fargo's a big bank, right?

Last item. Get ready to unload on me, but…..

I know it’s been some long lean years for most non-hedge fund investors—and ”no,” I’m not sitting on a ton of F&F stock hoping my reverse JuJu will make me rich-- but everyone wants to jump on the latest news (and gaffes) coming from the Hill, Mnuchin, Otting, others and get giddy or angry.

But  those—who seem to care more about financial returns than the national value of returning the GSEs to operating an efficient, fair, honest, and diverse secondary mortgage market, where all participants, lenders,  Realtors, builders, and can succeed and generate income—please hold off your crazy predictions about when this ephemeral gold mine will hit.

I sense you all are agonizing over these peaks and valleys as the stocks rise and fall with each GSE belch.

Nobody knows, given court schedules, Administration and congressional political priorities, delays, judicial vacations, and competing cases, when something good or bad will occur, despite all of the rampant and largely uninformed speculation.

My advice is to save yourself some high blood pressure and gray hair.

Also, at the end of the day, it might not be a gold mine at all, just another five or ten years of slogging through Conservatorship.

Speculate all you want, but there is not a soul who knows, exactly, when or what any final GSE chapter looks like or when/if that curtain will go up—and that includes this Administration. 

Stay well, healthy, and happy!!!

Maloni, 2-10-2019

Count the ways Crapo 2.0 is DOA ver 2

“I am always disappointed when a liar’s pants don’t catch on fire,” (line from a whacky get-well card from Dulcie, my sweetheart sister in law)

“We are the sycophants, the sycophants, the sycophants,

We are the sycophants, watch our abject groveling grow”

You have seen/heard already--and soon will hear more—political air kisses as the usual bank-centric suspects come out of their hidey holes, fawning and frothing about their support for and willingness to cooperate on birthing the latest anti-GSE “reform bill” unveiled last week in a three page summary by its sponsor Senate Banking Committee Chairman Mike Crapo (R-Idaho). (Cue the supplicants'  praise and applause.)

Early support for the plan is directly linked to kissing butt and ingratiating with Crapo, how much revenue the interest groups think they can get from this latest iteration of “Let’s needlessly and ideologically scramble the national mortgage markets, again” or conversely, “How much damage can we do to Fannie Mae or Freddie Mac?”

Some examples:

The  Mortgage Bankers Association (MBA) which has been in on and advocating anything which screws up the GSEs, ironically, since the GSEs created the modern mortgage company. (Ah, what short memories.)

WASHINGTON, D.C. (February 1, 2019) - Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association, issued the following statement in response to today's release of principles for housing finance reform by Senate Banking Committee Chairman Mike Crapo (R-ID).

"MBA welcomes the release of Chairman Crapo's principles for housing finance reform as a significant sign of his continued commitment to work toward finally ending the conservatorships of Fannie Mae and Freddie Mac and ensuring a stable and liquid market - with an explicit, paid-for government guarantee - for both single-family and multifamily mortgages. MBA looks forward to continuing to engage on a bipartisan basis with congressional leaders, the administration and other key stakeholders on reform efforts to create a system that supports borrowers, serves lenders of all sizes and business models and protects taxpayers." 

The U.S. Mortgage Insurers (USMI), hoping for huge new business volumes from, a Ginnie-run conventional mortgage security business. But to take on this new federal role, should those com- panies continue to be state-regulated—as they all are--or should they come under federal regulation??? And Congress--before escalating their role--should look closely at the MI's historty of slow claims paid as well thir 1980's experience, when it’s newly flush members, confidently, started taking on greater and greater risk (insuring riskier loans), generating almost $6 Billion in industry losses and reducing active MI companies to around 10, with fewer existing today.

“Today Chairman Crapo released a thoughtful outline to reform the GSEs in order to put the housing finance system on more stable footing. The reform plan covers many areas and USMI is particularly pleased that Chairman Crapo recognizes the importance and value of private mortgage insurance in enabling access low down payment conventional mortgages while protecting taxpayers at least to the levels that they are protected today.  Ten years after conservatorship of the GSEs, it is essential that meaningful reforms be done to better protect taxpayers and to ensure consumers will have access to mortgage finance credit through all market cycles.

Michael Bright on behalf of the Structured Finance Industry Group (his new gig), announced support. (It was Bright—while at Milken--who championed the Ginnie sections of the bill when he thought he was going to run the HUD FHA/VA loan guarantor, but something ($$$?) happened to change his career choices.

