Monthly Archives: June 2014

The Borrower Effect: Impacts & Implications of 2014 Loan Limits

Posted on by NAWRB

The Great Depression left the United States with widespread unemployment and financial collapse. Two million construction workers were out of work. Home mortgages were typically short-term loans that were limited to 50% LTV. In 1934, the National Housing Act created the Federal Housing Administration (FHA) to improve housing conditions and provide a more accessible housing finance system to rejuvenate and stabilize the broader housing finance market that was then only serving borrowers with means. Today’s FHA is still focused on stabilizing the broader housing markets by ensuring that properly documented and qualified borrowers, including those in the low to median income ranges, and in some cases, those adversely affected by and recovering from the recent economic crises, can systematically access affordable mortgage financing, purchase good, safe homes priced at or below the median income.

The end of 2013 marked the expiration of the emergency legislation implemented during the economic crisis from which the US is only now recovering. In similar fashion to the Depression era emergency legislation initially creating the FHA, the Economic Stabilization Act (ESA) of 2008, now expired, and it’s successor, the Housing and Economic Recovery Act of 2008 (HERA) both included provisions to stabilize the broader housing markets when the US housing market had been once again roiled by a severe national economic crises.

ESA increased the national FHA loan ceilings nationwide and allowed the highest cost markets to hold a $729,750 loan limit to maintain housing finance liquidity. Now, the HERA regulations reduce the national loan ceilings in approximately 20% of the more than 3,200 counties for which FHA establishes loan limits, adjusting for median house price corrections and recovering markets. Under HERA, the highest cost markets now have a loan limit of $625,500 – a reduction of $104,250.

Tom Clifford, Branch Manager of New American Funding in Paulsbo, Washington shared, “Yes, we have been affected by the FHA loan limit reductions in Washington State. Our county limits decreased from $475,000.00 to $307,000.00. The larger challenge however, is the drastic increase in the monthly MIP (mortgage insurance premium) making it a monumental challenge for median income homebuyers to afford FHA financing with home prices stabilizing and or increasing.” Clifford goes on say that “Realtors are telling their buyers that FHA financing is not a viable option any longer and steering them away, which has not been the case in years/decades past.”

Nevada Area Sales Manager for New American Funding, Chris Garza, also confirms the lower loan limits “have negatively impacted [Las] Vegas.” In addition to the downward pressure that reduced loan limits are having on the prospective homebuyer’s purchasing power, Garza says that “…Fannie Mae and Freddie Mac having much tougher…credit guidelines,” is also negatively impacting the Nevada market. So let’s unbundle each of these significant changes and the effects they’re having on the housing markets and the borrower’s purchasing power. In both of these high cost markets, the senior mortgage professionals identified three major changes; (1) The HERA implementation lowering the FHA and Conventional (GSE) loan limits; (2) the increased Mortgage Insurance Premiums required to insure the FHA loan product, and (3) the seemingly more restrictive credit environment in which the GSEs are operating.

2014 Loan Limits
On December 6, 2013, HUD announced the new loan limits with the January 1, 2014 effective date. Fortunately, the first-time and affordable homebuyers seeking to purchase homes in markets where the housing costs remain low, did not experience any loan limit changes. Their maximum available loan amounts remained at $271,050.

However, about 652 (20%) of the 3,234 counties for which HUD sets loan limits, will see reductions to their maximum loan amounts as FHA implements the long delayed requirements promulgated by the HERA legislation. These 652 counties are considered “high cost” markets and FHA historically provided for them to have loan limits higher than the median housing price for that county. ESA allowed the ceiling to rise to 125% above median housing price to keep mortgage funds available and sufficient to cover the high house prices created in the advent of the crises. HERA corrects the ceiling in these high-cost markets to 115% of the county’s current median housing price.

