Annaly Capital Management Inc., the largest mortgage real estate investment trust, is bracing for a higher level of prepayments as Obama continues to adjust policies.
Under Obama's leadership, "we potentially see more policy meddling," Wellington Denahan-Norris, chief executive officer of Annaly with $141.6 billion of assets as of Sept. 30, said this week on a conference call.
Annaly rose 0.9 percent as of 9:42 a.m. in New York, after falling 2.7 percent yesterday. The REIT has declined more than 11 percent since the Fed in September started acquiring $40 billion of mortgage bonds a month to boost the economy. The Bloomberg index of REITs rose 1 percent today, after dropping 7.8 percent from the Fed's announcement through yesterday.
Single-family home values are climbing after a six-year slump as buyers compete for a shrinking supply of properties listed for sale. U.S. house prices jumped 5 percent in September from a year earlier, the biggest 12-month increase since July 2006, CoreLogic Inc., an Irvine, California-based real estate data provider, said this week.
Legislation to expand HARP may not be required as the program is already exceeding expectations. Refinancing of higher-rate mortgages driven by the program reached new highs last month, beating the forecasts of analysts at JPMorgan Chase & Co., Credit Suisse Group AG, Barclays Plc, and Royal Bank of Scotland Group Plc.
The program is already being changed. Adjustments in September that lowered lenders' risks of having to repurchase bad loans because of appraisal mistakes may have fueled some of October's gains, Credit Suisse analysts led my Mahesh Swaminathan and Barclays analysts led by Nicholas Strand wrote yesterday in reports.
Obama probably will put forward a new head of the Federal Housing Finance Agency to replace Edward DeMarco, the current acting director, "as part of a broader package of financial regulators," said Isaac Boltansky, an analyst for Compass Point Research & Trading LLC. The new leaders would not be confirmed until the second quarter of 2013, he said.
DeMarco has sought to reduce Fannie Mae and Freddie Mac's role in the market as lawmakers failed to take action. One measure has been to increase the fees they charge to guarantee mortgage securities.
"Given that the FHFA has consistently been trying to make it easier for HARP borrowers to refinance over the last year, we think that some minor tweaks to HARP will be in the cards even if Ed DeMarco is not replaced," Citigroup Inc. analysts led by Ankur Mehta said.
California Senator Barbara Boxer and Senator Robert Menendez of New Jersey, both Democrats, have pushed for an expansion of aid to homeowners.
A bill written by Menendez and Boxer would expand the HARP program with measures including more relief for lenders from repurchase requirements.
"The bill is a no-nonsense fix to the HARP program," Boltansky said. "While HARP has helped about 1.5 million people, it still hasn't come close to its potential. They estimate 3 million more people will be able to refinance under this bill."
Obama's election also means the mortgage interest tax deduction won't be touched, said Chris Macke, senior real estate strategist at CBRE Group Inc.'s global research and consulting division in Boston. The credit reduces the cost of owning a home "significantly," Macke said.