*“A future state for housing finance should have clearly defined roles for who is taking on risk, private capital or the government,” Bright said. “It must also ensure that our housing markets work for all Americans. The current structure of conservatorship has helped our country to transition from crisis to economic growth, and the Federal Housing Finance Agency should be commended for the work it has done.”

“But an opportunity exists to make meaningful changes that enhance consumer access to credit, add financial stability guardrails, and ensure a more vibrant and liquid secondary market that does not put taxpayers at direct risk of loss,” he said. “In our view, a role for Congress is critical to effectuate these important changes.”

The National Association of Home Builders, which long ago lost prominence and lobbying stature, commended Crapo for his leadership on GSE reform.

*“NAHB commends Senate Banking Committee Chairman Mike Crapo for taking this important step to move the debate forward on overhauling Fannie Mae and Freddie Mac, and the U.S. housing finance system,” NAHB Chairman Randy Noel said. “He has consistently taken a leadership role on this issue.”

“Sen. Crapo’s plan would maintain a limited federal backstop to the nation's housing finance system, a critical element recommended by NAHB to achieve meaningful housing finance reform,” Noel said.

The National Association of Federally Insured Credit Unions expressed its support, saying it looked forward to working with Congress toward housing reform. NAFCU once was a big GSE supporter when Fannie and Freddie bought their loans and put them in position to compete with banks for mortgage lending. (Also exhibiting short memories. Someone also should remind the CU's of historic big bank hostility toward them. Careful with which businesses  you chose to play.)

*“We appreciate Chairman Mike Crapo’s commitment to reforming our housing finance system, including the recognition of the need for fair pricing and access for financial institutions of all sizes,” NAFCU President and CEO Dan Berger said. “We look forward to working alongside Congress and the Administration to ensure that credit union interests are protected in any housing finance reform proposal that is ultimately enacted.”

*All quotes provided by Housing Wire

It seems not to register on these “can’t see beyond their next golfing leadership event/warm weather conference” special interest groups and congressional sponsors and campaign fund recipients, that similar ideas—many of them drawn by those elements which most would cash in—have congressionally died in the last 10 years, owing to the consumer support/satisfaction, market strength, resiliency, and effectiveness of Fannie and Freddie, which Crapo and others are hoping to marginalize or make disappear.

Expect your collective blood sugars to rise when forced to consume all of the sweet (and self-serving) adjectives directed toward Chairman Crapo and IMO his dead-on-arrival legislative proposal.

One seasoned Washington veteran –a handsome, thoughtful guy, recently hit by a car, who has done his share of “sycophanting”—predicted to Paul Muolo, Inside Mortgage Finance’s GSE guru, “Only Francisco Franco is more dead than the Crapo proposal.”

Why am I certain about its fate??? Let's count the ways….

Crapo’s proposed bill is warmed over gruel, birthed by Wells Fargo through the MBA Task Force/MBA trade association, pumped by David Stevens, et al, written by Michael Bright (and Ed Demarco) while at Milken (and just after Bright and his bank allies lobbied for Bright to get the Ginnie Mae President’s job—for which he signed up and then decided he was too big to serve and could make more money elsewhere, jumping ship earlier this month. (Psst, Michael, your departure created rapture among many in the Ginnie workforce.)

Without getting into the details--even without the other miscreant’s non-lustrous and perfidious reputations--Wells Fargo’s and Bright’s DNA on it, alone should tank the concepts for thoughtful Senators.

But, let me, indeed, get into a few details so I can silence those who think Crapo actually will reshape GSE legislative events this year.
It's not that the Senator and his SBC aren’t important, but his party no longer has total legislative/political control and therein lies the fate of this latest chicanery paid for by bank interest groups. Then, there is the existence of at least two D presidential candidates--Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.--on the SBC who can’t ally with Crapo on efforts to damage homeownership opportunities for low and moderate-income families. (A cadre of dedicated senators can use that chamber’s intricate rules to frustrate lots of unpopular actions pushed by a simple majority.)

The big hoot? Crapo gives major control to Ginnie Mae (Oh, no, that won’t be too chaotic, ironic, or crazy inefficient, Mr. Chairman!)

Bear in mind that Ginnie is the “Government National Mortgage Association” (GNMA)—part of HUD, you all remember HUD and its leader Dr.  Ben “find me a new dinette set now” Carson, right *&^%$#^ now.

