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June 2016 - Jeb Hensarling

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» VISIT US ONLINE @ DSNEWS.COM 81 » e effect of net declining net interest rates, which resulted in an after-tax esti- mated fair value loss of $1.4 billion for Q1 (compared to an estimated fair value gain of $0.3 billion for Q 4 2015 after an increase in interest rates); and the use of deriva- tives, which Freddie Mac uses as a hedge against changes in interest rates. e value of interest rate derivatives can fluctuate dramatically, however. » e spread change effect: An estimated af- ter-tax loss of $0.6 billion for Q1 (compared to an estimated loss of $0.3 billion for Q 4) due to spreads on certain mortgage loans and mortgage-related securities measured at fair value experienced more widening in Q1 than in Q 4. » On the positive side, Freddie Mac Trans- ferred a portion of the credit risk on $54 billion of single-family loans, and have now transferred a portion of the credit risk on $440 billion in single-family loans since credit-risk transfer initiatives began in 2013. Also, Freddie Mac's core (post-2008) book of business, which excludes HARP and other relief refinance loans, increased up to 68 percent of Freddie Mac's credit guarantee portfolio. Also, Freddie Mac's management and guarantee fee income has significantly increased in the past two years. "Freddie Mac's first quarter business results continued to be strong, reflecting our transformation to be a more competitive company," Freddie Mac CEO Donald Layton said. "We're serving our customers better and also more effectively executing on our mission to responsibly support homeowners and renters nationwide. e percentage of our purchases of loans to first-time homebuyers hit a 10-year high and we continue to finance record levels of rental housing. Also, the transfer of mort- gage credit risk away from taxpayers, which we pioneered, proved its resiliency through the quarter's significant financial market distress. While the resulting flight-to-quality decrease in interest rates reduced our GAAP results this quarter, an impact which is non-economic in nature, the fundamentals of our business are very solid and continue to improve." Stakeholders in the industry generally did not react to the news of Freddie Mac's finan- cial results positively like Layton did. Specifi- cally, they were not convinced that another taxpayer-funded bailout is not on the horizon. "Even after Federal Housing and Finance Agency Director Mel Watt joined housing advocates and economists on both sides of the aisle in sounding the alarm, the Treasury Department has inexplicably refused to allow Fannie Mae and Freddie Mac to maintain a capital buffer against losses like the one Freddie reported today—and like every other financial institution must maintain," said Wade Henderson, president and CEO of e Leadership Conference on Civil and Human Rights. "We are inevitably headed toward a path of yet another taxpayer-funded bailout, which should be unthinkable eight years after the financial crisis, and which is even worse because it appears to be by design." Tim Pagliara, Executive Director of Inves- tors Unite—a coalition of more than 1,500 private investors committed to preserving the rights of GSE shareholders, stated: "By stripping Fannie Mae and Freddie Mac of 100 percent of their profits every quarter since 2012, the Treasury Department put taxpayers on the hook for any future losses by either of the companies, and we're now seeing this play out in real-time. It's time to reverse the sweep and to protect the taxpayers by allowing these companies to begin rebuilding capital." WASHINGTON DC Housing Discrimination? Not on HUD's Watch In an effort to address fair housing activi- ties, HUD has announced that it is making a multi-million dollar grant available to organi- zations that advocate against discriminatory acts in the housing market. HUD announced Monday that it is mak- ing $37.3 million available to fight housing discrimination under HUD's 2016 Fair Hous- ing Initiatives Program (FHIP) Notice of Funding Availability (NOFA). According to HUD, the three funding notices are intended to support fair housing testing in the rental and sales market, public education efforts, capacity building, and education and outreach activities. e funding will be made available to organizations that fight against the common cause of housing discrimination, fair housing laws and policies, as well as educating the pub- lic, housing providers, and local governments about their rights and responsibilities under the Fair Housing Act. HUD announced three categories of grants: 1. Education and Outreach Initiative grants (EOI) – $7,450,000 available. HUD awards these to groups that educate the public and housing providers about their rights and responsibilities under federal law or state and local fair housing laws that are equivalent to the Fair Housing Act. is year's funds include $1,250,000 toward a national media campaign; $250,000 toward tester coordinator training; and the rest for general regional, local and com- munity based programs. 2. Fair Housing Organizations Initiative (FHOI) – $500,000 available. HUD awards these to help build the capacity and effectiveness of non-profit fair housing or- ganizations, particularly organizations that focus on the rights and needs of under- served groups, such as rural and immigrant populations. 3. Private Enforcement Initiative grants (PEI) – Total PEI multi-year funding is $29,375,000. However, $22,452,542 has already been reserved for FY 2014 and FY 2015 multi-year grantees, making $6,922,458 available for FY2016 new awardees. is year's PEI funds also include $975,000 to address lending discrimination. HUD noted that applicants that are inter- ested in the housing discrimination funding under the NOFAs should apply here by June 23, 2016. HUD's Assistant Secretary for Fair Housing and Equal Opportunity Gustavo Velasquez said, "e work HUD's fair housing partners do every day is critical to our efforts to ensure that every family in America has an equal shot at finding the home that is right for them. ese grants help to provide the critical financial resources they need to do their work." e Five Star Institute has a wide footprint in furthering the diversity and inclusion agenda in the mortgage industry with the newly announced 2016 Five Star Diversity Symposium and its member organization, the American Mortgage Diversity Coun- cil (AMDC). e AMDC, a Five Star Institute member organization, is comprised of executives from various mortgage companies and aims to shape the diversity agenda. e council, launched in June 2015, was created to drive results that support the application and promotion of the mortgage industry's best diversity practices, and advancing solutions that support initiatives out- lined by Section 342 of the Dodd-Frank Act. "e dialogue around diversity in the mortgage industry has not been advanced the way it needs to be," said Five Star Institute President and CEO Ed Delgado. "Five Star was presented with a tremendous opportunity to fill a leadership void and we will work with our industry partners to set the bar for diver- sity in the industry."

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