Fannie Mae and Freddie Mac enjoy considerable advantages because of their lower cost of capital and significant government subsidies. But with some conforming loans, the private market is finding a way to compete.
Fannie Mae's first-quarter profits were enough for it to rebuild its minimum capital buffer and pay the Treasury Department dividend after being forced to take a draw during the previous fiscal period.
If Freddie Mac's credit-risk transfer activities continue to grow, mortgage lenders could eventually see a reduction in the guarantee fees they pay to the government-sponsored enterprise, according to CEO Donald Layton.
Freddie Mac posted a fourth-quarter net loss of $3.3 billion and will request $312 million from the Treasury after recent tax reform legislation forced it to write down the value of deferred tax assets.
Royal Bank of Scotland Chief Executive Officer Ross McEwan said the likelihood is waning that the lender will settle a U.S. mortgage-bond probe before the end of the year as he'd hoped, though it's well-capitalized to handle a settlement.
The U.S. is taking steps to stamp out the practice of servicemembers and veterans being pressured into taking mortgages they don't need, a move that officials say will lower consumer costs and could lead to financial penalties for lenders.
Testing of the common securitization platform is taking longer than expected, but the Federal Housing Finance Agency said it won't delay the 2019 launch of Fannie Mae and Freddie Mac's new single "uniform mortgage-backed security."