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Freddie Mac proposes buying home equity loans

Government-backed mortgage securitizer Freddie Mac is considering whether to broaden out its portfolio from first-time mortgages to become a purchaser of home equity loans, a move that could offer borrowers more favorable terms than those of private credit markets.

Public comments closed less than a week ago on the proposal, which is getting praise from low-income housing advocates and disapproval from bankers and Republicans.

The new rule, which would provide borrowers a cheaper loan option than cash-out refinancing, is specifically responsive to the higher interest rate financing environment that is putting the squeeze on the housing sector. Interbank interest rates currently sit at an effective 5.33 percent, their highest levels since 2001.

“In the current mortgage interest rate environment, a closed-end second mortgage may provide a more affordable option to homeowners than obtaining a new cash-out refinance or leveraging other consumer debt products,” the Federal Housing Finance Agency (FHFA) wrote in its proposal.

FHFA is the federal agency in charge of overseeing Freddie Mac — formally known as the Federal Home Loan Mortgage Corporation — and Federal National Mortgage Association, also known as Fannie Mae.

Fannie and Freddie each buy mortgages and package them into mortgage-backed securities, which are purchased by investors. The sales are intended to broaden the pool of Americans who can afford home loans and keep rates lower.

In a scenario comparing the new home equity loan proposal to a cash-out refinancing option, borrowers could save $136.77 in monthly payments as a result of the new product, FHFA said.

The new type of loan is the first time Freddie Mac or any of the government-sponsored enterprises (GSEs) that underpin the U.S. housing market have offered a fundamentally new type of product since they were nationalized as conservatorships in the wake of the 2008 financial crisis.

“We applaud Freddie Mac for its innovation and identifying a need in the market and seeking to create liquidity for a mortgage product other than a first lien mortgage loan,” Garth Rieman, a director of the National Council of State Housing Agencies, which advocates for low-income housing groups around the country, told the FHFA last week.

Rieman said the bounds of the new rule should be expanded, allowing for secondary loan amortization write-offs to extend throughout the course of the primary loan rather than cutting them off at a 20-year limit, as proposed.

Bankers and Republicans are against the new product proposal and fear it will cut into the business of the enormous private lending market. In 2022, there were $37.8 billion in secondary loan originations and $211.1 billion in maximum credit extended to borrowers, according to a 2023 study of the home equity loan market by the Mortgage Bankers Association, a trade group for home lenders.

“Government subsidization will not only enable the proposed product to offer terms that are economically impossible for private capital to match, but represents a vast (albeit indirect) expansion by the GSEs into these other credit markets,” Republican legislators including Sens. JD Vance (Ohio) and Mike Crapo (Idaho) as well as Reps. Warren Davidson (Ohio) and Blaine Luetkemeyer (Mo.) wrote to FHFA on Friday.

Several Democratic congressional offices declined to comment on the proposal, including those of House Financial Services Committee ranking member Rep. Maxine Waters (Calif.), and Senate Banking Committee Chair Sherrod Brown (Ohio). The White House also declined to comment, referring questions to FHFA.

Asked about precedents for the new product, its effect on private lending markets, and how exactly it will be securitized, the FHFA told The Hill on Tuesday that it is “reviewing comments from the public to inform our evaluation of this proposed new Enterprise product.”

“As with all activities FHFA considers, the safety and soundness of the [GSEs] and the mortgage finance system are fundamental requirements of any program,” the agency added.

Bankers blasted the secondary mortgage from Freddie Mac as unnecessary.

“The Freddie Mac proposal published by FHFA offers no data to support an assertion that the private market is not sufficiently meeting the demand for these second liens,” Joseph Pigg, senior vice president of the American Bankers Association, wrote to FHFA last week.

“While our members report growing demand for second liens, they have not raised concerns about insufficient capacity,” he wrote.

