economist with CoreLogic. “This is the first time in a year that REO sales have outpaced completed foreclosures, and part of the reason for the decrease in the foreclosure inventory.”
FHFA Issues Its Plans for the GSEs to Congress
(D-AK) and John Thune (R-SD) have introduced SB 2054, the Stop the Outrageous Pay (STOP) at Fannie Mae and Freddie Mac Act, and act which prevents the distribution of undisbursed bonus money and moves all Fannie Mae and Freddie Mac employees onto a structured pay scale similar to that of other federal financial regulators. The BegichThune bill follows a series of events from November of 2011, when reports surfaced that the Federal Housing Finance Agency (FHFA) approved nearly $13 million in bonus pay for 10 executives at Fannie and Freddie. In response, Sens. Begich and Thune spearheaded a bi-partisan letter, signed by a total of 60 senators, to FHFA Acting Director Edward J. DeMarco and Treasury Secretary Timothy Geithner expressing outrage over the excessive pay. “Our goal is to make sure the reckless and outrageous bonuses issued to Fannie and Freddie execs last year are never repeated and remain a history lesson on abuse of taxpayer money,” Sen. Begich said. “The two agencies have received over $150 billion in taxpayer funds since 2008, and those executives should not be living like fat cats while many Alaskans and other Americans are struggling to pay their bills, send their kids to college, and make the mortgage payment.” The Begich-Thune STOP Act suspends the current compensation packages of Fannie and Freddie executives and limits the pay for all employees. Specifically, SB 2054: Places all employees of Fannie Mae and Freddie Mac on the pay scale used by the federal financial regulators such as the FDIC and the SEC, as established by the Financial Institutions Reform, Recovery, and
harp 2.0
Your turn National Mortgage Professional Magazine invites you to submit any information on regulatory changes, legislative updates, human interest stories or any other newsworthy items pertaining to the mortgage industry to the attention of:
NMP News Flash column Phone #: (516) 409-5555 E-mail: newsroom@nmpmediacorp.com Note: Submissions sent via e-mail are preferred. The deadline for submissions is the 1st of the month prior to the target issue.
continued from page 28
page or through a company that can help you capture those leads. Second, the above numbers also let us know how many people you can market to through direct mail campaigns, as well as cold calling campaigns. If you set up your direct marketing programs correctly with the right partners, HARP will be bigger than you could have imagined! Raymond Bartreau is chief executive officer of BestRate Referrals, and founder and chief executive officer of www.harpmortgageleads.com. He may be reached by phone at (800) 811-1402 or e-mail RBartreau@BestRateReferrals.com.
MARCH 2012
or outbound call campaign. We are currently seeing more than 2.5 percent responses with marketing campaigns to current Fannie Mae and Freddie Mac loan holders. Once this new plan launches in full force and major news outlets begin reporting on the program, the excitement should drive direct mail responses up well over the three percent mark. The above-stated numbers provide us with a couple important things to consider. First, there will be at least 11 million homeowners (that you can help) that may be searching online for HARP rates at any given time from now until the end of 2013. It is your job to capture that search, either by your own
39
UTAH MORTGAGE PROFESSIONAL MAGAZINE
Illinois Attorney General Lisa Madigan has filed a lawsuit against Standard & Poor’s (S&P) for its fraudulent role in assigning its highest ratings to risky mortgage-backed securities (MBS) in the years leading up to the housing market crash. Madigan filed her suit in Cook County Circuit Court, alleging that S&P compromised its independence as a ratings agency by doling out high ratings to unworthy, risky investments as a corporate strategy to increase its revenue and market share. The Attorney General’s lawsuit alleges that S&P ignored the increasing risks posed by MBS, instead giving the investment pools ratings that were favorable to its investment bank client base and S&P’s profits. “Publically, S&P took every opportunity to proclaim their analyses and ratings as independent, objective and free from its desire for revenue,” AG Madigan said. “Yet privately, S&P abandoned its principles and instead used every trick possible to give deals high ratings in order to retain clients and generate revenue. The mortgagebacked securities that helped our market soar—and ultimately crash— could not have been purchased by most investors without S&P’s seal of approval.” AG Madigan’s suit cites numerous internal e-mails and conversations among S&P employees