Latest news with #DiscoveryBay
Forbes
4 days ago
- Business
- Forbes
Privatizing Fannie And Freddie: Rationales And Credit Impacts
An American flag at a residential home in Discovery Bay, California, US, on Thursday, Nov. 7, 2024. ... More Mortgage rates in the US increased to the highest level since July. Photographer: David Paul Morris/Bloomberg All week, markets and politicians been dissecting the President Trump's proposal to privatize Fannie and Freddie. As they support 70% of the U.S. mortgage market, it is important to consider the credit markets impacts and risks for the U.S. These are still hard to work out until the rationale becomes clear, beyond removing the FHFA as conservator. Since their creation, the two main GSEs have been quintessential mixed-ownership corporations. In 1938, FNMA was established as a standalone company in the New Deal. It was acquired in 1950 by the entity that became the U.S. Department of Housing and Urban Development with two classes of shares: preferred, held by the U.S. Treasury, and common, non-voting, held by a network of mortgage lenders. In 1968, Fannie was reorganized and split into a successor FNMA and Ginnie Mae. The successor FNMA was listed on the New York Stock Exchange and chartered to purchase, bundle and sell residential mortgages as securities (RMBS). GNMA became part of HUD. Its function: to guarantee payments on securitizations backed by mortgages issued under programs by U.S. government departments like HUD, Veterans Affairs and Agriculture. FHLMC was created in 1970 along lines similar to FNMA—publicly traded, earning guarantee fees on loan portfolios, with HUD oversight—but its client network is smaller banks and credit unions rather than large banks. Originally, FHLMC was owned by the Federal Home Loan Banks, but under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 it became independent. In 1995, FHLMC diversified into making markets in subprime mortgage collateral. In 2008, Fannie and Freddie suffered material losses on their combined mortgage portfolio of USD 1.5 TN. They were bailed out, delisted from the NYSE on July 7, 2010, placed under FHFA's conservatorship, and began trading on OTC markets the next day. The stock of both institutions remains publicly investible alongside their residential mortgage-backed securities and corporate bonds. So there must be more to the current proposal than giving American investors access. The Big Beautiful Bill will shrink the U.S. tax base if it passes the Senate. Could privatizing these mortgage giants fill the gap with new, incremental tax revenues? It is hard to say without a concrete deal structure in place. However, the mortgage giants already pay taxes on operating income, as well as paying federal, state and local taxes on securities' earned interest. So the motivation to privatize is not obviously tax-related. It may have more to do with the U.S. Treasury currently owning the GSE preferreds as well as warrants on 80% of common stock. If pricing on a future IPO were to hit or exceed the target, the U.S. government could reap a one-time, massive windfall. Arranging banks would profit handsomely as well. A USD Trillion IPO (Chairman Pulte's estimate) could generate fees in the range of USD 40 to 70 Billion. That's plenty of incentive for a successful initial offering. But for most Americans, what matters more is what happens in the aftermarket. First, what would be the go-forward impact on rates for homebuyers? The more common theory is that the replacement entities, being purely profit-driven and maybe facing higher funding costs, would drive up rates—and up again as supply shrinks. A minority viewpoint says rates will go down as privatization drives innovation. The reality is—we can predict given a concrete exit plan, but without one, we just can't know. Second, and intimately linked, is the status of the U.S. guarantee. This decision would impact the entire credit market ecosystem starting with borrowers, whose numbers would shrink as government support goes away. If the new entities were to retain U.S. support in some form, the impacts on bank market microstructure and the competitive playing field are less clear; but don't expect the status quo to continue. Would a distributed ecosystem form anew, or would intense, uneven competition transform the U.S. bank market where only giants survive? Related to the status of the guarantee is how potential backlash could impact the U.S. government rating, which Moody's just downgraded to Aa1. Would global bond investors view sudden withdrawal as a default, regardless of the legal definition? And in this same point, will GNMA and its guarantee continue? The answer directly impacts home affordability for veterans, rural homeowners and disadvantaged groups. Third, are the potential changes to the GSE's current information disclosure regime. This question is not yet debated in the media but it should be. The go-forward disclosure package could have the greatest impact on aftermarket