Trump administration officials are putting the finishing touches on a plan to return mortgage-finance giants Fannie Mae and Freddie Mac to private-shareholder ownership, the Wall Street Journal reported. The proposal, coming more than a decade after the government seized the firms to save them from collapse, would seek to put the companies on a sounder financial footing and then release them from government control, if Congress doesn’t enact a more fundamental overhaul. The plan is being developed by the Treasury Department in consultation with a regulator of the companies, the Federal Housing Finance Agency. It could change as it advances through the Trump administration, works its way through the White House and ultimately is submitted to the president for his approval as early as June. The proposal is expected to include a version of what has been called “recap and release,” which would ensure the firms have adequate capital to absorb loan losses in a future housing slump and thus avoid needing another taxpayer-backed bailout. If carried out, the companies could return to a status similar to how they operated before the financial crisis. Still, administration officials would prefer that Congress act on a more sweeping remake of housing finance, and their plan would also make a series of recommendations for lawmakers to consider.
A New York State financial regulator is investigating a security vulnerability at First American Financial Corporation, a title insurance company, that exposed an estimated 885 million records related to mortgage deals, the New York Times reported. The inquiry, by the Department of Financial Services, is likely to be followed by other investigations from regulators and law-enforcement authorities into a security failure that exposed 16 years of digital documents containing bank account statements, tax records, Social Security numbers, wire transaction receipts and images from drivers licenses. In terms of the sheer number of exposed records, the leak appears to be the largest since an attack on Yahoo that compromised three billion user accounts. First American left the documents on a website that was publicly accessible, without any authentication protections, according to a report published on Friday by KrebsOnSecurity, a security news site.
Mortgage giants Fannie Mae and Freddie Mac could be returned to the private market at different times, especially if the government moves to float them on the public markets, the head of the U.S. housing finance regulator told Reuters. It may be preferable to stagger that process due to the complexities involved in getting the government-backed firms, which have different business models, ready for private ownership, said Mark Calabria, director of the Federal Housing Finance Agency, which oversees Fannie Mae, Freddie Mac and the U.S. housing finance system. “I’m open to seeing what makes sense...that kind of sequencing hasn’t been decided, but obviously if you tried to engineer them both at the same time, you’re depending on more things going right at the same time,” he said. “One may be ready before the other, it just depends.” Fannie and Freddie have operated under government conservatorship since they were bailed out during the 2008 subprime mortgage crisis. Washington has struggled for years to devise a plan to safely return the companies, which guarantee over half of the nation’s mortgages, to the private sector. The prospect of a phased privatization could present fresh challenges and risks for some shareholders in the firms, since the enterprises could enter the public markets under different economic conditions. The Trump administration, which is eager to make progress on housing finance reform, last month appointed Calabria, a libertarian economist who previously worked for Vice President Mike Pence, to lead the effort.
U.S. antitrust officials are investigating potentially anti-competitive practices in the residential real estate brokerage business, with a focus on compensation to brokers and restrictions on their access to listings, Bloomberg News reported. The probe was detailed in a civil investigative demand, which is akin to a subpoena, issued by the Justice Department to CoreLogic Inc., which provides real estate data to government agencies, lenders and other housing-market participants. The U.S. residential real estate industry has long faced criticism that it stifles competition among brokerages, protecting agent commissions that are higher than those paid by sellers in many other countries. In 2008, the Justice Department reached a settlement with the National Association of Realtors, a trade group, that was designed to lower commissions paid by consumers by opening the industry to internet-based brokers. The investigative demand to CoreLogic, dated last month, follows a lawsuit filed against the Realtors association and real estate broker franchisors, including Realogy Holdings Corp., claiming they conspired to prevent home sellers from negotiating commissions they pay to buyers’ agents. The Realtors association filed a motion to dismiss the lawsuit, arguing that it misunderstands the role of brokers.
