Fannie Mae’s rebound means taxpayers have been repaid in full

By Maria Saporta | Contributing Writer-Atlanta Business Chronicle

The U.S. Congress should use caution if it undertakes housing finance reform because of the complicated nature of the industry and because of the potential risks involved, according to Timothy Mayopoulos, president and CEO of Fannie Mae.

Mayopoulos was the guest presenter at Monday's Rotary Club of Atlanta, where he was interviewed by Rotarian Egbert Perry, founder of the Integral Group and chairman of Fannie Mae.

Timothy Mayopoulos,
President and CEO of Fannie Mae

Both Mayopoulos and Perry spoke about how Fannie Mae had developed an unfavorable reputation in the country after the 2008 economic crisis and required a federal investment from the U.S. Treasury of $116.1 billion.

As of December 2014, Fannie Mae is estimated to have paid back dividends of $134.5 billion back to the U.S. Treasury.Perry said that Fannie Mae's sibling company, Freddy Mac, had gone through a parallel experience.

When asked about the future of housing finance reform by Perry, Mayopoulos said it was hard to predict what could happen during the next Congress. But he warned much would be at stake in how the issue would get resolved.

Although many elected to Congress believe it is best to reduce the role of the federal government in housing finance, Mayopoulos said nearly every country in the world plays a public role in housing because of the "fundamental societal need."

Looking back, Fannie Mae, which was placed in conservatorship in 2009 during the financial crisis, ended up providing stability in the U.S. housing market, he said.

"This housing finance system works," said Mayopoulos, who joined Fannie Mae as general counsel in 2009 before becoming its CEO a couple of years ago – playing a critical role in the recovery of the company.

"Fannie Mae was able to repay the taxpayer within five years. It is sustainable," Mayopoulos continued. "The system works. Any new system being discussed would involve a lot of change and would have a huge amount of risk. It's important for policymakers to consider how much change do you want to introduce after the crisis when things have stabilized."

Perry said that since 2009. Fannie Mae has provided $4.3 trillion in liquidity in the mortgage market. Fannie Mae currently has a $3.1 trillion book of business – primarily in providing secondary mortgage financing.

The operating capital that it has to manage that book of business is $2.4 billion, and Perrysaid that amount is scheduled to be reduced by $600 million every year until it is down to zero.

When asked how the agency would function without that capital, Mayopoulos said those were decisions made when the agency was placed in conservatorship.

The luncheon served as an opportunity for Perry to thank local Fannie Mae employees for their service. There was a time when employees didn't even want to acknowledge they worked for the agency. Now that public sentiment is beginning to change, Perry and Mayopoulos said.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

What a Government Shutdown Means for Home Buyers

What a Government Shutdown Means for Home Buyers

(As of October 3, 2013)

Congress has failed to approve a Continuing Resolution (CR) providing funding for most government operations.

Therefore, spending authority for most of the government expired at midnight on September 30, 2013. Until legislation providing for funding is signed into law, many offices and programs of the federal government are now shut down. This means many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The Office of Management and Budget (OMB) requires each agency to have contingency plans in place. The information below is based on NAR staff review of agency agency contingency plans for the current shutdown and past experience with previous shutdowns and near-shutdowns.

Internal Revenue Service (IRS)

The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac have also adopted relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.

Social Security Administration (SSA)

The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac have also adopted policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.

Department of the Interior – Bureau of Indian Affairs (BIA)

BIA has announced that there will be no processing or recording of property transactions on Leased Indian Tribal Land during the government shutdown.

Federal Housing Administration

HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. Management & Marketing (M&M) Contractors managing the REO portfolio can continue to operate. You can expect some delays with FHA processing.

VA Loan Guaranty Program

Lenders will continue to process and guaranty mortgages through the Loan Guaranty program in the event of a government shutdown. Expect some delays during the shutdown.

