MReport January 2018

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56 | TH E M R EP O RT 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 THE LATEST LOCAL EDITION GOVERNMENT GOVERNMENT 56 | TH E M R EP O RT Federal Relief Helping to Restore Flood-Ravaged Communities WITH LARGE HUD RELIEF PACKAGES ISSUED TO BOTH TEXAS AND FLORIDA, THESE BATTERED COMMUNITIES ARE WORKING TO REBUILD AFTER THIS YEAR'S BRUTAL HURRICANE SEASON. FLORIDA // The Department of Housing and Urban Affairs (HUD) announced a $615.9 million grant had been awarded to the State of Florida, designed to help communities in the Sunshine State recover from Hurricane Irma's damaging floods earlier this year. This comes after a mid-November grant of more than $5 billion to help Texas recover from Hurricane Harvey. Both grants are pulled from a larger $7.4 billion block that is being divided between Texas, Florida, Puerto Rico, and California (following that state's widespread wildfires). But how exactly will the money be distributed and used on the ground in Florida and Texas? In the case of Florida, the nearly $616 million will be distrib - uted through Florida Department of Economic Opportunity. The grant is earmarked for housing, business losses, and dam- aged infrastructure, but it almost certainly won't be enough to cover every need. Of Florida's 67 counties, FEMA designated 48 of them for individual assistance. According to the Orlando Sentinel, "in Orange, Seminole, Orange and Osceola counties, more than 37,660 Irma-related insurance claims had been closed without payment—making them part of the 250,000 unpaid and closed claims statewide." According to a HUD analysis, thousands of middle- and low - er-income Florida homeowners and renters "experienced serious damage to their residences and were not adequately insured for flood damage." The state is coordinating with various govern- ment officials to figure out exactly how that grant money will be disbursed. Tiffany Vause, Director of Communications for the state's Department of Economic Opportunity, also said that they will likely seek additional federal funds beyond the $615 million. In Texas, it's been three months since Hurricane Harvey hit the Gulf Coast. According to the Texas Tribune, Texas leaders are estimating they may need as much as $121 billion in federal money to tackle damages just to public buildings and infrastruc - ture—a figure that makes that $7.4 billion grant look like a drop in the bucket. There's no official estimate for what the damage tally is for private homes, but according to the Tribune, "more than 18,000 families were still living in FEMA-paid hotel rooms as of Nov. 13 and federal inspectors have visited more than 570,000 homes damaged by Harvey." While that HUD grant is undoubtedly much needed, the Tribune reveals that none of that money has been handed over to the State of Texas yet. Given that it's only been two weeks since the initial HUD announcement, that's not too surprising, but HUD will reportedly be announcing spending parameters for the Texas grant sometime in December. Texas has received more immediate federal relief from FEMA, which has so far spent around $1.4 billion to assist Harvey vic - tims with short-term needs, including $186 million toward hotel rooms for displaced residents. FEMA's National Flood Insurance Program has paid out even more, paying more than $5.7 billion in claims for Texan homeowners who were underinsured or not covered by private insurance. Even once those HUD millions are disbursed, it will be a long road to recovery for Florida and Texas homeowners trying to pick up the pieces after hurricane season. Ginnie Mae Prez on Growth: 'Our Systems Are Volume Agnostic' Ginnie Mae Acting President Michael Bright briefed Congress on how Ginnie Mae is adapting and growing, and what that growth means for the agency. T he House Financial Services Committee recently held a hearing entitled "Sustainable Housing Finance: The Role of Ginnie Mae in the Housing Finance System." Michael R. Bright, Acting President, Government National Mortgage Association (Ginnie Mae), appeared before the Committee to discuss the challenges currently facing Ginnie Mae, as well as what challenges and adaptations await it in the future. Much of the discussion focused on a paper Bright co-wrote with former FHFA Acting Director Ed DeMarco in September 2016. Bright's and DeMarco's proposal would "end the conservatorships, reconstitute Fannie Mae and Freddie Mac as lender- owned mutuals, and build on the credit risk transfer (CRT) initiative to create a private market for mortgage credit risk while preserving a government-guaranteed rates market for mortgage-backed securities." In addition, Ginnie Mae would be removed from the Department of Housing and Urban Development (HUD) and converted into a standalone government corporation like FDIC, "with authority over its own budget, hiring, and compensation." Obviously, making dramatic changes to Ginnie could be a cause for concern to some. As Rep. Brad Sherman (D-California) put it, "I don't buy the idea that 'if it's not broke, don't fix it,' because sometimes you can make things better. But if it's not broke, don't break it." Even though he proposes changes, Bright had plenty of positive things to say about Ginnie, and the things it does well. "At a very high level, the Ginnie Mae wrap works because we do two things effectively. First, we are transparent about our rules and our processes with our investors. And second, we work hard to police our program." Whether or not Ginnie undergoes that sort of large-scale change in the future, there are plenty of challenges closer at hand. With the mortgage market moving to modernize and embrace eMortgages, Ginnie Mae is moving to follow. While Bright conceded there were various upgrade and architecture challenges posed by this, he said Ginnie has those upgrades slated for 2018. Rep. Dennis Ross (R-Florida) asked what impact this year's damaging flood season had on Ginnie, especially given how many affected properties either did not have flood insurance or had insufficient flood insurance. "That is not an insignificant problem," Bright said, noting that 150,000 Ginnie properties had been affected by the floods and did not have sufficient flood insurance. Bright continued, saying, "If you have a property that has been damaged through a flood, and the property cannot get into a conveyable condition to file a claim with FHA, it does raise the risk that the issuer, if they're concentrated in that particular geographic location, could have an insolvency situation." Bright said they were currently analyzing the total impacts of the floods. Rep. Randy Hultgren (R-Illinois) asked Bright if he had any concerns about Ginnie's recent or expected growth. "We're very aware that with greater size comes greater risk, especially when your base is shifting," Bright said. However, he said that he didn't believe growth was concerning in and of itself, as Ginnie has an array of risk-management tools and the processes tend to work the same way regardless. "Mechanically speaking, our systems are volume agnostic," Bright said. Looking forward, Bright said Ginnie's focus over the next few years would be ensuring that issuers have access to the liquidity they need, having a solid idea of the value of the MSRs involved, and having a game plan for what they would do with the MSR in the event of a problem. "It's not so much value as the quality of your counterparty that matters," Bright said.

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