MReport July 2020

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62 | M REPORT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T COVID-19 Causing Changes to Financial Requirements For GSEs The FHFA's original proposal "will not be finalized and implemented." T he Federal Housing Fi- nance Agency (FHFA) announced that it will be re-proposing the updated minimum financial eli- gibility requirements for Fannie Mae and Freddie Mac. "FHFA has determined that it is prudent to work with the Enterprises to reassess and re-pro- pose these requirements, including incorporating lessons learned from the evolving COVID-19 national emergency," the Agency said in a release. The FHFA said it would not provide additional comments. FHFA's original proposal was made on January 31, 2020, and "will not be finalized and imple- mented this month as planned." The proposed financial require- ments released earlier this year sought to improve seller/servicer standards and provide transpar- ency and consistency of the capital and liquidity required with differ- ent business models. "A critical improvement from the minimum financial requirements established in 2015 is addressing the risk factors related to servic- ing Ginnie Mae mortgages. The updated requirements improve the safety and soundness of the Enterprises by strengthening Seller/ Servicer counterparties in the event of an economic downturn," the January release from FHFA said. Continuing its path to end conservatorship for the GSEs, the FHAFA announced in February that it selected Houlihan Lokey Capital, Inc., as its financial advisor to assist in the development of a plan to conservatorship of Fannie Mae and Freddie Mac. The agreement between the FHFA and Houlihan Lokey has up to one year to produce a plan to end the privatization of the GSEs. The FHFA's report states Houlihan Lokey will consider business and capital structures, market impacts, timing, and avail- able capital raising alternatives among other items. "Hiring a financial advisor is a significant milestone toward ending the conservatorships of the Enterprises," FHFA Director Dr. Mark Calabria said. "The next ma- jor milestone for FHFA is the re- proposal of the capital rule, which will happen in the near future." The contract between the FHFA and the firm is $9 million for the first year. The FHFA has options to extend for an additional four- and-a-half years. The total contract is not to exceed $45 million. Quicken Loans IPO Could be Largest of the Year CEO Jay Farner said March was the "biggest closing month" on record. A report by CNBC says Quicken Loans, the largest mortgage lenders in the U.S. is planning an initial public offering (IPO). The report added that the Detroit-based company may be public by next month. CNBC states Quicken Loans is working with Morgan Stanley, Goldman Sachs, Credit Suisse, and JPMorgan to manage the deal. Valuation has yet to be decided but CNBC reports that it is "tens of billions of dollars" and possibly one of the largest IPOs of the year. Quicken Loans CEO Jay Farner told CNBC that March was the "biggest closing month in our company's history with nearly $21 billion in mortgages closed." He said on CNBC that the company was estimating nearly $75 billion in mortgage applica- tions in the second quarter, compared with almost $53 billion in the first quarter. Quicken Loans and Morgan Stanley said they would not com- ment on the matter. Mortgage applications have been growing across the na- tion. The Mortgage Bankers Association (MBA) revealed mort- gage applications rose 9.3% weekly for the week ending June 5. Purchase applications continued its run of success, rising week over week by 15% and annually by 13%. "The next major milestone for FHFA is the re-proposal of the capital rule, which will happen in the near future." — Dr. Mark Calabria, Director, FHFA

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