It’s important to understand that the emergency legislation deployed through ESA enabled the federal government to fill the housing finance liquidity void created by the mass and abrupt exodus of private sector financing during the U.S. mortgage crisis. Housing is the second largest contributor to our nation’s Gross Domestic Product (GDP), historically comprising 17-20% of GDP and second only to Consumerism, and the federal government could not allow the funding for housing finance to evaporate. This temporary emergency measure was intended to be a short term “plug” and, in 2009 was to be replaced by the more sustainable and permanent HERA, which amended the National Housing Act to tie the FHA’s loan limit “ceiling” and “floor” to the conforming loan limit standard used by Fannie Mae and Freddie Mac.

We can see in the graph above, that as a result of HERA, 183 counties across the US now have loan limits that are lower by a whopping $100,000 or greater!

As you might expect, California felt the heaviest impact of HERA, with 54 counties receiving downward adjustments. In contrast, Texas saw 27 counties receive upward adjustments. While California was the largest issuer of FHA Single Family endorsements in 2013, in both dollar volume ($24.7B) and loan count (89.1MM), only 7.7% of those issuances were above the 2014 loan limits.

Nonetheless, reductions of this nature have constrained the purchasing power of borrowers in the impacted markets, causing them to rethink their home buying strategy and possibly even their timing.

The map above provides a visual depiction of the heavily impacted markets.

Note that the concentration of “reds” and “oranges” are along the coastal regions where population density is higher. Typically, the high and highest cost markets are designated as such as they tend to also be higher job producing markets, which create higher density populations, which in turn create higher housing demands. And as we all know, increased housing demands tend to increase house prices.

So why is all of this important for the real estate professionals working across the housing continuum? The job seekers filling the red and orange landscape fit the traditional first time homebuyer profiles for which the FHA program was developed. 2013 was a very strong recovery year for housing prices, with many markets showing strong improvement. And even though some of these high and higher costs markets were hit so severely during this economic crisis, they had risen so high prior to it, that with the reduced loan limits, their current prices are out of reach for the gainfully employed first-time homebuyer. Legitimate homebuyers who managed to save the 3-3.5% required to buy their entry level home were also located in those 183 counties who’s loan limits were reduced by $100,000 or more. Where do they now derive the additional funds to fill the down payment gap created by the reduced loan limits?

The National Association of Realtors (NAR) reports that in a normal market environment, first-time homebuyers consummate 40% of home sales. By the end of 2013, NAR reported that only 28% of the home sales were to first time homebuyers!

At upwards of 80%, the GSEs and FHA remain the main sources of housing funding. While it’s important to enact the requirements of any final piece of legislation, would it have been truly detrimental to have enacted these particular requirements/corrections in phases? Especially, since it had already been completely delayed 5 years past its legislated enactment date.

Brainpower and models much larger and more intense than ours evaluated these changes and made the decision to move forward on all fronts in one swooping, market pervasive move. With the overall economic recovery still progressing very slowly, the recovery in the housing sector still far from “full-steam-ahead”, and the prevailing lack of meaningful private financing, one begins to wonder. Is it possible that all three agencies are repressing “bubble” fears?

Come back next month to get our perspective on drivers and impacts of FHA’s higher MIP and the increasingly “intense” credit mindset in the conventional loan arena.

—

Ingrid Beckles
Founder & CEO of The Beckles Collective, LLC
NAWRB’s Regulatory & Policy Chair
ibeckles@thebecklescollective.com

 

 

Policy Prescriptions to Assist Women Entrepreneurs

Posted on by Ann Sullivan

Does the name Alice Paul ring a bell? Alice Paul led the effort to give women the right to vote. She raised money for the cause, led a group of White House protesters known as the Silent Sentinels, was imprisoned three times, force-fed raw eggs when she staged a hunger strike, and kept the pressure on President Wilson to support ratification of the 19th Amendment. She was all of these things, but above all else, she was a fierce advocate on behalf of women.

