DS News

36 MIKE HEID ELECTED TO FANNIE MAE BOARD OF DIRECTORS Fannie Mae has announced in an 8K filing with the Securities and Exchange Commission that Michael J. Heid has been elected to Fannie Mae's Board of Directors. Heid, 59, previously served as EVP (Home Lending) of Wells Fargo & Company from 1997 until January 2016 and was employed by Wells Fargo or its predecessors since 1988. His positions with Wells Fargo Home Mortgage, the bank's mortgage banking division, include serving as president from 2011 to September 2015; co-presi- dent from 2004 to 2011; and chief financial officer and head of loan servicing prior to 2004. "Fannie Mae will benefit from Mike's experi- ence and knowledge as we continue our mission to provide responsible, affordable, long-term mortgage financing," a Fannie Mae spokesperson said. Over the years, Heid has been actively in- volved in legislative and regulatory policy matters that affect the mortgage industry. "Mike played an integral role in aligning the industry during a critical time, by displaying unparalleled leadership in working with both the Bush and Obama Administrations and the U.S. Treasury Department during the height of the U.S. housing crisis," said Ed Delgado, presi- dent and CEO of e Five Star Institute. "e industry and the country should be thankful for his efforts." According to the 8K filing, Wells Fargo was Fannie Mae's largest single-family customer in 2015, accounting for approximately $63.7 billion in loan deliveries—which comprised about 13 percent of Fannie Mae's single-family volume. A Wells Fargo subsidiary was Fannie Mae's largest multifamily customer last year. JPMORGAN'S RMBS DEAL MAY NOT SPUR DEMAND FOR SIMILAR TRANSACTIONS JPMorgan Chase's recent $1.9 billion residen- tial mortgage-backed security (RMBS) transac- tion may not spur demand for similar transactions from other banks in the next few years for several reasons, according to a report from Moody's Investors Service. According to the report, not all banks will see the benefits or have the same costs as JPMorgan Chase when securitizing loan portfolios. ough deals like Chase's could offer banks risk-weighted capital relief, the report says that banks will also consider the effect it will have on shareholder equity returns (ROE), as well as other unweighted leverage ratio capital requirements. In fact, the report says, with many of these deals, shareholder ROE could actually decline significantly. In a market where banks have seen ROE below the cost of capital since 2007, this will likely be a huge deterrent to similar RMBS purchases. Banks would need to return capital to the shareholders or choose to redeploy proceeds of the transactions into assets for those shareholders if they want to keep ROE steady. But even this, the report says, poses a problem. "Reinvesting released deal proceeds into assets yielding more than the non-retained securitization bonds could alter banks' investment portfolios and risk profiles, something they might be unwilling, or unable, to do." ough under the Basel III regulatory frame- work, banks may be able to use RMBS purchases to reduce risk weights and the burden of certain regulatory capital requirements, they also need to keep in mind the impact that securitization will have on other capital limitations. e Fed's supple- mentary leverage ratio (SLR) constraints will be a big consideration. "e banks are already in excess of their 5 percent SLR requirement, with their most recently reported, fully phased-in ratios as follows: Bank of America (6.8 percent), JP Morgan (6.6 percent), and Wells Fargo (7.6 percent)." Another big concern for banks will be the weak secondary market, which has seen signifi- cant decreases in liquidity as of late, and high RMBS governance, which requires deal agents as well as compensation for those agents. According to the report, both of these issues will likely keep most major banks from following in JP Morgan Chase's footsteps – at least for the short term. "Anecdotal evidence from investors indicates that a lack of secondary market liquidity is giving investors pause before they invest in subordinate tranches of RMBS securitizations. Investors have asked for yield premium to account for lower market liquidity, but determining how much that should be is likely to be challenging." CONGRESSIONAL GRANTS TO AID MORE STRUGGLING BORROWERS While the foreclosure rate is slowing as a trend nationwide, some pockets are still struggling to recover eight years after the housing crash. e Congressionally-funded National Foreclosure Mitigation Counseling (NFMC) program has just provided another $40 million to assist in the recovery effort for those areas still devastated by foreclosures and where homeowners are still struggling to make mortgage payments. According to NeighborWorks America, the latest (10th) round of NFMC funding was awarded to 21 state housing finance agencies, 19 HUD-approved housing counseling intermediaries, and 60 community-based NeighborWorks America organizations. e money will go to help provide counseling for at-risk homeowners who are working with their servicers to avoid foreclosure. It is estimated that approximately 122,000 families will be directly assisted with the latest round of NFMC funding. A study conducted by the Urban Institute showed that homeowners who work with NFMC counselors were nearly twice as likely to cure a serious delinquency or foreclosure, and three times as likely to receive a modification cure. "e extent of the foreclosure crisis is evident by the strong request for NFMC funding from the housing counseling community," NeighborWorks America said. "Demand for NFMC grant funds approached $84 million, or more than twice the amount of money that was available in this program round." In March, the NFMC program passed a milestone when the two millionth homeowner facing foreclosure received counseling through the program in the eight years of the program's existence. NeighborWorks America NFMC funds to grantee organizations, which in turn provide the counseling services. e Urban Institute found that homeowners who had been through NFMC counseling and then received a modification saved an average of $4,980 annually. In addition to directly helping families, NFMC funding also goes toward training foreclosure prevention counselors. According to NeighborWorks America, approximately 1,600 counselors are expected to be trained with the latest round of NFMC funding. At the same time the latest round of NFMC funding was announced, NeighborWorks America released its 13th report to Congress, which summarizes the challenges and successes faced by foreclosure prevention counselors in the NFMC program.

• Cover