While FHFA says that resolution and loss-mitigation servicing for second mortgages would basically work as it does for first mortgages, private insurers are also against the proposal, arguing that it’s “duplicative of an already active private market, and raises important, unanswered questions,”said Seth Appleton, president of the U.S. Mortgage Insurers trade group.

Despite the pushback from bankers and insurers, one industry representative told The Hill that because it’s the first time the GSEs are offering a new product since the 2008 collapse of the banking sector, the move represents a first test of a new rulemaking process.

Accordingly, mortgage bankers are stressing that there are still a lot of unknowns about what’s going to emerge.

“What does Freddie Mac estimate base loan pricing will look like? Will pricing be equitable for lenders of all sizes?” Pete Mills, head of residential policy at the Mortgage Bankers Association, wrote to FHFA.

Amid higher interest rates and a concentration of consumer-facing inflation in the housing sector, housing agencies have shown some sensitivity to the pressures facing renters, tenants and mortgage holders.

In April, the Department of Housing and Urban Development put in place what amounts to a 10 percent rent increase cap for the low-income housing tax credit, a move that was hailed by tenant rights advocates.

Argentina Faces Heating Crunch as Worst Winter Since 1980 Looms

Government tenders for extra supplies of LNG amid shortage
Extra imports hinder Milei team’s bid to build dollar reserves

Argentina is scrambling to secure supplies of fuel as winter bites in the southern hemisphere with lower-than-expected temperatures boosting demand for home heating.

Extra imports are a headache for President Javier Milei’s government, which needs to build up reserves of dollars through trade surpluses — not lose them — in order to lift currency controls that have been strangling the economy.

Milei’s spokesman said consumer demand for natural gas has spiked 55% in recent weeks to nearly 70 million cubic meters a day. “We’re making all efforts to avoid” a heating shortage, Manuel Adorni told reporters Wednesday at a daily press briefing. “It’s the harshest winter in the last 44 years.”

With families in the Buenos Aires metro area, which is home to about a third of Argentina’s 46 million people, switching on heating for longer in recent days, the government has been caught off-guard. It’s been forced to buy additional natural gas and prioritize residential users by cutting off supplies to factories and to drivers who run their cars on compressed gas.(...)

PwC faces crisis in China over audit of failed property giant Evergrande
Role in approving accounts has led to infighting at Big Four firm as clients reconsider relationship

PwC is facing a crisis in China as partners brace for penalties over its audit of collapsed property developer Evergrande and some clients reconsider their relationship with the accounting firm.

China’s securities regulator ruled in March that Evergrande had inflated its mainland revenues by almost $80bn in the two years before the developer defaulted on its debts in 2021, despite PwC giving the accounts a clean bill of health.

Partners fear they could face one of the largest fines ever imposed on a Big Four accounting firm in China and other sanctions, prompting infighting among senior figures, according to insiders and retired partners still close to the firm.

PwC enjoyed success on the back of China’s property boom, but in the wake of Evergrande’s collapse and the property sector slowdown, the firm’s future business in the country has been clouded in uncertainty ahead of a leadership change.

The situation is “high stakes” for PwC China partners, said Francine McKenna, accounting lecturer at the University of Miami Herbert Business School. “The Chinese firms of the Big Four are also part of global networks, and many multinational firms operating in China count on them for audit, tax and advisory services.”

Partners believe possible regulatory action could eclipse the punishment handed to rival Deloitte last year for a “deficient audit” of China Huarong Asset Management. Deloitte paid a $31mn fine and its operations in Beijing were suspended for three months.

“The current partners are braced for impact,” said one former PwC partner.

Evergrande was one of China’s largest developers, and its collapse has sent shockwaves through the economy. Founder Hui Ka Yan faces a lifetime ban from public markets as a result of the March regulatory findings. PwC had audited the company since as early as 2009 before resigning in 2023.

Officials at Beijing’s finance ministry have discussed possible punishments for the firm’s failure to detect the accounting irregularities, including a large monetary penalty, the suspension or closure of some of PwC’s regional offices and curbs on auditing state-owned enterprises, according to a person briefed on the matter.