performance. Bonds are most active in the capital structure of GSEs today. Their required bond disclosures comply with the very best practices in the world that were created in the U.S. public securitization markets. Will the disclosures continue? Will the public have access to them after the IPO? Or will the financial position of the new players become more opaque as information disclosures lag changes in financial performance? We have seen this movie before in the GFC. It did not end well. Fourth, the operational impacts of privatization are unclear. Will the 30-year fixed rate model made in the 1930s continue or gradually be replaced by loan structures benefitting borrowers less and lenders more—floating rate indices, shorter and longer maturities, different funding formulas? Will a forward-settled market replace the To Be Announced market that FNMA and FHLMC currently use? The TBA market today allows sellers to fund their origination pipelines and buyers to lock in prices before transaction specifics are settled because the guarantee equalizes the potential risk between offerings. The cost benefits, which can be quite substantial, may disappear if the guarantee goes away. Fifth are what Donald Rumsfeld called unknown-unknowns. If the first four categories of unknowns are known (with the possible exception of #3), news unfolding daily shines a light on impacts we have not yet thought of. Was Moody's downgrade of FNMA a reflection of recent past performance, or does it also anticipate future shocks to the organization? Does the introduction of an anti-crime unit with AI fraud detection technology materially impact how ? WASHINGTON, DC - FEBRUARY 27: William Pulte, nominee for Director of the Federal Housing Finance ... More Agency testifies at a hearing of the Senate Banking Committee on February 27, 2025 at the Dirksen Senate Building in Washington, DC. When FHFA Director Bill Pulte says, 'what we're trying to do…is take cost out of the system and get homes so they can be affordable again,' is he referring to the current interest rate levels or foreshadowing a collapse in prices? These scenarios have drastically different economic consequences. Finally, when President Trump says, 'the U.S. will keep its implicit GUARANTEES,' the key word seems to me to be the one in small caps: implicit. Equities are story paper, but bonds are based on contracts; and it is hard to assign a financial value, positive or negative, to implicit support.
CBS News
27-05-2025
- General
- CBS News
Discovery Bay man honors fallen son nearly 20 years after fateful door knock; "Your world falls apart"
Discovery Bay man honors fallen son nearly 20 years he was killed in Iraq Discovery Bay man honors fallen son nearly 20 years he was killed in Iraq Discovery Bay man honors fallen son nearly 20 years he was killed in Iraq Pictures and tributes to his son, Joseph Anthony Graves, hang from walls and are displayed on shelves at Kevin Graves' home. There's a picture on his computer, too, that he'll always keep. "This was the last physical contact I had with him, and I'm so blessed to have this horribly grainy picture of my son and I together," said Graves. The photo of father and son embracing for the last time was taken on November 7, 2005. Less than nine months later, Graves got a knock on his door. "She said, 'Kevin, there's two soldiers. There's two soldiers on the front porch," said Graves. Kevin raised Joey in Discovery Bay as a single dad. He signed the papers for his then-17-year-old to enlist in the Army in 2003. The high school senior wanted to serve in the military in the aftermath of 9/11. Joey was just 21 years old when he was killed in Baghdad, Iraq, on July 25, 2006. "That's the day that your world falls apart," said Graves. Nearly 20 years have passed. But the tears and heartache for a child's life cut short never go away. "I just stared out at the water. I just stood at that window right there and stared out at the water," said Graves. Graves remembers Joey looking out for the ones who weren't always embraced, the underdogs. "Those are the people that Joey liked to help," said Graves. "He was a leader from behind. He wasn't necessarily a leader from in front." As Graves honors his fallen soldier, remembering times of laughter and joy embracing his child, and standing next to his best man, he hopes the rest of the country will also take a moment to remember. "I want everybody to take a moment and think about why they have those freedoms that they have," said Graves. "That's because of the sacrifices that have been paid by hundreds of hundreds of thousands of service members throughout the centuries who have given their lives so we can live in this freedom." A freedom that comes with a cost, on this Memorial Day. Graves also joined the military when he was 53 years old, serving as a chaplain. He runs the foundation, Some Gave All - the Joey Graves Foundation, with a mission to honor the fallen, support those who fight, and serve their families.