Today, hunger strikes or stage protests to stop traffic are less common, but we do raise money and we do advocate for the advancement of women-owned businesses. Having just celebrated Women’s History Month, the following are policy changes that will enhance the growth of women owned businesses.

Strengthen Counseling for Women Business Owners.

There are 106 Women Business Centers (WBCs) across the country that counsel and train more than 137,000 entrepreneurs and aspiring entrepreneurs annually, creating 700 new businesses a year at a cost of $122 per person. Last year, WBCs outperformed their goals by 18% and enjoy high customer satisfaction ratings. With the success of these women business centers, Congress should invest in more funding to establish additional centers and to boost the ones currently in existence. The centers are required to match these federal grants by raising matching funds from other sources, but with $14 million in federal money for the whole program they are boot strapped. Women deserve better.

In addition, other entrepreneurial training and counseling programs operated by the U.S. Small Business Administration (SBA) should be given priority when it comes to funding. Programs such as the Program for Investment in Microentrepreneurs (PRIME) are critical pieces of the puzzle when it comes to supporting women entrepreneurs with the skills needed to successfully run a business. Studies show that these investments pay off. According to the Association for Enterprise Opportunity’s (AEO) most recent report, Bigger than you Think: The Power or
Microbusiness in the United States, businesses that receive training have higher success rates (88% are still in business after five years, compared to a 50% success rate for businesses that do not) and have average annual revenues 38% higher.

Similarly, the Department of Labor (DOL) should encourage entrepreneurship as a viable job strategy. The DOL oversees a national network of job training centers, which are allowed to provide entrepreneurial training to unemployed individuals interested in starting a business – thus creating a job for themselves. However, a barrier exists that prohibits these centers from counting people starting a business as a “successful employment outcome,” and discourages these centers from providing entrepreneurial training. The DOL should change their performance metrics to accept a business startup as a successful employment outcome.

Increase Capital Access for Women-owned Businesses.

Women entrepreneurs continue to struggle to access capital to start or grow a business. According to Women Impacting Public Policy’s (WIPP) most recent annual member survey, women make an average of two attempts to access capital, securing a loan only 60% of the time.

The SBA operates a number of loan programs essential to women-owned small businesses: the 7(a) loan program, the Microloan Program, and the 504 commercial real estate loan program. These programs are supported by federal funding, meaning any decrease in funding reduces their ability to make loans. Congress should ensure adequate funding in order to meet the demands of women-owned businesses.

The advent of online crowdfunding is another recent development and step in the right direction, allowing businesses to raise up to $1 million. However, the Securities and Exchange Commission (SEC) threatens to derail it from taking off with burdensome compliance and reporting requirements. The SEC should ensure these costs stay at a minimum to allow this innovative model to take off.

Bring Women to the International Marketplace.

March 8th was International Women’s Day — a good reminder that expanding U.S. women’s business presence abroad through exporting should be a top priority. Many women business owners limit themselves to selling domestically because the international market is too daunting. A simpler, streamlined exporting process, one focused on getting our products abroad, would help. The dividends are significant: women-owned businesses that exported have on average more than 100 times the total annual receipts, five times as many employees, and more than triple the receipts per employee than those only selling domestically. WIPP operates an export education platform, ExportNOW focused on encouraging more women entrepreneurs to engage within the global marketplace to increase their success.

Bring Parity to the Women’s Federal Contracting Program.

The U.S. federal government is the world’s largest consumer —spending more than half a trillion dollars annually. You may be surprised to know that the goal — not mandate — for federal agencies to buy from women-owned companies is 5%;and the government has never met it. The Women-Owned Small Business (WOSB) procurement program, designed to ensure the mandate is met, does not have parity with other contracting programs. There are some bills to combat this in Congress — though none have been a priority for the leadership. That seems to be what the suffragettes fought for — parity. So why are we fighting for this 100 years later?

The histories of women like Alice Paul, and the countless other Suffragettes, serve as reminders of how hard we have fought to achieve the present. But more work needs to be done. To quote Alice Paul, “When you put your hand to the plow, you can’t put it down until you get to the end of the row.” We won’t.

