With so much going on between the shutdown and key changes in the administration and at the GSEs, it’s worth doing a quick scan of some of the key things to be looking at.
FHFA: Acting Director Joseph Otting took over FHFA this week as Director Watt’s term expired. The consensus view is that he will have a lot on his plate maintaining his role as head of the OCC and running FHFA. An interesting move he made was to ask Bob Ryan to stay on in his role during this transition which includes remaining as the conservator. This indicates to us that things will remain relatively stable while we await the confirmation of Mark Calabria. As to Mark’s confirmation, we remain highly confident that he will be voted into the job. Mark is a brethren of both the Senate Banking Committee having served a key role there in the past and will be treated favorably in the confirmation process. While some senate dems may try to challenge some of his statements made in the public domain about the GSE’s, the votes will go Marks way as the republican majority is slightly larger in this new congress than it was before. While judges, cabinet level nominees, and regular order may delay the ultimate confirmation, we expect him to get through the committee fairly quickly and then confirmed by the full senate likely by mid summer at the latest, and sooner depending on the senate agenda.
Shutdown and HUD: It’s clear that housing leadership in the administration is working to reduce the negative impacts of the shutdown. A good reflection that there is some good leadership at HUD with Brian Montgomery, Adolfo Marzol, and Michael Bright and at Treasury with Craig Phillips and others who understand this industry. Unfortunately without budget authority they are limited. Brian Montgomery sent a letter to approved FHA lenders asking lenders to use forbearance measures. Zillow put out an estimate that the mortgage cost for unpaid federal workers has a combined monthly bill of just under $250 million. While HUD May ultimately make servicer’s whole here, advances to GNMA investors will still be required putting the liquidity headache on top of industry to advance under a forbearance period. If the shutdown is resolved soon, perhaps this can be managed. If it extends, we will need to evaluate capacity and solutions to address this challenge affecting approximately 800,000 workers.
Home Sales: Bloomberg just issued a report suggesting that they shutdown is affecting as much as 20% of home sales activity. They surveyed approximately 2200 agents and if this sample is reflective of that nations marketplace, it does raise concerns.
GSEs: National Mortgage News put out a story on 12 people to watch in 2019 which included the two new heads of Freddie Mac and Fannie Mae. Hugh Frater, a long time board member of Fannie Mae, has stepped in to take over the helm at Fannie while a long term decision is made. David Brickman, the former head of multi-family at Freddie, has assumed the Presidents title at Freddie Mac. Both of these gentlemen are highly regarded executives, both with primarily Multifamily backgrounds, and both will join in the need to understand what the playing field will look like under a new regulator.
The one word which comes to mind, especially with rates uncertain, questions about overall home sales activity, and questions about the transitions occurring in the GSE space amidst a government shutdown is this: Uncertainty.