PwC China had eight central government-controlled SOE audit clients as of 2022, according to finance ministry data, accounting for about 6 per cent of revenue. Regulators reiterated last year that state-owned companies should not typically hire auditors that have received significant fines or other punishment within three years.

A director at a mainland-listed state-owned enterprise said its board in recent weeks discussed dropping PwC as its auditor if Beijing imposed heavy penalties. Last Friday, state-owned insurance group PICC said it had axed PwC as auditor after just three years, hiring EY instead.

The uncertainty has extended to PwC clients beyond SOEs. Shanghai-listed Eastroc Beverage cancelled a shareholder vote scheduled for last Friday that would have reappointed the firm as its auditor, saying it needed to “further verify related matters surrounding the accounting firm”.

“PwC China is co-operating with its regulators as it relates to any proceedings involving Evergrande,” the firm said, declining to comment further. China’s finance ministry did not respond to a request for comment.

Xue Yunkui, professor of accounting at the Cheung Kong Graduate School of Business in Beijing who sits on the boards of several listed companies, said officials were likely to weigh a severe punishment of PwC against the possibility of disrupting capital markets by taking action that destabilises the firm. “Everyone is waiting for guidance from the regulator,” he said.

PwC has the largest market share in China among the Big Four accounting firms, according to the finance ministry, with revenues of Rmb7.9bn ($1.1bn) in 2022. It has almost 800 partners and more than 20,000 staff in mainland China.


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The letter claimed that Chao, then head of the firm’s audit business, had fought off an effort to ditch Evergrande as a client in 2014, when allegations of aggressive accounting first circulated and then-chair Silas Yang and other partners raised questions.

PwC China has previously said the letter contains “inaccurate statements and false allegations”. Chao declined to comment.

Yang, who hails from the old PwC Hong Kong side of the firm and retired in 2015 to become steward of the prestigious Hong Kong Jockey Club, also declined to comment when contacted by the Financial Times. His LinkedIn profile, however, contains some of his post-retirement thoughts in a comment on a video about EY in China.

“The profession is indeed facing many challenges. I’m only glad that I’m out of it now,” he wrote, going on to use an abbreviation for “troublesome practice matters”, the euphemism used internally at PwC for business that gets the firm into regulatory trouble.

“Luckily during my years, there were no TPMs! 🙏🏻🙏🏻,” he wrote.

EU Aims to Start Ukraine Membership Talks by End of June

Hungary is chief obstacle to next step in accession process
EU wants to open talks before Hungary takes over EU presidency

The European Union is aiming to start negotiations as early as June 25 with Ukraine on becoming a member of the bloc to help boost Kyiv’s morale, but has yet to fully overcome objections from Hungary.

Almost all 27 member states were supportive of launching the negotiations around the time of the General Affairs Council meeting taking place in Luxembourg on June 25, according to people familiar with the matter.

So far, however, issues raised by the Hungarian government have complicated an agreement on the framework that would allow the bloc to start the talks.

Back in March, the European Commission proposed a negotiating framework to establish guidelines and principles for accession negotiations, following the EU leaders decision to open membership talks with Ukraine in December.(...)

Palma pone coto al turismo masivo: prohíbe nuevas viviendas de alquiler vacacional

Se suprimirán 4.000 plazas turísticas que están proyectadas
El Ayuntamiento propone restricciones a los cruceristas y a los coches de alquiler

Ofensiva de Palma contra la saturación turística. El Ayuntamiento de la ciudad balear ha presentado un paquete de medidas que busca minimizar el impacto que el turismo masivo está provocando en el territorio, especialmente en el ámbito residencial. El Gobierno local ha propuesto prohibir el alquiler vacacional en todo tipo de viviendas, limitar los 'megacruceros' y los coches de alquiler, y entre otras cosas, regular o registringir los grupos organizados de turistas.

