I just read this article about Fannie and Freddie merging some of their
operations. Found the article on this link:
Fannie, Freddie to Merge Some Operations
By Nick Timiraos
3/4/2013 5:33:00 PM
The regulator of Fannie Mae(FNMA) and Freddie Mac(FMCC), the
government-controlled mortgage companies, announced Monday one of the
most concrete efforts to date for building a new infrastructure that
could ultimately replace Fannie and Freddie.
the director of the Federal Housing Finance Agency, said the agency
would begin forming a new company that would consolidate some of the
"back-office" functions currently replicated individually by each firm.
The new company will have its own chief executive and board and for now
would be jointly owned by Fannie and Freddie, said Mr. DeMarco, in a
speech Monday afternoon before the National Association of Business
Economics in Washington, D.C.
Fannie and Freddie have operated
for decades as independent firms in competition with each other, but
last year the FHFA began working with the companies to create a single
platform in which home loans could be packaged into securities. The
companies were taken over by the U.S. Treasury in 2008 and the FHFA was
tasked with conserving the firms' assets until Congress and the White
House decided what to do with them.
Debating the Future of Fannie and Freddie 2/25/13
Up until now, few steps have been taken toward any overhaul. The two
firms, together with federal agencies, are responsible today for backing
nearly nine in 10 new mortgages, with taxpayers on the hook if those
loans default. Fannie and Freddie collapsed as the housing sector
deteriorated five years ago and their rescues have cost taxpayers $131
billion so far.
The new company could eventually be privatized
or folded into the governmentâ€”that will be determined by Congress and
the White House when they begin the process of any overhaul of the
nation's $10 trillion mortgage market. Before those decisions are made,
the new company would build a new securitization infrastructure to serve
whatever replaces Fannie and Freddie.
"What we are trying to
doâ€¦is to ease the transition from where we are today to wherever
lawmakers decide the country ought to ultimately go," said Mr. DeMarco.
Mr. DeMarco said the new platform for issuing mortgage-backed
securities would allow for much needed operational upgrades to the
back-office infrastructure at both firms. It would also aim to merge
certain functions duplicated by the two firms. "Right now, this
investment takes place twice. We're trying to just do this once," he
The initiative comes as a stabilizing housing market has
boosted the fortunes of the mortgage companies. Freddie Mac last week
reported an $11 billion profit for 2012, its largest ever and its first
in six years. Fannie Mae has until mid-March to file its annual report.
In recent months, some industry executives have voiced concerns that
the new mortgage-bond infrastructure might allow Fannie and Freddie to
extend their dominance over the mortgage market. The latest move by the
FHFA could tamp down those worries. Mr. DeMarco said the new entity will
have a separate physical location from Fannie and Freddie, in addition
to its own management and staff. It's unlikely that the entities would
actually begin the process of issuing securities through the new company
this year, he said.
Creating the new company is one of a
series of objectives on an annual corporate scorecard, also released
Monday by the FHFA, that is used to evaluate Fannie and Freddie's
performance and determine the pay of top officers at both companies.
As part of those annual priorities, the FHFA said it would direct the
companies to advance previously announced plans to sell slices of
mortgage-backed securities that aren't covered by a government
guarantee. It said that each company should attempt to sell at least $30
billion in different mortgage-backed products that would put private
investors in a first-loss position on those loans.
also directed the firms to reduce their backing of loans for rental
apartments by 10% from last year's levels and to sell a portion of the
whole loans or other illiquid securities that sit on the firms balance
sheets. The companies are already required to shrink those portfolios by
15% annually, but they have largely met those targets simply through
the normal maturity of various mortgage investments.
Write to Nick Timiraos at email@example.com
The Adams Team at
Rothwell Gornt Companies