in the run up to the housing market’s crash that demonstrate the company misrepresented its ratings as objective and independent. In one such exchange, in April 2007, an online conversation via a companybased instant messenger application revealed employees discussing S&P ratings compared to the reality of risk involved, with an employee stating an investment “could be structured by cows and we would rate it.” Madigan said investors relied on S&P ratings because they were historically rooted in the agency’s purported independence and objectivity. S&P’s internal code of conduct states its goal to “promote investor protection by safeguarding the integrity of the rating process.” But, the Attorney General’s lawsuit cites congressional testimony by a former managing director of S&P who revealed that “profits were running the show,” with ratings being assigned to risky investments to help drive profit margins for their clients. S&P, a subsidiary of McGraw-Hill Companies, is one of the nation’s largest credit ratings agencies responsible for independently rating risk on behalf of clients and investors. Madigan said in the run up to the financial crisis, S&P consistently misrepresented the risk of MBS, assigning these securities its highest seal of approval—or AAA rating. This misrepresentation spurred investors to purchase securities that were far riskier than their ratings revealed.
Enforcement Act (FIRREA) of 1989. Under this pay scale, Fannie Mae and Freddie Mac employees would be prohibited from being paid more than employees of other federal financial regulatory agencies (currently capped at $275,000 annually); Prevents any future pay or bonus payments for 2011 and beyond that are in excess of this new pay cap and that have not yet been disbursed. These funds would be used to pay down the national debt; and Requires the FHFA to make Fannie Mae and Freddie Mac salary disbursements data available to Congress and the public without compromising the privacy of individual employees. “It is unbelievable that Congress needs to step in and end these outrageous salaries for Fannie Mae and Freddie Mac executives,” said Sen. Thune. “The American taxpayers have already bailed out these agencies to the tune of over $150 billion and should not be on the hook for millions of dollars in exorbitant salaries.” The House Financial Services Committee passed similar legislation to suspend the bonuses and limit future compensation packages by a vote of 524 on Nov. 15, 2011.
NationalMortgageProfessional.com
Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco has issued a strategic plan for the next phase of the conservatorships of the governmentsponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to Congress. The plan builds on DeMarco’s February 2010 letter to Congress on the conservatorships and sets forth objectives and steps that the FHFA is taking or will take to meet its obligations as conservator. Fannie Mae and Freddie Mac were placed into conservatorship on Sept. 6, 2008 and have since received more than $180 billion in taxpayer support. “MBA welcomes FHFA’s proposal for the next phase of the conservatorship of Fannie Mae and Freddie Mac,” said David H. Stevens, president and chief executive officer of the Mortgage Bankers Association (MBA). “We have been out front on GSE reform issues, and our Council on Ensuring Mortgage Liquidity outlined many of these same types of changes in its September 2009 proposal on the future of the government’s role in the secondary mortgage market.” The FHFA identifies three strategic goals for the next phase of the conservatorships: Build a new infrastructure for the secondary mortgage market; Gradually contract the GSEs’ dominant presence in the marketplace while simplifying and shrinking their operations; and Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages. “With the conservatorships operating for more than three years and no near-term resolution in sight, it is time to update and extend the goals and directions of the conservatorships,” said DeMarco. “FHFA is contemplating next steps to build an infrastructure for the secondary mortgage market that is consistent with existing policy proposals and will support any outcome of the leading legislative proposals. FHFA looks forward to working with Congress and the Administration on a resolution of the conservatorships and a comprehensive review of the nation’s housing finance system.” Stevens continued, “Uncertainty, wherever it exists, must be removed and a clear path forward must be laid out, in order for the housing market in this country to be strong and vibrant. This proposal that FHFA is putting forth shows a strong commitment to doing just that.”
Illinois AG Madigan Files Bill Introduced to STOP Suit Against S&P for Risky Excessive GSE Bonuses MBS Ratings U.S. Sens. Mark Begich