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Fannie and Freddie regain capital reserves; withhold billions from Treasury

Fannie Mae and Freddie Mac have capital reserves again. As expected, the government-sponsored enterprises on Friday made their quarterly dividend payments to the Department of the Treasury. But, thanks to the new agreement between the Federal Housing Finance Agency and the Treasury, each of the GSEs withheld billions from the Treasury to ensure that each has enough capital on hand to “cover other fluctuations in income in the normal course of each Enterprise’s business.”Under the previous version of the Preferred Stock Purchase Agreements that went into effect when the government took the GSEs into conservatorship, Fannie and Freddie send dividends to the Treasury each quarter that they are profitable. The PSPAs also stipulated that the GSEs were prohibited from rebuilding capital and each of the GSEs’ capital base was required to be reduced, with their capital reserves scheduled to be drawn down to $0 in 2018. But that all changed earlier this month when the FHFA announced a new agreement with the Treasury that allows the GSEs to hold a $3 billion capital reserve. Collectively, the GSEs made dividend payments this week to the Treasury of $2.897 billion. Of that, $2.249 billion came from Freddie Mac and $648 million came from Fannie Mae.

But those amounts are far less than the amount of profit that each GSE made in the third quarter. Freddie Mac’s profit was $4.7 billion, while Fannie Mae’s checked in at $3 billion, but unlike previous quarters, the GSEs did not send all of their profits to the Treasury. Based on some rough calculations, Freddie withheld $2.451 billion from the Treasury, while Fannie withheld $2.352 billion. As the chart from the FHFA states: “As set forth in the Letter Agreement dated December 21, 2017, amending the Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, the dividend amount is the Net Worth Amount for the dividend period minus the Applicable Capital Reserve Amount. Beginning in 2018, the Capital Reserve Amount is set at $3 billion under most circumstances.” With the $2.897 billion sent to the Treasury for the third quarter, Fannie and Freddie have now paid approximately $278.783 billion to the Treasury in dividend payments since the fourth quarter of 2008.

US steelmakers raise their bets

Steelmakers are betting on the US again, building mills they hope will help them compete against cheap imports as demand rises. Steel companies have complained for years that steel from China, South Korea, Vietnam, Turkey and elsewhere is being sold in the US for less than the cost to make it. While imports are still increasing, steel prices are also on the rise globally. And demand for US steel is starting to rebound, thanks to rising oil prices and a strengthening manufacturing sector, steel executives say. Still, others see expansion as a risky bet. Some steel companies say they can capture more customers with new plants that can make more steel at less cost than older plants, and can deliver it faster to customers. They’re also counting on additional US tariffs to drive out cheap, foreign-made steel, creating more opportunities for domestic producers. Stiff tariffs imposed over the past 18 months have significantly slowed steel imports from China, according to Commerce Department reports. Nucor Corp. is building a $250 million steel mill in Sedalia, Mo. Startup Big River Steel LLC in Osceola, Ark., accelerated production early this year at one of the largest new steel sheet mills built in the US in years. And Tenaris SA started making pipe for oil and gas wells at a new $1.8 billion mill near Houston this month.

California’s record poverty and real-estate bubble are creating a “wheel-estate” boom of people with good jobs living in their cars

Extreme housing prices in California — driven by a combination of speculation, favorable legal/tax positions for landlords, foreclosures after the 2008 crisis, and an unwillingness to build public housing — has created vast homeless encampments, but there’s a less visible side to the crisis: working people in “good jobs” who have to live in their cars. There’s a whole subreddit devoted to these folks, a mix of maker culture (modding cars to make them more comfortable as homes), hobo chalk-marks (where can you park, and for how long?), and generalized anxiety. It’s not just single middle-class people, either — they’re roaming America’s streets in company with a vast nomad army of homeless seniors who drive from town to town looking for seasonal work to replace their busted pensions. What’s striking in California is that many communities already accept people living in vehicles, despite there often being rules or laws against it. This fall, the city of San Diego expanded its Safe Parking Program, which designates lots that can be used by those living out of their cars, and many other cities have similar programs. Under a law passed last year, Los Angeles also allows overnight parking in some commercial districts. In Mountain View, the mayor brags about the services his city provides to those living in more than 330 cars, trucks and RVs. So long as vehicle dwellers aren’t in residential areas, the NIMBY attitudes that have helped spur California’s housing shortage seem to be relatively in check. And given the many huge parking lots that are empty overnight, capacity is not going to be a problem if living in vehicles becomes a California phenomenon — at least if owners of those lots have a compassionate streak or can monetize this use of their property. Given the centrality of Golden State’s car culture to its image and history — reflected in movies like “American Graffiti” and in the once-huge popularity of drive-in restaurants and movie theaters — a redefinition of the car in California as not being about independence and adventurousness but about shelter would be a twist that not many state residents would have seen coming 25 years ago.