New York Times
09-05-2025
- Entertainment
- New York Times
Celebrating With 150 Guests and Jabba the Hutt
Hayley Michelle Finetti can't help but feel that the talent show championship she was awarded at age 10 should have gone to someone else. 'You should have won,' Ms. Finetti told her onetime competitor Emilio Lopez days before they were to be married in San Jose, Calif. 'It must have been rigged.' Ms. Finetti and Mr. Lopez met in 2009, when she was a fifth grader and he was a new fourth grader at Discovery Bay Elementary in Discovery Bay, Calif., in the Bay Area. Mr. Lopez had moved to town that year with his mother, Lucy Rodriguez, a single parent. Ms. Finetti is a native of Discovery Bay. She and her older brother grew up in a theatrical household where their parents, Jennifer and Chris Finetti, were community theater buffs. 'I started singing before I could talk,' she said. A rendition of Christina Aguilera's 'Hurt' won her the 2010 talent show. Mr. Lopez's talent was speed-drawing — he had set up a projector and asked audience members to name their favorite animals, then combined those animals into mutant monsters. 'It was real avant-garde stuff,' he said, jokingly. [Click here to binge read this week's featured couples.] At the after-school care center where both were enrolled that year, they struck up a friendship. In middle school, it withered. But neither was willing to let budding talent die on the vine: In 2016, they reconnected through their high school's performance of 'Gigi.' Mr. Lopez had a starring role. 'It was a freak thing,' he said. When the actor who had won the part initially slipped up academically, Mr. Lopez said, he became the last-minute replacement. Ms. Finetti was the show's assistant vocal director, charged with helping actors learn to sing. As rehearsals heated up, the play's romantic overtones took on real-life meaning. 'I maybe pretended I couldn't sing as well as I could so I could get more lessons from Hayley,' Mr. Lopez said. In April 2016, Ms. Finetti asked Mr. Lopez, then a sophomore, to be her date for junior prom. During a slow dance that night, he asked, 'Will you be my girlfriend?' 'There was nothing about her that I didn't love,' he said. They have been together ever since. Ms. Finetti, now 26, went on to study at California State University, Chico, where she earned a bachelor's degree in political science. Mr. Lopez, now 25, attended the University of Silicon Valley in San Jose, where he earned a bachelor's degree in art and animation. By 2019, they were living together as college students in Chico. Both retreated to their parents' homes during the early months of Covid, but by 2021 they were again sharing a household in Santa Clara, Calif. In 2023, each took jobs — she as a senior subcontract administrator for Lockheed Martin, the aerospace company, and he as a designer at a robotics company — that routed them to their current home in Oakland, Calif. A year earlier, in July 2022, they had become engaged at Rancho Rubalcava, a San Jose ranch owned by Mr. Lopez's aunt and uncle, but not everyone liked the timing. Mr. Lopez said his mother 'had been adamant that I wait until after I had my degree' to propose. 'I had made it all the way to my senior year, and we had been talking about marriage for years. I couldn't wait any longer,' he said. The couple exercised considerable patience, however, in the nearly three years it took to plan their May 4 wedding at Rancho Rubalcava — in part because they needed time to work on projects for their wedding theme. Mr. Lopez is among the many 'Star Wars' fans who celebrate May 4, or Star Wars Day ('may the fourth be with you'). 'I'm a huge nerd,' he said, as if to explain the life-size Jabba the Hutt sculpture he built out of chicken wire, liquid latex and craft foam for the reception. The couple combined cultural traditions during a ceremony for 150 officiated by Mr. Lopez's uncle, Jesse Rodriguez, who became a Universal Life Church minister for the occasion, while Ms. Finetti's father participated in the ceremony. In a nod to Ms. Finetti's Jewish background, they stood beneath a huppah and stomped glass. Mr. Lopez's Mexican heritage was represented by his traditional charro suit and a lasso ceremony, in which a lasso is draped over the couple to join them symbolically. The reception was held in a barn decked out in 'Star Wars' tchotchkes. There was a hora and a taco truck at the reception (the consumption of 'many tacos' was important both culturally and personally, Mr. Lopez said). As Ms. Finetti and Mr. Lopez danced to a custom 'Guardians of the Galaxy' music medley, guests sipped 'Star Wars'-themed cocktails near Jabba the Hutt. Before they left for a honeymoon, Ms. Finetti and Mr. Lopez saw to the sculpture's future safekeeping: It will be installed at the famed museum of 'Star Wars' memorabilia, Rancho Obi-Wan, where the couple serve as volunteers.