"La presión turística que hay sobre Palma debe compensarse con limitaciones, con restricciones y, en algunos casos, con prohibiciones", ha dicho el alcalde Jaime Martínez, quien ha explicado que alguna de las medidas presentadas superan las competencias municipales, aunque espera poder llegar a acuerdos con el resto de instituciones. En el caso de las viviendas, la prohibición de aprobar nuevos alojamientos, que entrará en vigor a corto plazo, supondría eliminar hasta 4.000 plazas que estaban pendientes de autorización. En total, la ciudad cuenta con 50.000 plazas destinadas al turismo.(...)

El indicador de caída del mercado con un historial irregular 'Hindenburg Omen' se activó la semana pasada

Puede que no todo vaya bien en Wall Street, incluso con el mercado de valores en máximos históricos. El siniestro “Hindenburg Omen” se desencadenó la semana pasada, señaló el lunes el técnico jefe de mercado de StockCharts.com, David Keller.

El Hindenburg Omen considera el porcentaje de acciones en una bolsa que alcanzan máximos y mínimos de 52 semanas, junto con otras métricas de amplitud, para medir el potencial de una caída del mercado. Ha predicho con éxito la caída del mercado de 1987 y la crisis financiera de 2008.

Sin embargo, la errática tasa de éxito del indicador ha llevado a muchos observadores del mercado a considerarlo con cierto escepticismo. El Wall Street Journal informó anteriormente que el indicador ha señalado con precisión un retroceso significativo ni siquiera el 30% de las veces.(...)

Fed divergence: ECB officials confirm first rate cut next week

It is now nearly certain that the European Central Bank will lower interest rates before the Federal Reserve, bucking the trend of the U.S. central bank leading the way in terms of monetary policy.

ECB officials have all but confirmed that the first rate cut will happen at its meeting next week, as inflation has moved closer to its 2% target. Eurozone inflation held steady at 2.4% in April, staying below 3% for the seventh month in a row. Data for May will be out Friday.

Olli Rehn, member of the ECB Governing Council and head of the Bank of Finland, said inflation was easing in a sustained way, "and the time is thus ripe in June to start cutting rates."

Another ECB policymaker, Francois Villeroy de Galhau - also the governor of France's central bank - said the first reduction next month is a "done deal." "After the first two rate cuts, our monetary policy will remain restrictive. We are still actively fighting inflation until we reach the neutral rate."

ECB's chief economist Philip Lane told the Financial Times that there is enough data to support to remove the top level of restriction, "barring major surprises."

"It seems to me that a fairly general consensus has emerged on the possibility of a rate cut," said Fabio Panetta, the Bank of Italy's governor and ECB policymaker.

Markets are betting on a 25-basis point rate cut from the ECB next week and no reduction at its meeting in July. "We expect the ECB to hold rates steady in July, before delivering another 25 bps rate cut in September," said Wells Fargo economist Nick Bennenbroek.

Blackstone Buys $1 Billion Mortgage Portfolio From Germany’s PBB

Blackstone Inc. has bought a $1 billion mortgage portfolio from Deutsche Pfandbriefbank AG as the German real estate lender grapples with the impact of volatile commercial real estate markets.

The portfolio comprises of 11 loans secured against performing multifamily, office and hospitality assets in the US and UK, Blackstone said in a statement on Tuesday. Its real estate debt strategies unit is acquiring the assets on an all-cash basis, Blackstone said, without disclosing what it is paying for the loans.

The sale comes as part of a broader strategy by PBB to manage its balance sheet through divesting assets. The lender became one of the most prominent examples of European banks hit by fears that troubles in the US commercial property markets are spreading to Europe.

EU Nears Deal on Failed Lenders in Path to Closer Banking Ties

Agreement by governments could come as soon as next month
German reservations have largely been addressed, sources say

The European Union is nearing a deal on measures that would make it easier to wind down smaller lenders that run into trouble, according to people familiar with the matter.

