April, 2012

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THE LATEST SECONDARY MARKET Fannie Mae Reports $2.4B in Q4 Losses GSE reveals predictably poor numbers for the final quarter of last year. F Obama Scorecard Suffers Due to 2011 Housing Doldrums February data shows the nation's housing markets continue to feel the effects of the previous four quarters. scorecard from the Obama adminis- tration, underscoring a still-unsteady pace for home prices, mortgage origi- nation volume, and housing supply. Jointly released by HUD and the A Treasury Department, the scorecard reflects an industry still in transition from crisis to recovery. The scorecard cited a National Association of Realtors (NAR) Home Affordability Index, showing that it moved from 179.1 February last year to 194.9 this year, not far from the level seen in January. February home prices averaged $136,700, according to the Standard & Poor's/Case-Shiller index, a few figures below $142,400 seen last year and down from $138,200 in January. "This lasting scar of the Great Recession driven by housing's collapse is a clear sign that we are not yet out of the woods," HUD assistant secretary Raphael Bostic said in a statement. 72 | THE M REPORT troubled year for housing surfaced in a February housing The scorecard tallied up figures from CoreLogic that showed home prices, including those for distressed sales, declining from $149,300 to $147,900 year-over-year. New home sales ticked up 26,800 in February, down from 25,800 last year and 27,000 in January, according to Census Bureau figures, while NAR fielded 380,800 in existing-home sales, also up from 378,300 year-over-year. Numbers from the Mortgage Bankers Association reveal that refi- nance loan volume fell from 1.6 million last year to 1.3 million in February but markedly improved from 950,600 in January. Purchase originations contracted from 498,000 in February last year to 431,500 this year, down from 582,600 month-over-month. The Federal Housing Administration reported that refinance volume ticked down from 34,300 originations to 26,700 year-over-year, down from 31,400 in January. annie Mae fielded $2.4 billion in net losses for the fourth quarter, less than $5.1 billion quarter- over-quarter but unhelpful to more losses year-over-year than seen in 2010. The federally conserved mort- gage company said in a filing with the Securities and Exchange Commission in recent weeks that net losses amounted to $16.9 billion last year, more than the $14 billion it bled in 2010. Outgoing Fannie Mae CEO Michael Williams pared loss by citing Fannie's role in liquidity, attributing the losses to zigzag- ging economic forces. "While economic factors such as falling home prices and high unemployment produced strong headwinds for our business again in 2011, we continued to grow a very strong new book of business, as we have since 2009," he said in a statement. He also portrayed the losses against Fannie Mae's role as a supplier of credit in the mar- ket, citing 6.6 million refinance mortgages, 1.9 million home purchases, and loans for more than 1.1 million rental units from last year. "We continue to build a high- quality new book of business for both single-family and multifamily. Our new single- family book now accounts for more than half of our overall single-family guaranty book of business," Susan McFarland, EVP and CFO for the company, added in the statement. Fannie Mae tallied up a net worth deficit that stood at $4.6 billion by the end of the fourth quarter, together with $1.9 billion in total losses and $2.6 billion in senior preferred stock dividends paid back to the Treasury Department. The mortgage giant said that Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco would request around $4.6 billion from the Treasury to shore up the company and tamp down the net worth deficit. Fannie Mae has asked for more than $116 billion in taxpayer funds since entering federal conservatorship at the height of the financial crisis in 2008. Taken together, Fannie and Freddie Mac have received more than $180 billion in draws from the Treasury. The GSEs continue to amass quarterly losses—and taxpayer dollars—as lawmakers and poli- cymakers scramble to identify a sustainable way forward for the companies, which back roughly nine out of 10 mortgages. DeMarco lately headlined a so-called strategic plan that calls on lawmakers to wind down Fannie and Freddie without destabilizing liquidity in the markets or the still-brittle economic recovery. He also recommended that lawmakers establish a secondary market replete with new securi- tization measures able to shoul- der more than $100 billion in mortgages currently originated by Fannie and Freddie each month. SECONDARY MARKET ANALYTICS SERVICING ORIGINATION

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