TheMReport — News and strategies for the evolving mortgage marketplace.
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Year in Review Rewind and Review Last year was eventful, to say the least. Take a look at the some of the biggest headlines of 2013. JANUARY FEBRUARY MARCH APRIL MAY JUNE Congress Approves Carol Galante as FHA Commissioner Justice Department Sues S&P Over PreCrisis Ratings FHFA Head Details Objectives for 2013 FHFA, Citigroup Settle MBS Claims Senate Group Introduces Bill to Dissolve GSEs Congress approved the appointment of Carol Galante as assistant secretary for housing and commissioner of the Federal Housing Administration (FHA). The appointment was finalized with 69-24 vote from the Senate. Shaun Donovan, secretary of HUD, praised Galante for her role in launching the Office of Risk Management and Regulatory Affairs and integrating it into the Office of Housing as well as launching the Office of Housing Counseling at HUD. He also mentioned her efforts to provide affordable housing for the elderly and disabled. The Justice Department (DoJ) and Standard & Poor's (S&P) were at odds with each other over civil fraud charges stemming from an alleged scheme to defraud investors in the lead-up to 2008's financial meltdown. The DoJ filed a civil lawsuit against S&P and its parent company, McGraw-Hill, alleging that S&P "knowingly [issued] inflated credit ratings" for collateralized debt obligations in the years before the crash, misrepresenting their creditworthiness and understating their risks. While Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), anticipates the gradual reduction of the GSEs in the housing market, he does not believe either Fannie Mae or Freddie Mac will exit conservatorship and return to the private sector. As such, FHFA's goals for 2013 expand on 2012's three main goals of building an infrastructure for the future of the secondary market, contracting the GSEs' role in the market, and maintaining the GSEs' foreclosure prevention and credit availability efforts. Fannie Mae Posts Largest Net Income in Company History JULY AUGUST Senate Confirms Cordray in 66-34 Vote Former CFPB Deputy Starts Mortgage Company, Attracts Criticism The U.S. Senate voted to confirm Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB). According to the Senate website, Cordray was confirmed in a 66-34 vote. President Obama installed Cordray as a recess appointment in 2012, a move that attracted criticism from opponents, who say the Senate was not actually in recess. Critics of the CFPB had vowed not to confirm any nomination for director until the agency saw substantial changes. 14 | The M Report After helping draft rules for a qualified mortgage, former Consumer Financial Protection Bureau (CFPB) deputy director Raj Date resigned from the agency and opened his own advisory and investment firm aimed specifically at those borrowers who do not meet the standards for "qualified mortgages." This turn of events raised questions as to the agency's ethics and integrity, prompting lawmakers to call for a release of communications between Date and others regarding the company's creation. Fannie Mae's Q4 earnings report shows the mortgage behemoth earned a quarterly net income of $7.6 billion in Q4 and an annual net income of $17.2 billion throughout 2012. Fannie Mae credited 2012's growth to improved credit results driven by a decline in serious delinquency rates, an increase in home prices, and higher sales prices on Fannie Maeowned properties. The company's agreements with Bank of America (BofA) to resolve repurchase claims—which saw BofA paying more than $10 billion—also played a role. The Federal Housing Finance Agency (FHFA) and Citigroup reached a settlement over allegations of fraud in the selling of $3.5 billion of mortgage-backed securities. According to FHFA's original complaint, Citigroup and its affiliates misrepresented the credit quality and gave false statistical summaries of the groups of mortgage loans in securities purchased between September 2005 and May 2007, resulting in "substantial losses" to Fannie Mae and Freddie Mac as the loans fell apart. FHFA filed suit against Citigroup and a number of other institutions in 2011 seeking restitution for those losses. SEPTEMBER OCTOBER NOVEMBER DECEMBER CFPB Finalizes Changes to Mortgage Rules JPMorgan, Feds Negotiate $13B Settlement Mel Watt Confirmed as Director of FHFA With months to go before the implementation of the Consumer Financial Protection Bureau's (CFPB) qualified mortgage (QM) rules, the agency released several finalized amendments and clarifications created to ease the process. The bureau also introduced last year new loan officer compensation rules to remove incentivized "steering" toward certain products, servicing rules to establish protections for borrowers facing foreclosure, and strengthened consumer protections for highcost mortgages. JPMorgan Chase is reportedly set to pay a record $13 billion to the government to settle questions surrounding its sale of bonds backed by poor loans. An unidentified source reportedly told Bloomberg that JPMorgan CEO Jamie Dimon discussed the deal with U.S. Attorney General Eric Holder. According to that source, the discussed deal does not release the bank from potential claims of criminal liability at the insistence of Holder, who earlier in the year remarked that some institutions may be "too big to jail." Senate Banking Committee Approves Yellen Nomination for Fed Chair The Senate Banking Committee voted to approve Janet Yellen's nomination to chair the Federal Reserve, bringing her one step closer to being the first woman to serve as head of the country's central bank. The committee approved Yellen's nomination by a vote of 14-8, passing it to the Senate floor for a final vote. Like her predecessor, Yellen is expected to push for accommodative monetary policy as the economy slowly recovers. Citing the overwhelming presence of the GSEs in today's mortgage marketplace, Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Virginia) unveiled a new piece of legislation designed to wind down the enterprises. The legislation would dissolve Fannie Mae and Freddie Mac within five years of passage and transfer appropriate utility duties and functions to a "different, modernized, and streamlined agency." The transfer would be done with a fiduciary duty to maximize returns to the taxpayer as the GSEs' assets are sold off. Following a play by Democrats to defang Republicans' filibuster powers, the U.S. Senate voted to confirm Rep. Mel Watt (D-North Carolina) as director of the Federal Housing Finance Agency (FHFA). The vote went 57-41 in Watt's favor, the Wall Street Journal reported. All Senate Dems voted in favor of confirmation; they were joined across the aisle by Sens. Rob Portman (R-Ohio) and Richard Burr (R-North Carolina).