Governments may reach a deal on the crisis management and deposit insurance framework next month after addressing some concerns of countries including Germany, said one of the people, who asked to remain anonymous as an agreement has yet to be reached. Talks to hammer out the details together with other European authorities will probably continue into next year, they said.

Such a move would be a key step to regain momentum in deadlocked talks over forging closer banking ties in the region and ultimately facilitate cross-border bank mergers.

European banking fractured along national lines after the 2008 credit crunch and efforts to put in place the architecture needed for a truly unified market ran out of steam in recent years. The package that governments are set to agree on is commonly-viewed as a key step toward deeper and even thornier reforms such as a system of joint deposit insurance like the one that exists in the US.

France and Germany have recently sought to revive the issue of banking ties. The two countries’ leaders — Emmanuel Macron and Olaf Scholz — are discussing the matter during a state visit this week.

Last year, the EU’s executive arm suggested tapping national deposit protection funds to bridge gaps at failing banks that don’t have sufficient reserves of their own. Germany’s mass of smaller savings and cooperative banks slammed the plan, saying it would undermine the systems they have in place to protect savers.

Germany still has reservations on the use of such funds because it could weaken rules on forcing losses on a failed bank’s investors, said one of the people. Still, a deal is likely because negotiators are set to agree on strict conditions for when a bank that runs into trouble is sent into resolution, rather than being wound down under national insolvency laws, they said.

While the talks have been cumbersome, discussions on pooling deposit insurance are likely to be even more difficult. A related plan approved by a committee of European lawmakers in April drew swift criticism from German bank lobbyists.

German officials say the banking union isn’t just about deposit insurance and that work is needed in other areas, such as rules that would address banks’ large holdings of bonds issued by governments in their home markets.

Israeli tanks enter central Rafah

Eyewitnesses report IDF taking positions in Gaza’s southernmost city despite international condemnation

While Novo Nordisk charges $1,349 a month for Wegovy in the U.S., the drug costs just $140 a month in Germany and $92 a month in the U.K.

Novo Nordisk has blamed middlemen in the U.S. healthcare system for the high prices of its top-selling weight-loss drugs Wegovy and Ozempic, following the launch of an investigation into the drugs led by U.S. Senator Bernie Sanders.

In a letter to the Senator for Vermont, the Danish pharmaceutical giant said it only retains 60% of the list price on both drugs, with the rest paid out to middlemen.(...)

Europe’s Biggest Pension Fund Sells €10 Billion in Fossil Fuels

ABP has sold equity, bonds, oil futures linked to fossil fuels
Plans to phase out remaining €4.8 billion in illiquid assets

Europe’s biggest pension fund, Stichting Pensioenfonds ABP, has exited all liquid assets in oil, gas and coal worth about €10 billion ($10.8 billion), in an effort to be greener.

The last shares and bonds owned by the fund were sold in the first quarter of this year, Harmen van Wijnen, chairman of ABP’s board of trustees, said in an interview at the fund’s headquarters in Amsterdam. ABP, which had pledged to sell down a majority of the investments by early last year, no longer holds any “liquid assets” in fossil energy producers, he said.

In its latest disclosure since the 2021 commitment to cut €15 billion exposure to fossil fuels, the Dutch fund has gradually divested all stocks, bonds and investments in oil and gas futures contracts linked to fossil fuels, Van Wijnen said.

The fund has said the step is necessary after efforts to engage with fossil-fuel producers and get them to reduce their greenhouse gas emissions proved ineffective.(...)

“We only want to invest in companies that also have a vision and are on a pathway in the transition to a sustainable economy and companies that don’t harm climate or biodiversity,” Van Wijnen said.(...)