Ginnie—hardly is competent (except in Michael Bright's eyes)  to carry on its thin bureaucratic shoulders the Crapo proposal, because Ginnie has no real private market staff, no history, no management, nor true capacity to run a conventional (non-government guaranteed) mortgage market securities operation. (But, who cares since about the public's interest since Crapo’s buddies the nation’s largest banks are the major beneficiaries of the plan?)

At various times in history both Fannie Mae (I know) and Freddie (I believe) had to help Ginnie (the government) and became its “back office” to carry out Ginnie's statutory government mortgage securities work, because Ginnie didn’t have the onboard resources, experience, or plain sense to run their own business. (Remember, in the legislation privatizing Fannie in 1970, Ginnie was spun off from the original Fannie to allow the former to work exclusively on securitizing government loans, while Fannie took on a new set of conventional mortgage loan responsibilities.)

According to Ginnie’s 2018 “Report to the Secretary” (Ben Carson, signed by then, acting President Michael Bright,) Ginnie has some 150 employees on board and as I noted only deals in safe, guaranteed by the federal government FHA/VA mortgage-backed securities. (Those 150 interact with @2500 dedicated FHA/VA lenders. Who then can step up and deal with a gaggle more who will want to do conventional lending???)

In contrast Fannie and Freddie—with almost all of their assets being conventional, non-government guaranteed mortgages—has north of 12,000 employees between them working closely to administer their voluminous portfolio assets (which are tightly managed and never left unwatched once they go on the GSE books)  and the fresh billions in new business which comes in over the transom every month.

In light of these facts Sen. Crapo, ask HUD and Ginnie what are their significant mortgage histories (bearing in mind that Ginnie already delegates much of the hard mortgage lending work to the very lenders who bring them product)?

Can HUD really attract hundreds or thousands of quality new employees to work at one of the dullest and unimpressive locales in DC to help oversee the nation’s $11 Trillion primary and secondary mortgage markets (which is what their primary mortgage market client institutions will require)??

Remember, too, it was an earlier Congress which gave a new "private Fannie" the mission to operate a secondary mortgage market for conventional loans because it didn't trust HUD to do it in 1970. 

How many dinette sets do you want to bet me Ginnie/HUD still won't be able to perform?

Think about this headline Senator Crapo, "GOP Senator Crapo gives HUD $$ trillions to Manage." That may get you un-elected, not re-elected, even in Idaho!

Truth (please, check!), it took then OFHEO--Fannie’s original regulator, now the FHFA—10 years just to develop its own risk-based capital regime, which it was charged by Congress to complete by year two of its operation. New federal bureaucracies don’t work quickly/efficiently, even for DJT,

Senator Crapo, I will “guarantee” (Ginnie FHA/VA pun intended) the country’s slick financial mortgage operators are licking their lips at having Ginnie try and mastermind their mortgage activities.

Also, while the SBC conducts “Groundhog Day” GSE hearings, once again--with the same witnesses, going down the same dead-end paths--I think I confidently can predict very little meaningful legislation will result.

Just as Chair Maxine Waters (D-Cal.) and the House Banking Committee won’t accept a “destroy the GSEs bill,” which is what Crapo and his cronies have proposed, nor will Crapo cooperate on the GSE bill HBC Chair Waters would write and lead the House to pass.

Ergo, GSE-advocates would do well to pay close attention—reading between the lines and scrawling through the entrails of any Treasury statement—what Mnuchin/Phillips, Otting, and Calabria are doing (not just saying).

And, oh yes, there are the federal court cases. (For an excellent discussion of the Collins case and related matters, see the  Investors Unite link to Attorney David Thompson's presentation to en banc judges in the Fifth Circuit Court .)

https://investorsunite.org/wp-content/uploads/2019/01/GSE-013119.mp3

and the top 10 takeaways from Thompson's discussion...

https://investorsunite.org/top-ten-takeaways-from-5th-circuit-hearing-in-collins-v-mnuchin/

Let me repeat something I wrote earlier in this blog.

It seems not to register to the “can’t see beyond their next golfing leadership event/warm weather conference” special interest groups and congressional sponsors/campaign fund recipients, that similar legislative ideas—many of them from those elements which most would financially benefit—have died in the last 10 years, owing to the consumer satisfaction, market strength, resiliency, and effectiveness of Fannie and Freddie, which Crapo and others are hoping to marginalize or make disappear.

It's GSE efficiency, structure, and success you want to destroy, that's why it has been so hard, politically to obliterate them. (And all those greedy bankers banging on you to kill Fannie and Freddie still are making money, tons of it!)

Maloni, 2-4-2019