—

Ann Sullivan
WIPP Government Relations
1156 15th Street, NW, Suite 1100
Washington, DC 20005
202-626-8528

 

Diversity in the Housing Market

Posted on by NAWRB

 

Diversity in the housing market is a broad topic, and one with many avenues to venture down. There is a range of buyers and sellers and there always will be. Further, there are an equal number of products for those same buyers/sellers as well. Over the last few years it went from homeowners to banks, investors, foreigners and it is beginning to circle back to homeowners.

Reflecting back on the most recent U.S.Census Bureau State and County Quick Facts data, one can immediately notice diversity, from the various ethnicities, age makeups, and types of homes being owned. This is by far the most widely assumed diversity today within the American melting pot. Most notably though is the homeownership rate. Why is this important? Homeownership has always been the driving force within the U.S. economy, but over the last few years the housing market has been impacted dramatically, as well as the households that participated during the run up to the housing crash. We saw many short sales, foreclosures, and REOs; the resulting effect was many displaced households forced to enter into the rental market.

Those forced households were in a state of credit repair for the last few years. We are now seeing those same homeowners re-entering the housing market. Their attitudes on financing are completely different, as well as their choice of home; people are now living within their means. Competing against these displaced persons are the younger generations in their twenties and thirties beginning their careers and looking to buy their first home. With scarce inventories of homes an increased demand for new housing has arisen and the new trend shows that first time buyers are from the younger generations. These demographics favor higher-end lofts, condos, and townhomes over the traditional single-family residences.

There are plenty of examples of these high-end properties in the Los Angeles area, and the model is slowly working its way out to the Inland Empire. In Los Angeles there are the Ritz-Carlton Residences, the Wilshire Coronado, and 432 Oakhurst set to open in the summer. Most of these communities offer gym facilities, pools, pet amenities, and social activities for residents to interact with one another. In the Inland Empire Lewis Development Corporation built Santa
Barbara in Rancho Cucamonga.

Within the Inland Empire we are seeing homebuilders build again, and this is a positive sign for the area. A unique finding came from The Urban Land Institute’s (ULI) report on Emerging Trends In Real Estate 2014, “…interest in development is up in 2014, and it isn’t the multifamily sector, that lands at the top of the list. Industrial development is where respondents feel the best opportunities exist for development in 2014.” The Inland Empire has long been a hub for industrial warehousing and this amplified emphasis on industrial could spell improved demand for housing starts. Well-known Inland Empire economist John Husing estimated an increase in housing starts of 6,442, up from 4,737.

The Inland Empire is comprised mainly of blue-collar workers, and a potential industrial spike will likely increase blue-collar jobs. In John Husing’s same presentation he highlighted that manufacturing could be a major growth source for the Inland Empire. This in turn will attract more workers, and as a result increase the demand for housing. With the median wage for manufacturing sectors between $40,000-$55,000, and using the industry standard that a mortgage payment should not represent more than 35 percent of monthly wages, the higher quartile of blue-collar workers qualify for a $225,000 dollar home, with a 3.5 percent down payment. What the above figure describes is a need for moderately priced housing.

Another facet to the home buying market is the entrance of the female consumer. In an Urban Land Institute (ULI) report titled, Resident Futures, the researchers noted young women in their twenties are buying houses at twice the rate of males. More women are entering the housing market, and their needs, wants, and desires are driving a fresh approach on new communities. An MSN story highlighted the following eleven demands of women buyers: big closets, jetted bathtubs, location, security, a great place for socializing, dedicated laundry room, low maintenance, separate shower and tub combination, two-car garage, great kitchen, and a smart layout. With no signs of slowing, the woman consumer is one that the housing industry will be heeding in their housing concepts.

