Aug 13 2018, 8:37AM
Don’t think that correct mortgage documentation is important? Think again, or ask Citigroup. The Federal Reserve said Friday it had fined Citigroup $8.6 million over poor quality mortgage documentation practices at its CitiFinancial subsidiary in 2015. The Fed Citi mishandled customer files as it was preparing to wind down its mortgage servicing business, doing so in 2017. But there is good news! The Fed said that the problem was corrected, and the Fed is terminating a separate 2011 enforcement action against Citigroup on a separate residential mortgage loan servicing matter, citing sustainable improvements by the bank. Dot those i’s and cross those t’s!
The various high-ranking officials within the Federal Reserve know just as much about the direction of the economy, short-term rates, and financing than anyone else, right? Fed Governor Quarles said the Secured Overnight Financing Rate (SOFR) is more liquid than Libor and should be used by banks when lending to one another going forward. Fed Kansas City President George said she believes “gradual further increases in our policy rate will be necessary to return policy to a neutral stance.” Fed Chair Powell said in Congressional testimony that the global growth outlook “remains solid” and the US economy is in a “really good place” and the “best way forward is to keep gradually raising the federal funds rate.”
The markets continue to expect the Fed to increase rates twice more this year baring any surprises in economic data or world events. The expected timing for those rate increases remains at the September and December meetings. Any questions?
As mentioned in this commentary, Fannie Mae issued the market’s first-ever Secured Overnight Financing Rate (SOFR) securities, a three-tranche $6 billion SOFR debt transaction scheduled to settle on July 30, 2018. This transaction should accelerate the development of the SOFR market and encourage other issuers in the debt markets to follow suit. The floating rate notes, offered in three maturities, 6, 12, and 18 months, were met with strong investor demand.
What else have those crafty Agencies been up to? Here’s a primer on the single security efforts. Loan originators should care because anything that contributes toward an active and liquid market for mortgages helps rates for borrowers.
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