Fannie & Freddie Hearing Feb. 9
Scott Garrett, chairman of the House Financial Services Committee’s Subcommittee on Capital Markets, announced that he would hold a hearing Wednesday on Feb. 9 on reforming Fannie Mae and Freddie Mac. “This hearing will be the first in a series of hearings to examine the steps Congress can take right now to protect taxpayers from the ongoing bailout of Fannie Mae and Freddie Mac.” The hearing is titled “GSE Reform: Immediate Steps to Protect Taxpayers and End the Bailout,” and will focus on immediate steps that Congress can take to begin F&F’s transition out of Federal conservatorship and examine ways to end the $150 billion bailout.
Loan Limits Going Down
Speaking of proposals, it is heavily rumored that the Obama administration will recommend reducing loan limits for Fannie/Freddie eligible loans. If that happens, it will, of course, make obtaining a home loan in high-priced areas more expensive. The $729,750 figure, of course, is only temporary and only available in certain areas. (In the old days, conventional loan limits were set around Thanksgiving, with secondary marketing managers being hounded by producers leading up to the announcement.) “The administration is now likely to suggest that Congress allow the policy to lapse as scheduled in September, lowering the loan limit to $625,500.”
BofA Restructuring Mortgage Unit
Not only is Bank of America splitting its mortgage business into two units (with a new division created specifically to handle foreclosures and discontinued loan products), but is also exiting the reverse mortgage business. A recent story in Bloomberg points out that BofA bought Countrywide for $2.5 billion (some figures have it at $4 billion), but that approximately 1.3 million home loans are in some stage of default. In 2010 Bank of America Home Loans list nearly $9 billion, with billions more set aside in reserves. The new “Legacy Asset Servicing” unit will be responsible for resolving servicing issues, mortgage modifications, and buyback claims. The bank reached a settlement last month with Fannie & Freddie on some of Countrywide’s loans, but analysts have estimated the bank faces up to $10 billion in claims from private buyers. Bank of America Home Loans will continue to handle new loans and the servicing of current loans, with the grand total being slightly over $2 trillion.
In addition, Bank of America said it will exit the reverse mortgage origination business and shift the staff from that business to other mortgage operations. Loans in process will be funded, and existing loans continue to be serviced (about 100,000 of them).