Fostering more housing diversity is the Baby Boomers. The Baby Boom generation was born between 1946-1964, with roughly 4 million born every year from 1954-1964 making up 40 percent of the US population, and is one of the largest groups in the United States. At the date of this publishing the youngest Baby Boomer is 49 years old. As the enormous population of Boomers ages, their need for adequate housing will be stressed. Signs of these developments are already in place as more new homes include a downstairs suite complete with separate bedroom, bathroom, and entrance.

Real estate is extremely fragmented and no two geographic areas or communities are the same. Though some basics remain constant, the consumer in 2014 is very diverse and has a different outlook on what a home should be. Scared from the 2008 housing crash and subsequent recession, the consumer is very cautious and more financially aware. Moreover as the Baby Boomers continue to age their impact in the local markets will also drive change and product types in the housing market. The world will continue to shrink as well, and as people immigrate and emigrate to and from areas, the local real estate markets will evolve to reflect these changes. Diversity is inevitable, and the real estate industry is evolving to accommodate and embrace these changes.

—

Scott Kueny
Strategic Business Partner
Ticor Title Company
www.ticoroc.com

 

 

In Which Dimension is Credit Constrained?

Posted on by Mark Fleming

The year 2014 is sure to be another eventful one in mortgage finance. A litany of new regulations are prepared to be implemented, the economy is projected to improve, driving mortgage rates higher, and demand to refinance loans is expected to decline further. The overall size of the mortgage market, in dollar terms, is anticipated to be significantly smaller than in 2013. In light of these market conditions, one of the most discussed issues right now is the availability of credit for mortgage borrowers – is mortgage credit availability too tight? The importance of this question cannot be understated, particularly because of the impending implementation of the Qualified Mortgage (QM) standard and the mortgage market’s determination of the types of credit it will offer to borrowers.

Whether credit is too tight or too loose is an especially hard question to answer because there is no one single measure of credit availability. Nonetheless, it is possible to look at a variety of measures that collectively influence a borrower’s access to credit: borrower credit worthiness, loan-to-value (LTV) ratios, debt-to-income (DTI) ratios, the level of documentation, the propensity of adjustable rate (ARM) loans and the share of purchase-money loans.

To answer the question of whether each of these credit measures is too loose or too tight requires a determination of what would constitute a “normal” level of availability. For example, the average credit score of all originated first-lien purchase loans in October 2013 was 749. The average credit score over the year before the Federal Reserve announcement encouraging the use of ARMS in February 2004, and subsequently raising the federal funds rate, was 710. In percentage terms, this is only a 5-percent difference. The average doesn’t show us that the share of originated first-lien purchase loans in October 2013 with credit scores below 620 (typically ineligible under GSE guidelines) was 0.3 percent, but averaged 29 percent over the year before the Fed announcement. Credit to borrowers with low FICO scores was normally available prior to the beginning of the housing boom (as marked by the Fed announcement), but clearly is not currently. For each measure of credit availability, it is much more insightful to compare the share of the riskiest subset of the entire measure’s distribution to that same share prior to the housing bubble. Credit availability in each measure represents the extent to which lenders originate loans to the riskier subset of the distribution.

In the chart, each axis represents a different measure of credit availability. The inner hexagon crosses each axis at a value of 100, which is the reference point for the normal value for the measure illustrated on that axis, based on the average over the year preceding the Fed announcement in February 2004. For example, as described above, the share of first-lien purchase loans in October 2013 with credit scores below 620 was 0.3 percent, but averaged 29 percent over the year before the Fed announcement. Therefore, relative to a normal share of 29 percent, indexed to 100 and represented in the “normal” hexagon, the “current” unbalanced hexagon clearly shows the constrained availability of credit to low credit score borrowers. For each measure, the “current” and “maximum” unbalanced hexagons represent the deviation from normal for each measure both currently and at the loosest since the start of the housing bubble, respectively.

