Orange, CA (PRWEB) May 20, 2014
On May 13th, 2014, FHFA Director Mel Watt outlined the three main strategies of the FHA and the Conservatorships of Fannie Mae and Freddie Mac. This is the first time that Watt has spoken in public since he was sworn into office on January 6th, 2014. The strategies are as follows: MAINTAIN, REDUCE, and BUILD, the FHFA outlines the strategies below.
“MAINTIAIN (in a safe and sound manner), foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets.
REDUCE taxpayer risk through increasing the role of private capital in the mortgage market.
BUILD a new single-family securitization infrastructure for use by the enterprises and adaptable for use by other participants in the secondary market in the future." (Federal Housing Finance Agency, "2014 Strategic Plan")
Mel Watt included that these three strategies are the tasks that must be fulfilled by the FHFA, however it is the duty of Congress and the administration to pass housing reform legislation.
The first MAINTAIN component entails improving the enterprises’ single-family credit guarantee business. This means that Enterprise conservatorships will continue to maintain the $6.4 trillion liquidity of the secondary mortgage market and have minimized their losses by implementing foreclosure programs and refinance programs, which provided an innovative approach to lower risk and help many homeowners stay in their homes. The Enterprises must also tighten their credit standards such as higher credit score requirements, which would thus create a barrier of entry for low-income borrowers, but would also minimize the risk for another financial crisis as the Enterprises will have ‘safer dollars’. The safety of FHFA’s endeavors as well as the stability of liquidity are the main responsibilities of the MAINTAIN strategy, and the two must go hand-in-hand to achieve such a goal.
With that being said, the FHFA also plans to explore ways to reach underserved, creditworthy borrowers. The FHFA will also see that proper prevention measures will remain in place such as the Home Affordable Modification Program (HAMP) and the Home Affordable Refinancing Program (HARP). The 2014 Strategic Plan contends, “Since April 2009, over 3 million borrowers with mortgages backed by one of the Enterprises have refinanced mortgages through HARP. Additionally, there have been HARP refinances of loans guaranteed by Fannie Mae and Freddie Mac during this same time period.” The FHFA has also launched the Servicing Alignment Initiative to make the servicing and loss mitigation efforts more effective by providing new guidelines for short sales, deeds-in-lieu, loan modifications, servicing standards, and compensatory fees, which have provided borrowers additional foreclosure prevention loss mitigation options.
Rather than the anticipated expansion of HARP, the FHFA plans to target the outreach of HARP. The rational for this is that with mortgage interest rates on the rise, not as many can benefit from the HARP program. In order to continue HARP, the FHFA must identify and reach out to the appropriate target market. The FHFA also plans to center focus on certain parts of the country that were hit the hardest by the foreclosure crisis. Efforts will include increasing loan modifications in targeted communities as well as matching properties with non-profits to ensure occupancy.
The second component to the strategic plan, REDUCE, entails reducing taxpayer risk while increasing the role of private capital in the mortgage market. The report contends that “the objective here is to shift risk to private market participants and away from the Enterprises in a responsible way that does not reduce liquidity or adversely impact the availability of mortgage credit.” This segment will focus on transferring taxpayer risk that currently exists to the private sector so that they assume a more significant portion of the risk and taxpayers assume less. They will deploy multiple risk-sharing transactions that can be possible to execute in varying market conditions.
Under REDUCE, Fannie & Freddie will have to reduce their retained portfolios of liquid assts by no more than $250 billion each by 2018. The plans to implement this must include meeting this goal despite contingencies or adverse market conditions.
The third component of the strategic plan is to BUILD a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future. Under this component, the FHFA has worked with the Enterprises to develop a Common Securitization Program (CSP). As a result of the program, the Enterprises and CSP will leverage industry standard interfaces, industry software, and industry data standards where possible. They will also develop mortgage data standards to, “improve accuracy, increase transparency, effectively assess risk, and create efficiencies for the Enterprises and mortgage industry participants.
Overall, the plan assumes the authority to increase the Government’s role in the measures taken by Fannie Mae and Freddie Mac to mend the housing market. The report concluded with the message, “As the FHFA implements this Strategic Plan, the agency will seek public input about core aspects of the conservatorships. FHFA looks forward to working with the Enterprise and all stakeholders to achieve the objectives detailed in this Strategic Plan.”
In short, the 2014 Strategic Plan highlighted the following objectives:
1. Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
a. Complete all strategies with caution,
b. Tighten credit standards, but also innovate ways to assist creditworthy homeowners, and
c. Reach as many people possible with the current HAMP and HARP programs in place.
2. Reduce taxpayer risk through increasing the role of private capital in the mortgage market.
a. Transfer more risk from tax payers to private capital than is currently in place, and
b. Fannie & Freddie must reduce their current portfolios of liquid assets by no more than $250 billion by 2018.
3. Build a new single-family securitization infrastructure for use by the enterprises and adaptable for use by other participants in the secondary market in the future.”
a. Improve research and data to increase transparency, assess risk more effectively, and increase efficiencies.
Broadview Mortgage values the opportunity to educate consumers to understand which direction that their current or future mortgage is taking them in. If you have any questions about the information herein, feel free to reach out to the Author, Brittany Williams, at Brittany(dot)williams(at)broadviewmortgage(dot)com. If you would like a quick pre-approval click here, and for assistance with down payment or buyer assistance, click here. You are also always free to give us a call toll free at (855) 692-7623.
Since 1988, Broadview Mortgage has distinguished itself through honest business relationships with clients, loyalty to employees, and commitment to empowering and educating those communities. Broadview Mortgage is a mortgage banker and direct lender made up of loan officers with years of experience in the firm and sheer excellence in customer service. The firm works to explore several financial solutions from which it’s clients may choose. Business is initiated and conducted on a word-of-mouth basis. Broadview Mortgage is a delegated underwriter for the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Federal National Mortgage Association (FNMA). Broadview is also approved to participate in several state, county and city programs for First Time Home Buyers.
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