Anticipation high as California rolls out retail pot sales

Californians may awake on New Year’s Day to a stronger-than-normal whiff of marijuana as America’s cannabis king lights up to celebrate the state’s first legal retail pot sales. The historic day comes more than two decades after California paved the way for legal weed by passing the nation’s first medical marijuana law, though other states were quicker to allow the drug’s recreational use. From the small town of Shasta Lake just south of Oregon to San Diego on the Mexican border, the first of about 90 shops licensed by the state will open Monday to customers who previously needed a medical reason or a dope dealer to score pot. In November 2016, California voters legalized recreational marijuana for adults 21 and older, making it legal to grow six plants and possess an ounce of pot. The state was given a year to set retail market regulations that are still being formalized and will be phased in over the next year. “We’re thrilled,” said Khalil Moutawakkil, founder of KindPeoples, which grows, manufactures and sells weed in Santa Cruz. “We can talk about the good, the bad and the ugly of the specific regulations, but at the end of the day it’s a giant step forward, and we’ll have to work out the kinks as we go.” The long, strange trip to get here has been a frustrating one for advocates of a drug that in the federal government’s eyes remains illegal and in a class with heroin.

The state banned “loco-weed” in 1913, according to a history by the National Organization for the Reform of Marijuana Laws, the pot advocacy group known as NORML. The first attempt to undo that by voter initiative in 1972 failed, but three years later felony possession of less than an ounce was downgraded to a misdemeanor. In 1996, over objections of law enforcement, the drug czar under President Bill Clinton and three former presidents who warned it was an enormous threat to the public health of “all Americans,” California voters approved marijuana for medicinal purposes. While the rollout of grassroots collectives of growers and dispensaries where marijuana could be sold to patients was at times messy, the law led to wider acceptance of the drug as medicine. “The heavens didn’t fall,” said Dale Gieringer, director of California NORML. “We didn’t see increased youth drug abuse or increased accidents or crazy things happening as our opponents predicted.” Today, 28 other states have adopted similar laws. In 2012, Colorado and Washington became the first states to legalize recreational marijuana. California is one of five states, plus Washington, D.C., that followed suit. Retail sales are scheduled to begin in Massachusetts in July.

Foreclosure rate in Minnesota lowest in a decade

The foreclosure rate in Minnesota is now at the lowest level in more than a decade, and far below the national average.At the end of September, just 0.2% of all Minnesota homeowners with a mortgage lost their homes to foreclosure, according to CoreLogic, which tracks mortgage delinquencies at several intervals. That rate was down from 0.3% last year and was only about a third of the national average. At the same time, far fewer homeowners are having trouble staying current on their mortgage payments. In Minnesota, 2.9% of all homeowners were 30 or more days late on their payment compared with 3.1% last year. “We’re encouraged to see another year of flat or declining delinquency rates for homeowners across Minnesota,” said Julie Gugin, director of the Minnesota Homeownership Center. “It shows people are in the right homes for their families and their wallets.” During the height of the foreclosure crisis, the organization’s counselors were overwhelmed by demand from homeowners who needed help avoiding foreclosure, Gugin said. Today, the need has shifted to providing unbiased information and hands-on financial coaching for low-income families that want to buy a home. “They want to make choices based on solid and factual information,” Gugin said. “Rent prices are on the rise and homeownership is a valuable asset-building alternate for some families.”

Gugin said that while declining foreclosures are clearly a positive sign, underlying problems linger. Namely, the recession and subsequent economic recovery only broadened the homeownership gap in Minnesota. There are more low-income families than before that are unable to own a home. “Our goal is to ensure that homeownership’s benefits are fairly available and sustainable to everyone, no matter their race or where they live,” she said. “Next year — and even 10 years from now — we want the delinquency rate to stay low, and with a closed homeownership gap. Individuals and families, communities and our state would be better off as a result.” Foreclosure rates across the country are also falling. Nationwide, the foreclosure rate fell slightly from 0.8% to 0.6%, and the 30-day plus delinquency rate fell from 5.2% last year to 5.0% in September. There was a slight increase, however, in the number of homeowners who were 30 to 59 days late on their payments, mostly because of hurricane-related troubles in Texas, Florida and Puerto Rico.

Posted by: pharbuck on January 1, 2018
Posted in: Uncategorized