Petits prêteurs ont augmenté la vente directement au GSEs une épée à double tranchant

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The Federal Housing Finance Agency's Office of Inspector General (FHFA OIG) has released an evaluation of Fannie Mae's and Freddie Mac's (the GSEs) increased recent level of purchases of loans from small banks, credit unions, and non-bank mortgage companies.  Such purchases, OIG said, presents both potential benefits and certain risks.  

Historically the GSEs have purchased loans from large commercial banks and other financial companies that acted as loan aggregators by purchasing mortgages originated by smaller lenders and bundling them with their own loans for sale.  The aggregation system offered several benefits to participants:

Aggregators received volume discounts on guarantee fees and passed a portion on to smaller lenders. Aggregators usually acquired associated servicing rights for the loans they purchased, gaining ongoing fee income and cross selling opportunities to the borrowers they serviced.The aggregators provided an additional layer of review to ensure loans met GSE underwriting standards.The GSEs did not have to track the financial condition and loan compliance of hundreds of small lenders.Aggregators may have had more financial capacity to honor GSE repurchase demands.

This system changed radically after the housing crisis.  Fannie Mae recently reported that only 5 of the top 20 mortgage originators in 2006 are currently active in the mortgage market, having failed or been absorbed by other lenders.  Moreover several large aggregators have stopped purchasing mortgages originated by other lenders while others have reduced their aggregation activities.  In early 2011, the GSEs' top five sellers delivered between 65% and 70% of the mortgages purchased by each GSE.  By the third quarter of 2013 these purchase had dropped to less than half.

In response many credit unions, thrifts, smaller banks, and nonbank mortgage companies have stepped up their direct sales to the GSEs which have seen a steady increase in their number of their active mortgage seller counterparties.  Between late 2007 and late 2013 this number grew by an average of about 30% for the two GSEs.  At Fannie Mae, the smallest sellers-those outside the top 50-gained the most market share, increasing from 8% to 22%, while it was mid-tier sellers at Freddie Mac which expanded market share from 24% to 43%.

Lenders can sell loans to the GSEs in one of two ways.   They can swap the loans for GSE mortgage backed securities backed by the same loans then sell them to investors or they can sell the mortgages to the GSEs for cash after which the GSEs securitizes the mortgages and sell them to investors themselves.  Either way the mortgages end-up as part of a GSE mortgage-backed security (MBS) and lenders obtain cash they can use to make additional loans, creating liquidity for the housing finance market.

In exchange for a "the guarantee fee," the GSEs guarantee that investors will continue to receive the timely payment of principal and interest on their MBS regardless of the credit performance of the underlying mortgages. The GSEs have established ongoing post-purchase quality reviews to determine conformance with their underwriting standards and may require lenders to repurchase mortgages that do not comply.  Since the financial crisis the GSEs have recovered nearly $100 billion through assertion of repurchase claims.

Traditionally, smaller lenders have sold their mortgages to the GSEs for cash because such sales are less operationally challenging than MBS swaps so it is not surprising that the market share of cash-window sales has increased significantly over the past few years.  Those sales grew to between 20% and 25% of each GSEs' total mortgage purchase volume by late 2013 with Fannie Mae's cash window sales increasing at a faster rate than Freddie Mac's.

In conducting its evaluation, OIG identified several reasons why the surviving aggregators may no longer serve as conduits for small lender loans.

A high volume of repurchase requests from GSEs for legacy mortgages they purchased between 2005 and 2008 has led large banks to reduce future exposure to loans originated by other lenders and increase their scrutiny of mortgages they do acquire.Increased GSE guarantee fees have caused large banks to realize less compensation for assuming the risks of representation and warranty liability from small lenders.Because of new banking financial regulations that require higher levels of capitalization large banks have prioritized their own lending over purchasing from third parties.

Enterprise data also indicate that sales from nonbank mortgage companies, i.e., those unaffiliated with commercial banks, represent a growing percentage of their mortgage purchases. According to Fannie Mae documents, 46.6% of its mortgages were purchased from nonbank mortgage companies in the first three quarters of 2013, which was up from 33.2% in 2011. Freddie Mac data shows that its share of mortgage purchases from nonbank mortgage companies more than doubled from 8.4% to 20.5% over that same period, but its share remains significantly lower than Fannie Mae's share.

