The portfolio caps restrained the size of their PLS books, but maturing subprime and Alt-A PLS were replaced by PLS from the much riskier 20 origination years. The quality of their holdings of private-label mortgage securities (PLS) issued by others also deteriorated. For Fannie Mae, roughly 28 percent of new business in the first half of 2007 was in Alt-A and interest-only products versus 26 percent in 2005. For example, for the first half of 2007, roughly one-third of the Enterprises’ new business was composed of Alt-A (less than standard documentation), interest-only, or Option ARM products, and mortgages with layered (multiple) risk characteristics vs.
FREDDIE MAC BOARD OF DIRECTORS APPOINTMENT VERIFICATION
They bought or guaranteed many more low documentation, low verification and non-standard ARM mortgages than they had in the past. In retrospect and despite OFHEO’s surplus capital requirements, portfolio caps, and repeated warnings about credit risk, the credit profile at both Enterprises followed the market down in 20-without commensurate pricing for risk. Worse, it threatened to require substantial shedding of current positions with attendant further damage to mortgage and housing markets. That left both Enterprises unable to provide counter-cyclical support. In particular, the capacity to raise capital to absorb further losses without Treasury Department support vanished.
Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. Because of recent market conditions, that balance was upset. A key component of this balance has been their ability to raise and maintain capital. That has required a careful and delicate balance of mission with safety and soundness. During the turmoil that started last year, they have played a very important role in providing liquidity to the conforming mortgage market. Their market share of all new mortgages was 76 percent during the first half of this year. Between them, these Enterprises have $5.3 trillion of guaranteed mortgage-backed securities (MBS) and debt outstanding, which is equal to the publicly held debt of the United States. On the Appointment of FHFA as Conservator for Fannie Mae and Freddie MacĬhairman Dodd, Ranking Minority Member Shelby, and members of the Committee, thank you for the opportunity to testify on recent regulatory actions taken by the Federal Housing Finance Agency (FHFA) at Fannie Mae and Freddie Mac.įannie Mae and Freddie Mac share the critical mission of providing stability, liquidity, and affordability to the housing market. Lockhart III, Directorīefore the Senate Committee on Banking, Housing, and Urban Affairs The sentence previously included a figure of 40 percent, which was in error. "For Fannie Mae, roughly 28 percent of new business in the first half of 2007 was in Alt-A and interest-only products versus 26 percent in 2005." He previously served as an economist at the International Monetary Fund from 1996 to 2000.Correction Notice: The following information was corrected in this document on September 26, 2008, at 5 p.m. from 2000 to 2013, including managing director, partner and global head of research. Prior to that, he held various positions at Tudor Investment Corp. “We welcome him as a highly qualified new member whose decades of experience position him to play an important role on our Risk committee and our Compensation & Human Capital committee.”īefore founding Evince Asset Management, Musalem served as executive vice president at the Federal Reserve Bank of New York from 2014 to 2016, as head of the Integrated Policy Analysis Group and of the Emerging Markets and International Affairs Group. “Musalem brings significant finance, capital markets, economics and public policy expertise to our board,” says Sara Mathew, non-executive chair of the Freddie Mac board. Musalem, CEO, co-chief investment officer and a founder of Evince Asset Management LP, has been elected to the Freddie Mac board of directors.