Immediately apparent from this chart is that credit availability is tight for two important underwriting criteria – credit scores and documentation levels. Low-credit-score loans are not being originated relative to the height of the expansion of credit or even at the normalized level of availability. Additionally, access to no- and low-documentation loans is significantly constrained relative to the height of expanded credit or the normalized level of availability. Underwriting eligibility in the current market requires good credit and the ability to fully document your loan.

Also interesting to note is that the shares of high-LTV and DTI lending are very close to normal. Both measures expanded availability during the housing boom. High-LTV lending currently remains modestly loose relative to normal and high-DTI lending is modestly tight relative to normal. The share of ARM loans being originated is currently much more restricted than normal, as many subprime ARM loan products are no longer available.

Looking at the share of the riskiest subset of an entire measure’s distribution compared to the share prior to the housing bubble for multiple measures gives more insight into the answer to the pressing question of whether credit is too loose or too tight. Right now, credit is tight for low credit score borrowers, those who don’t want to or can’t fully document their loans, or who would like an ARM product. For many, the choice to document or select an ARM product is not necessarily an impediment to credit availability, but for those with low credit scores there are fewer options.

—

 

Mark Fleming
Chief Economist
CoreLogic
www.corelogic.com

 

New Program Offers Peer Support for Women

Posted on by NAWRB

It has long been said that imitation is the sincerest form of flattery. At City of Hope, researchers are implementing this concept of imitation—of making one thing similar to another—in a leading-edge approach to treating difficult cancers.

City of Hope’s new chief of surgery and an enthusiastic researcher, Yuman Fong, M.D., has been developing a therapy that essentially makes resistant breast cancer respond like thyroid cancer, which is cured in 90 percent of patients.

Triple-negative breast cancer—named for its lack of three important receptors that can be targeted with common, effective therapies—remains a challenge for women, as well as for the oncologists who care for them. Fong is energized by this challenge and the promise of discovery. “If we can find something that can kill [these types of] cancer cells, it would be a big breakthrough for the field,” he says.

Fong has been developing a new approach to treating triple-negative breast cancer by starting with what he knows and loves: viral therapy. He has long studied how viruses can kill cancer. Happily, his expertise in viruses and affinity to the challenge of treatment-resistant cancers is a good fit.
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How Businesses Can Incorporate the Sharing Economy for Higher Success

Posted on by NAWRB

If you’re not already aware, the sharing economy is picking up speed. The sharing economy is a peer-to-exchange of goods and services, in which citizens rent or share resources. Companies involved in the sharing economy include Airbnb—where a host rents out part of his or her home to someone looking for a temporary place to stay. Companies like this are growing in size and it would bode well for business owners to adopt some of these characteristics in order to increase the chances of being successful.

A huge reason as to why companies within the sharing economy are so successful is because they are all about the customer experience. These companies bring an interpersonal connection so that all parties involved feel connected. For example, with the company Lyft—a service much like a taxi except the drivers use their own car—the service is able to create a more personal experience by offering the rider to sit in the front seat, next to the driver. This makes the ride seem less like the customer is being chauffeured around, and more like they’re being picked up by a friend.
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Exercise: Tackle Your Busy Schedule With Renewed Energy

Posted on by NAWRB

Being a successful woman in the real estate industry means your days are most likely hectic and stressful. The last thing you probably want to do is go to the gym. If you can motivate yourself to go, you may end up on the treadmill the entire time because the weight area intimidates you and/or you’re scared to ask questions. Sure, you look and feel great in your designer power suit, but that feeling can quickly melt away once the suit comes off.

Now many of you know that you should use weights to reap maximum benefits for your body but perhaps you’re too busy to learn the right exercises. Or, maybe you’re against weights because you believe you’ll bulk up like one of those bodybuilders. This is where a personal trainer comes in.

Because the real estate business can be exhausting, hiring a personal trainer who’s experienced enough to know how to design customized workout routines can be just what you need. This can maximize your exercise results and help keep your heart rate up throughout your entire workout. It can also help you burn a great deal of fat, while sculpting your body.
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FHFA Decision: Path to Affordable Housing or Another Crash?