OIG concluded that the recent shift in sales to smaller and nonbank lenders while reducing the GSEs' concentration risks, a product of their financial exposure to a few large commercial banks, may have led to new risks and challenges.  

Elevated Counterparty Credit Risks. This is a risk that a counterparty will default on representation and warranty obligations. The GSEs' traditional top sellers, large commercial banks, are generally well capitalized and are regulated by federal agencies to enforce these capital standards, and have financial strength that allows them to fill their responsibilities. In contrast some smaller and nonbank lenders have relatively limited financial capacity and the latter are not subject to federal safety and soundness oversight. Consequently, the GSEs could incur financial losses on mortgages purchased from such lenders if they do not comply with established underwriting guidelines. There are already questions about the long-term viability of some of these counterparties as the refinance boom winds down.Operational Risks. Some smaller lenders may lack the sophisticated systems and expertise necessary to manage high volumes of mortgage sales to the GSEs. This could result in potential quality control and fraud management and regulatory compliance problems.

The change in the composition of sellers may also increase the GSEs operational and costs.  The increasing number of lenders will require more resources to monitor financial strength and compliance and the informal regulatory role formerly played by the aggregators has also disappeared from the sales equation.

Elevated Reputational Risk. Buying loans from some nonbanks could damage GSE reputations if, for example, they bought loans from a lender later revealed to have harmed consumers through fraud or other misconduct or if several of the entities failed as could occur under adverse market conditions.

OIG confirmed that since at least 2012 FHFA has been aware of the risks associated with the increased sales to the GSEs by these smaller entities.  The GSEs have reportedly taken steps to mitigate these risks but due to other examination priorities, FHFA has not specifically tested and validated them.  FHFA indicates it plans to conduct several examinations of GSE management of these counterparties in 2014 and is developing guidance intended to strengthen the GSEs' management of risks associated with them. OIG said it will continue to monitor FHFA's efforts to oversee this critical issue.

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MBS journée : Vente aux enchères du Conseil du Trésor, Minutes FOMC et NFP spéciale Reflections

We will come back to normal 'day' stuff from the road in a paragraph today because I spent most of my time to write about something that I would otherwise do.

There's not much to say on the bond markets that continue trading in a range (marked by yields 10 yr 2.66% on the high side and something. as less clearly defined at the foot  It could be as low as 2.40, but key to 2.57 and 2.47 levels would need to be broken first.  We are right on the mark 2.57 commercially beginning of one night or more.  Perhaps FOMC Minutes this afternoon offers some advice.  Apart from this and the auction of 13 10 yr Treasury, the calendar is usually empty.

Now for these "special NFP reflections."

There is a problem in the world of media.  As far as I know it grows since before I was born and will probably get worse before it gets better.  I am talking about sensationalism.

The more efficient we, as humans, get them to create and to digest the news, the less interesting the same old news becomes.  The problem is: it's still the same old new.  It will always (in general).

Very rarely is it a new preview glorious and scandalous in the world of finance and the economy, but the media has learned that you are more likely to pay attention if they pretend like every day is holder of a new and exciting glorious scandal.

It is search of sensations (and peddling) it is more beautiful.  Instead of "eat well, exercise and get enough sleep sleep", we are bombarded with"three weird stuff that will completely revolutionize your life" and others.

It is a thing for sites like Huffpost, etc to do so.  But it is irresponsible for sites in finance/econ apparently objective to do so.  I don't think even intentionally do most of them, it's just that there so much, so much, so many quite boring and unnecessary, data from away with major economic releases that very few people will really take the time to chew the number required to disprove what may seem viscerally tendentious allegations.

It is normally easier just to ignore those apparently biased claims, especially when they are at cross-purposes or otherwise, seems to appeal to our innate interest in scandal, conspiracy, and ideological inertia (our tendency to push back against new ideas or facts that go against our current beliefs).

For these reasons, I can understand why some analyses of jobs most recent report that characterizes as a "harbinger of the unexpected economic doom because of job losses in full-time creeping disguised as a beat solid data-rigging of the BLS evil manipulative because" has enjoyed immediate popularity!

