Tag Archives: GSE

GSEs renting foreclosed properties

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>   
>   (email exchange)
>   
>   On Mon, Mar 1, 2010 at 3:40 PM, wrote:
>   
>   Hi Warren,
>   
>   I believe this is along the lines of your idea a while back to mitigate the
>   foreclosure problem by having the US Gov’t step in and take ownership of the
>   real property and rent the home to the current homeowners. I was sifting
>   through this Goldman piece about GSE reform and it looks like Fannie may be
>   already doing this in a program called ‘deed-for-lease.’ Were you aware of
>   this?
>   

The largest landlord in the nation? How the GSEs deal with loans headed for foreclosure is critical. According to the recent announcement, these loans will be held in their retained portfolios. However, moving this many loans into the portfolio—worth at least US$300bn—would threaten to violate the caps put in place by the Treasury (see Box). One way out of this situation would be to take ownership of the collateral, thereby converting loans, which count against the cap, into real property, which does not. With close to 2 million current and expected delinquent loans this year, how the GSEs dispose of this property will become an important issue. The GSEs will be under political pressure to hold property off the market, and may be inclined to do so in any case if they see property values bottoming. This could mean renting the properties: in November 2009, Fannie Mae announced a ‘deed-for-lease’ program, which allows homeowners to relinquish ownership of the property and rent it instead. In January, Fannie Mae took another step in this direction with the announcement of a policy to allow tenants in Fannie-Mae foreclosed property to rent the property on a month-to-month basis after foreclosure.

Yes, heard they were trying it late in the game, without many takers, but good that they at least did some, thanks!

Prof James Galbraith had presented the idea a year or more ago to a congressional committee. Don’t know if that was the source or not. Never did get any feedback.

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Re: Government support for GSE assets and debt

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Yes, the Fed is the agency that’s set up to buy financial assets, not the treasury as per the TARP.

They got that one wrong, this one right, in that respect.

Of course, no excuse not doing this a year ago- more evidence of a failure to grasp basic monetary operations.

>   
>   Just hitting the tapes!
>   *FED TO LEND UP TO $200 BLN TO INVESTORS IN ABS :FNM US, FRE US
>   *FED SETS UP TERM ASSET BACKED SECURITIES LOAN FACILITY :FNM US
>   *FED TO BUY MBS THROUGH ASSET MANAGERS, STARTING BY YEAR-END
>   *FED TO START BUYING GSE OBLIGATIONS NEXT WEEK :FNM US, FRE US
>   *FED TO BUY DIRECT GSE OBLIGATIONS THROUGH PRIMARY DEALERS
>   *FED PURCHASES OF GSE SECURITIES TO BE OVER `SEVERAL QUARTERS’
>   *FED SAYS SPREADS ON GSE DEBT HAVE `WIDENED APPRECIABLY’
>   *FED ACTION AIMED AT REDUCING COST OF CREDIT FOR BUYING HOMES
>   *FED TO BUY UP TO $500 BLN OF FANNIE, FREDDIE, GINNIE MAE MBS
>   *FED TO BUY UP TO $100 BLN OF `DIRECT OBLIGATIONS’ FROM GSES
>   *FED TO BUY UP TO $600 BLN OF GSE DEBT, MORTGAGE SECURITIES
>   


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Re: Agency details

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(an email exchange)

>   
>   On Sun, Sep 7, 2008 at 8:33 PM, Mike wrote:
>   
>   
>   In exchange the Treasury receives a quarterly fee, dividend payments and
>   ”warrants representing an ownership stake of 79.9% in each GSE going
>   forward.”
>   
>   Support of Agency MBS market: The Treasury will set up an investment fund
>   to “purchase Government Sponsored Enterprise (GSE) mortgage-backed
>   securities (MBS) in the open market.” The scale of this program is yet to be
>   determined. The Treasury noted that it “is committed to investing in agency
>   MBS with the size and timing subject to the discretion of the Treasury
>   Secretary. The scale of the program will be based on developments in the
>   capital markets and housing markets.” This should eliminate the majority of
>   investor concerns about the functioning of this market, improve liquidity and
>   lower borrowing costs.
>   
>   Credit facility: The Treasury has agreed to create a back-stop short-term
>   lending facility for the Agencies. In light of the other programs being put into
>   place, this seems unlikely to be utilized, in our view.
>   

Shareholders give up 79.9% of their residual value as the agencies wind down.

Must have been some technical reason the government used that % and left the shareholders just north or 20%.


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AGY MBS UPDATE: 08/12/08

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On Tue, Aug 12, 2008 at 5:18 PM, Andrew wrote:

AGY MBS UPDATE: 08/12/08

General Themes:

  • Mortgages were weaker to dealer hedge ratios – versus CXLs they were down only -5cents
  • The small CXL daily price change masks what was a pretty bad performance for mortgages
  • Dealer OAS’s are back to the wides of last week – Lehman has FN5.5 LOAS at +90bps
  • What could help mortgages?
  • Asian buying returning
  • Capital raising by the GSE’s, (or capital injection by Tsy)
  • Reduced capital surplus guidelines from OFHEO
  • Convexity led rally in rates

not to mention investors recognizing value vs tsy’s, atraight agency paper, quality AAA corporates, libor, and other lower yielding paper


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