Posted on by NAWRB

Mel Watt, Director of the Federal Housing Finance Agency (FHFA), is facing mounting pressure regarding his decision to lift a temporary suspension on allocating funds to the national Housing Trust Fund (HTF) and Capital Magnet Fund (CMF). With the lifted suspension, 4.2 basis points of each dollar of the unpaid principal balance for new business purchases from Fannie Mae and Freddie Mac will be diverted towards the funds.

Enacted in the summer of 2008, the Housing and Economic Recovery Act of 2008 (HERA) created the HTF and CMF. According to Housing and Urban Development (HUD), HTF “is a new affordable housing production program that will complement existing Federal, state and local efforts to increase and preserve the supply of decent, safe, and sanitary affordable housing.” Extremely low- and very low-income households are eligible for the program. Updated income limits for extremely low- and very low-income households for each county in the U.S. can be found on HUD’s website.

The HTF works by providing funds to eligible state and state-designated entities for activities that include real property acquisition, relocation assistance, demolition, and site improvements. In regards to eligible households, assistance can appear in the form of deferred loan payments, grants, interest subsidies, and equity investments.

Similar to the HTF, the CMF promotes affordable housing but utilizes Community Development Financial Institutions (CDFIs) and non-profit housing developers as the vehicles for creating inexpensive housing options. The CMF can also use funds for community facilities and economic development projects that encourage affordable housing. As a competitive grant program, the CMF is unique in that it was created to increase investments and attract private capital.

Although HERA established the allocation of funds to the HTF and CMF, it was temporarily suspended when the Government-Sponsored Enterprises (GSEs) were placed into conservatorship under the FHFA. The steep financial woes generated by the subprime mortgage crisis led to the eventual conservatorship decision.

Fast-forward to December 2014, Watt wrote a separate letter to the respective CEOs of Freddie Mac and Fannie Mae that explicitly called for the termination of the suspension on allocating funds to the HTF and CMF in order to help bolster affordable housing.

According to 12 U.S.C. § 4567 (b), the suspension was due to allocations violating one or more of the following:

  • Contributing or would contribute to the financial instability of Fannie Mae/Freddie Mac.
  • Causing or would cause Fannie Mae/Freddie Mac to be classified as undercapitalized.
  • Preventing or would prevent Fannie Mae/Freddie Mac from successfully completing a capital restoration plan.

Watt’s decision and his reasoning is the epicenter for the arguments of both proponents and opponents. In his letters to Freddie Mac and Fannie Mae, Watt used four main reasons to support his decision which is summarized below:

  • The decision to temporarily suspend allocations was a product of the circumstances at the time. Currently, those circumstances have changed.
  • Financial operations have stabilized to a reasonable level. In addition, allocations and set aside would not be a contributing factor to financial instability of the GSEs in question.
  • 12 U.S.C. § 4567 (b)(2) and (3) are no longer applicable. These sections refer to the classification as undercapitalized and the successful completion of a capital restoration plan. Currently, the capital classifications are suspended under the FHFA and the GSEs in question are not seeking to complete a capital restoration plan. Both GSEs have entered into Senior Preferred Stock Purchase Agreements (SPSPA) to avoid receivership.
  • Since 2012, the GSEs have not endured profit levels that are anticipated to be sustainable. However, projections reveal that they will maintain profitability in the future. The decision to resume allocating funds can always be reversed or updated based upon the financial situation.

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Sallie Krawcheck Empowering Women with New Fund

Posted on by NAWRB

Sallie Krawcheck Empowering Women with New Fund

blogSalliefund

On Wednesday, former Citigroup and Bank of America executive Sallie Krawcheck announced the creation of a unique index fund that will promote women within the business world. The first of its kind, the index fund is a result of a partnership between Pax World Management LLC and the company Krawcheck recently purchased, Ellevate. Continue reading →