Fannie Mae (FNMA) and Freddie Mac (FMCC): Two Pieces of Legislation That Could Be Interesting
Rep. James French Hill is seeking amendment to Consumer Financial Protection Act of 2010. Mr. Hill proposes annual study for Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA), and Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) to end the conservatorship. The bill is currently pending with House Financial Services Committee. Though the bill is in early stages, it would be positive for Investors.
Changes in Freedom of Information Improvement Act
In another development a major reform bill related to Freedom of Information Improvement Act has been sent to the white house. President Barack Obama has already stated that he would approve the bill to mark 50th anniversary of U.S independence.
The bipartisan legislation has support from Republican Senators John Cornyn of Texas and Chuck Grassley of Iowa, and House members Jason Chaffetz of Utah, and Darrell Issa of California, both Republicans, and Democrat Elijah Cummings of Maryland.
This bill is significant considering recent denial of requests with regard to information related to Fannie Mae (FNMA) and Freddie Mac (FMCC). Once the bill is approved it will embed in federal law a “presumption of openness,” making it clear that “sunshine, not secrecy, is the default setting of our government” and “government information belongs in the hands of the people,” According to Patrick Leahy of Vermont.
Credit risk transfer milestone
In other latest developments Freddie Mac (OTCMKTS:FMCC) has transfered a significant part of its risk related to single family and multifamily loans. Out of the total amount of $650 billion, $500 billion is related to single family loans and remaining $150 billion is related to multifamily loans since 2009 and 2013 respectively.
“I am grateful to Freddie Mac employees, our investors and many lending customers for helping us achieve this important milestone,” said Freddie Mac CEO Donald H. Layton. “This success is symbolic of how we have materially changed our risk management practices since the financial crisis. Freddie Mac has set the standard for transferring mortgage credit risk to private investors and away from taxpayers.”
Freddie Mac (OTCMKTS:FMCC) had started multifamily K-Deal security program in 2009. As per of the program major part of credit risk related to multifamily mortgage is transferred to private market investors. The company also started single-family mortgages in 2013 after it Structured Agency Credit Risk® (STACR®) debt notes and Agency Credit Insurance Structure® (ACIS®). Under STACR® debt notes are sold to bond investors whereas ACIS® transfers risk to insurance companies.
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