Macron and Scholz: we must strengthen European sovereignty

The EU needs more single market, innovation and investment to secure a common future


President Emmanuel Macron, left, at a recent press conference with Chancellor Olaf Scholz. France and Germany are proposing a renewed impetus for competitiveness for the EU’s next term © Halil Sagirkaya/Anadolu/Getty Images

In a few weeks, we Europeans will start setting out our agenda for the next term in the EU. Looking back at the challenges over the last five years — be it the pandemic, the ongoing Russian war of aggression against Ukraine or increasing geopolitical shifts — it is clear: Europe is experiencing its Zeitenwende*. We can’t take for granted the foundations on which we have built our European way of living and our role in the world. Our Europe is mortal, and we must rise to the challenge.

Strengthening our global competitiveness and enhancing our resilience while making the Green Deal and the digital transition a success is at the heart of responding to these challenges. To this end, France and Germany are proposing today a renewed impetus for competitiveness for the EU’s next term.
 
Europe must thrive as a strong world-class industrial and technological leader, while implementing our ambition to make the EU the first climate neutral continent. We can harness the potential of the green and digital transitions for developing the markets, industries and good jobs of the future.

To live up to these common ambitions, Germany and France are convinced that the EU needs more innovation, more single market, more investment, more level playing field and less bureaucracy.

Together, we will advocate to strengthen the EU’s sovereignty and reduce our critical dependencies, while building on the successful implementation of the agenda developed since the Versailles summit in March 2022. With an ambitious industrial policy, we can enable the development and rollout of key technologies of tomorrow, such as AI, quantum technologies, space, 5G/6G, biotechnologies, net zero technologies, mobility and chemicals. We have to make full use of and significantly accelerate existing EU instruments, from important projects of common European interest to the role of public procurement, considering a more strategic approach in relevant sectors, and to modernise our competition rules in view of global competitiveness.

We call for strengthening the EU’s technological capabilities by promoting cutting-edge research and innovation and necessary infrastructures, including those regarding artificial intelligence and health.

One of Europe’s greatest competitive strengths is the single market, allowing businesses to develop innovative products and services, to grow and to compete, while ensuring high standards. We need to reap its full benefits with a modernised single market, reducing fragmentation and barriers, fostering connectivity, enhancing skills, promoting mobility and convergence.

We call for an ambitious bureaucracy reduction agenda to deliver on simpler and faster administrative procedures and cutting bureaucratic burdens for businesses of all sizes. We welcome the European Commission’s initiative to reduce reporting obligations for our companies by 25 per cent. This promise has to be implemented with specific legislation. The principles of subsidiarity and proportionality need a fresh start, too.

We will jointly support an ambitious, robust, open and sustainable European trade policy that allows fair trade agreements and promotes EU interests, creates reciprocal market access opportunities and a clear level playing field with our trade partners. The EU should remain an advocate for the rules-based multilateral trading system and act for fair competition.

We will fully decarbonise our energy systems. And we will achieve this in a fully integrated and interconnected market while respecting national choices on the respective energy mix. This is the European way — and it will increase resilience, security of supply and pave the way for more sovereignty.

Finally, our collective investment efforts, both private and public, must match our ambitions. We need to unlock the full potential of our capital markets. Too many companies looking to fund their growth turn to the other side of the Atlantic. Too many European savings are being invested abroad rather than in Europe’s most promising start-ups and scale-ups. To mobilise the needed investments we have to get serious about a truly integrated European financial market with the banking and the capital markets union at its core, addressing fragmentation and ensuring global competitiveness of the European financial sector.

In doing so, we will have to relaunch the European securitisation market, improve the convergence and efficiency of the supervision of capital markets across the EU, harmonise relevant aspects of corporate insolvency frameworks and tax law, simplify the regulatory framework and develop a simple and effective cross-border investment and savings product for all. Private and public investments need to go hand in hand. We should make the EU budget fit for the future and further prioritise investments in transformational expenditure and European public goods while working on introducing new “own resources” as agreed in 2020.

Together, we call to put this agenda at the core of the coming term. The EU is our common future.

Suddenly There Aren’t Enough Babies. The Whole World Is Alarmed.

Birthrates are falling fast across countries, ​with economic, social and geopolitical ​consequences
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