Flood Insurance

The Federal Emergency Management Agency (FEMA) confirmed that the National Flood Insurance Program (NFIP) will not be impacted by a government shutdown, since NFIP is funded by premiums and not tax dollars. Changes to the flood insurance program scheduled to take effect on October 1 will be implemented as scheduled.

 Rural Housing Programs

For the U.S. Department of Agriculture programs, essential personnel working during a shutdown do not include field office staff who typically issue conditional commitments, loan note guarantees, and modification approvals. Thus, lenders will not receive approvals during the shutdown. If the lender has already received a conditional commitment from the Rural Development office, then the lender may proceed to close those loans during the shutdown. A conditional commitment, which is good for 90 days, is given to a lender once a USDA Underwriter approves the loan. If a commitment was already issued, the funds were already set aside and the lender may close the loan at its leisure. If Rural Development has not issued a conditional commitment, the lender must wait until funding legislation is enacted before closing a loan.

It is important to note that the traditional definition of “rural” for qualifying communities for assistance will be continued in effect during the shutdown. We expect that language to continue the current definition will be included in whatever funding measure is eventually enacted.

Government Sponsored Enterprises

Fannie Mae and Freddie Mac will continue operating normally, as will their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds.

Treasury

The Making Home Affordable program, including HAMP and HAFA, will not be affected as the program is funded through the Emergency Economic Stabilization Act which is mandatory spending not discretionary.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

Home price increase across the nation

New York, July 30, 2013 – Data through May 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed increases of 2.5% and 2.4% for the 10- and 20-City Composites in May versus April. Dallas and Denver reached record levels surpassing their pre-financial crisis peaks set in June 2007 and August 2006. This is the first time any city has made a new all-time high. The 10- and 20-City Composites annual returns rose slightly from April to May as they posted the best year-over-year gains since March 2006. All 20 cities increased from May 2012 to May 2013 and from April 2013 to May 2013.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

Michigan can't collect transfer tax from Fannie Mae/Freddie Mac

In 2011, Oakland County and Genesee County filed class-action suits against the firms that won nearly $200 billion in U.S. bailouts to collect real estate transfer taxes.

Oakland County said it was owed millions of dollars in transfer taxes, largely from the sale of foreclosed property by the two government-sponsored enterprises. U.S. District Judge Victoria Roberts wrote a March 2012 opinion ordering the firms to pay the taxes. Her ruling was reversed. The county said the two firms may have recorded thousands of deeds without paying any transfer taxes.

In a unanimous decision by a three-judge panel, Appeals Judge David McKeague reversed a lower court ruling that had upheld the right of the counties and state to collect the taxes.

Congress expressly said government-sponsored housing corporations the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac, along with the Federal Housing and Finance Agency, were exempt from all taxes. The counties — joined by the state of Michigan — argued that when Congress exempted them from “all taxation,” it didn’t mean to include state and local transfer taxes.

“Because the statutes are clear, we are not in a position to second-guess Congress and create a new exception in the statute for state and county real estate transfer taxes,” said the opinion written by McKeague, who was a federal judge in Grand Rapids before being appointed to the federal appeals court bench by President George W. Bush in 2005.

Michigan imposes a $7.50 fee per $1,000 in value on the property sold; counties impose a $1.10 per $1,000 in value of the property fee. They are paid at the time a deed is recorded, when ownership of a property is transferred.

Fannie Mae and Freddie Mac step in when a property is foreclosed as the purchaser or entity that guarantees 65 percent of the nation’s new mortgages. After the housing market collapsed in 2008, Congress seized the two publicly traded firms as part of bailouts nearing $200 billion and placed them in conservatorship.

In July 2008, Congress created the Federal Housing Finance Agency to oversee Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. As of September 2010, the combined debt and obligations of these government-sponsored enterprises totaled $6.7 trillion

The opinion was joined by Judge Boyce Martin Jr., an appointee of President Jimmy Carter, and Ralph Guy, a former lawyer for the city of Dearborn named to the appeals court by President Ronald Reagan.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.