Morning Scan

FHFA delays refi fee; fintech buys JPMorgan’s Quorum blockchain platform

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Wall Street Journal

Mortgage relief

The Federal Housing Finance Agency, Fannie Mae and Freddie Mac’s regulator, “agreed to delay a 0.5% surcharge on refinanced home loans until Dec. 1. The decision came after an outcry from industry groups, lawmakers and the White House, saying the fee was inappropriate in the middle of the coronavirus pandemic and would hurt consumers.”

“Mortgage lenders welcomed the delay. They said they had been given essentially no warning and would have to pay the fee out of their own pockets on refinancings that were in the pipeline before the fee was to take effect Sept. 1. The Mortgage Bankers Association had estimated that lenders collectively would have to pay $750 million in fees on about $150 billion of Fannie and Freddie loans already locked in.”

Separately, “some mortgage lenders are asking customers taking out a mortgage to confirm they don’t intend to seek forbearance, a move meant to keep losses low during a pandemic that has put millions of Americans on shaky financial footing. The unusual requirement comes in the form of a new document included in many borrowers’ closing paperwork.”

“While the language varies, the forms generally tell borrowers that they won’t be allowed to skip payments until their loans are backed by the government. The forms, known among lenders as ‘Covid-19 borrower certifications,’ often ask home buyers to confirm that they don’t expect changes to their income. Some warn of potential penalties if any of the certifications are later proven to be false.”

Safe haven

Shares of mortgage insurers such as MGIC Investment Corp. “have been slammed this year alongside lenders,” perhaps unfairly, the Journal says. “Many investors have broadly taken a grim view of default risk, and haven’t been comforted by declines in the number of borrowers seeking forbearance. But mortgage insurers such as MGIC have some other things going for them: Unlike a lender, MGIC’s revenue depends upon fees on the dollar-volume of mortgages it is insuring—not interest rates or spreads.” But lower rates “will continue to drive more mortgage production.’

“MGIC also is set to benefit as purchases become a bigger part of the mortgage market. Refinancings, where MGIC has a smaller share, have dominated in the market so far. When mortgages are repaid early, it creates churn and raises expenses. But more new buying may offset that.”

Financial Times

Pink slipped

As expected, “Wirecard’s administrator has cancelled the contracts of its chief executive and two other senior managers while cutting 730 staff at the collapsed German payments company. The moves follow the formal decision by a Munich court on Tuesday to kick off the insolvency proceedings for seven Wirecard subsidiaries and officially transfer decision-making powers away from the company’s directors and executives to the administrator.”

“Hundreds of Wirecard’s employees were informed by email on Monday night that they would be ‘irrevocably released’ from their contracts on Tuesday.”

Meanwhile, the global chairman of accounting giant PwC “has pledged to ‘aggressively’ review how the firm can better hunt for frauds following Wirecard and other accounting scandals.”

“We want to make sure we’re moving forward [on the detection of fraud] to ensure the relevance of the profession,” Bob Moritz said. “Wirecard is yet another example of the fact we need to look at this and do it aggressively over the next few years,” he said.

Back on the Street

Former Goldman Sachs president Gary Cohn has “joined Wall Street’s latest buyout fad as he moved to raise $600 million through a listing of a blank check company. The well-known Wall Street executive has joined forces with Clifton Robbins, a former dealmaker at the private equity group KKR, to raise the money through a so-called special purpose acquisition vehicle, or Spac,” called Cohn Robbins Holdings Corp.


Blockchain deal

“Brooklyn-based technology startup ConsenSys has acquired JPMorgan Chase’s marquee blockchain platform Quorum,” Reuters reported. “As part of the deal JPMorgan also made a strategic investment in ConsenSys. The Quorum team will remain at JPMorgan and help with the transition over the next year and will later work on other blockchain projects.”

“JPMorgan built the Quorum blockchain internally using the ethereum network, the software that underpins ether, one of the most well-known cryptocurrencies. Quorum, which will remain open-source, is being used by the bank to run the Interbank Information Network, a payments network that involves more than 300 banks. The network and other bank projects running on Quorum will continue to operate using the platform, JPMorgan said.”

No more delays

“In the country’s biggest white collar criminal case, an Australian court overseeing a criminal cartel case against Citigroup and Deutsche Bank on Tuesday declined a prosecution request to delay proceedings, raising the chances the long-running matter will proceed to trial this year.” The two banks have been accused “of colluding over a A$2.5 billion ($1.8 billion) 2015 share issue to withhold unsold shares and keep the stock from falling.”

“We’ve reached the point where I have to say enough’s enough,” Magistrate Jennifer Atkinson said.

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