Homebuilders Applaud Bold Move from Incoming FHFA Director Watt (XHB) (PHM) (TOL)
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Those involved in the housing sector - from private mortgage insurers, originators, and homebuilders - are cheering news announced late Friday that incoming Federal Housing Finance Agency (FHFA) Director, Mel Watt, will delay the guarantee fee (g-fee) and risk-based pricing fee recently announced by the FHFA, Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC), which threatened to lower borrowers access to credit.
The g-fee increase was scheduled to be 10 bps and was set to begin on March 1, 2014. In addition, Fannie Mae and Freddie Mac announced that loan level fees were also going up for any loan greater than 80% LTV or for borrowers with FICO scores below 760. These fees were expected to add an additional 20 bps to 40 bps for these borrowers.
Below is the statement from Watt:
Upon being sworn in as director of the Federal Housing Finance Agency, I intend to announce that the FHFA will delay implementation of the [guarantee] fee and risk-based pricing plan announced in the FHFA's News Release dated December 9, 2013 (and detailed more fully in the Loan-Level Price Adjustment Matrix released earlier this week) until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan's likely impact on the [companies'] risk exposure, the cost and availability of credit and how the plan would interface with the qualified mortgage standards.
I do not expect to elaborate further on this statement until after I have been sworn in as director of the FHFA in January. However, I felt that it was important to announce my intentions now because of the prospect that some lenders could start to price the announced changes into the market well before the effective dates of the changes outlined in the FHFA's December 9, 2013 News Release.
Commenting on the decision, FBR's Edward Mills said, "this is a victory for the
housing finance industry and should ease concerns that these fees were going to increase the cost of mortgages backed by Fannie and Freddie or prevent borrowers from accessing credit."
"We believe that this is the first of a series of decisions by Incoming Director Watt to preserve/expand mortgage credit availability," he added. "We view this announcement as positive for housing generally, but specifically for private mortgage insurers, originators, and homebuilders."
Homebuilding stocks are higher across the board Monday, as represented by the 2.2% move higher in the SPDR S&P Homebuilders ETF (NYSE: XHB). Leading the sector is PulteGroup, Inc. (NYSE: PHM) which is up 4.6%, Toll Brothers (NYSE: TOL) up 4.1%, and Lennar Corp. (NYSE: LEN) up 3.8%.
Private mortgage insurance stocks are also higher. Radian Group Inc. (NYSE: RDN) is up 4%, Genworth Financial Inc. (NYSE: GNW) is up 1.4% and MGIC Investment (NYSE: MTG) is up 1%
Mr. Watt will be sworn in as FHFA Director on January 6, 2014.
The g-fee increase was scheduled to be 10 bps and was set to begin on March 1, 2014. In addition, Fannie Mae and Freddie Mac announced that loan level fees were also going up for any loan greater than 80% LTV or for borrowers with FICO scores below 760. These fees were expected to add an additional 20 bps to 40 bps for these borrowers.
Below is the statement from Watt:
Upon being sworn in as director of the Federal Housing Finance Agency, I intend to announce that the FHFA will delay implementation of the [guarantee] fee and risk-based pricing plan announced in the FHFA's News Release dated December 9, 2013 (and detailed more fully in the Loan-Level Price Adjustment Matrix released earlier this week) until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan's likely impact on the [companies'] risk exposure, the cost and availability of credit and how the plan would interface with the qualified mortgage standards.
I do not expect to elaborate further on this statement until after I have been sworn in as director of the FHFA in January. However, I felt that it was important to announce my intentions now because of the prospect that some lenders could start to price the announced changes into the market well before the effective dates of the changes outlined in the FHFA's December 9, 2013 News Release.
Commenting on the decision, FBR's Edward Mills said, "this is a victory for the
housing finance industry and should ease concerns that these fees were going to increase the cost of mortgages backed by Fannie and Freddie or prevent borrowers from accessing credit."
"We believe that this is the first of a series of decisions by Incoming Director Watt to preserve/expand mortgage credit availability," he added. "We view this announcement as positive for housing generally, but specifically for private mortgage insurers, originators, and homebuilders."
Homebuilding stocks are higher across the board Monday, as represented by the 2.2% move higher in the SPDR S&P Homebuilders ETF (NYSE: XHB). Leading the sector is PulteGroup, Inc. (NYSE: PHM) which is up 4.6%, Toll Brothers (NYSE: TOL) up 4.1%, and Lennar Corp. (NYSE: LEN) up 3.8%.
Private mortgage insurance stocks are also higher. Radian Group Inc. (NYSE: RDN) is up 4%, Genworth Financial Inc. (NYSE: GNW) is up 1.4% and MGIC Investment (NYSE: MTG) is up 1%
Mr. Watt will be sworn in as FHFA Director on January 6, 2014.
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