After all, we love a good scandal.  We like to push back against the establishment.  It is easier to be a cynic unpleasant to be a consensus-builder.  It's fashionable to hate everything about the Government (it does perhaps not otherwise irrational, according to your definition of hatred).  And finally and most importantly, the resumption is not appearance as normal historical examples of collections, so anything that validates that feeling echoed with the ring of reality right out of the gate.

It turns out that there is a grey area with the NFP data.  There is almost always a sort of zone grey with almost any report.  In particular, the NFP is so colossal, that depends really just how hard you want to dig and what is your predisposition.  You can always find a way to prove your point if you have a point to prove!

In this case, I do not have a point to prove in respect to the goodness or badness of the data.  However, I have a almost the same problem with cheerleader girls and default conspiracy theorists.  The worst subjection of these two categories are those who follow their banner blindly, without even seeking to identify the counterpoint.

It's funny...  Post-SBL analysis I've seen usually has castigated ignorance of the mainstream, opinion of cheerleader.  But best I can tell, these opponents of the conspiracy theorist are the mainstream in this case!  When econo-17 blogs and the New York frickin' times is highlighting the 'but yes' in the workings of this report, it is therefore more avant-garde to do the same thing - regardless of how outraged, you manage to find (my apologies to friends and family with Apple products, but this is how I view the 'i' culture.)  It was counter-culture which was so popular that now Android/PC is counterculture.  For the record and in the spirit of the counterpoints, my wife and my colleagues say «Yes, because Apple stuff work!»  Perhaps they are right.  Maybe it depends on the person).

All this to say, I dug for the seedy belly of survey data that seems to have caused some outrage this week, and wouldn't you know, there are shades of gray!

In fact, the most interesting statistic which completely disarms the red flags of the full-time employment which is through June of last year, the net remuneration, unscaled, full time for the cohort '16 and greater' (that's everyone that they count) was 187 k.  Through June of this year, it was 677 k.  Read only fourteen times if desired.  Once more, there are more than three times as many full-time jobs created in the first half of 2014 vs. 2013 on a non-adjusted basis.

I'll post the rest of the raw tomorrow morning, but suffice it to say that the seasonal adjustments are haywire.  This is side-hilarious ironic in light of the conspiracy of the crowd generally test the idea of seasonal adjustments - claiming the cheerleader girls and crooked Government uses to manipulate numbers to look better than them - but their current findings are based on the same seasonal adjustments!

To be sure, I don't bring you a public conclusion to do battle with the findings of conspiracy - fair balance which explains how each side can be right depending on where they want to focus their attention.  The implied lesson is to make your trust wisely when it comes to form opinions on what is happening and do your own research when at all possible.

Priced below are delayed, note the timestamp at the bottom. Real time pricing is available via MBS's Live.

Les Doc Martens sont à vendre.

Le fabricant anglais des célèbres bottines, revenues ces dernières années sur le devant de la scène, est prêt à les céder à un prix qui pourrait atteindre 248 millions d'euros.




La rumeur courait depuis février. Elle vient d'être confirmée, selon The Independent : le célèbre fabricant des bottines Doc Martens sur coussins d'air, portées actuellement, entre autres stars, par les chanteurs des Black Eyed Peas, a bien été mis en vente par son propriétaire depuis 1959, le britannique R Griggs Group. Le prix de la marque Dr. Martens pourrait grimper jusqu'à 248,37 millions d'euros en cas de cession totale. Bien plus que les 145 millions d'euros évoqués il y a quelques mois. Plusieurs fonds seraient déjà sur les rangs, dont Electra Partners.
L'entreprise a réalisé l'an passé un chiffre d'affaires de 110 millions de livres (136,60 millions d'euros), en augmentation de 33% par rapport à 2010. Son résultat atteignait 15 millions de livres en 2011. Ses ventes sont réalisées pour moitié aux États-Unis, son principal marché avec l'Europe, où Dr. Martens compte plus de 10 magasins, dont deux en France. Le fabricant concentre la majorité de sa production en Asie où, en quête de rentabilité, il a délocalisé à partir de 2003. Seules quelques séries haut de gamme restant fabriquées au Royaume-Uni, dans l'usine historique de Wollaston.

Des policiers anglais à Johnny Depp: