Month: November 2008

Fed Chairman on The Future of Mortgage Finance

On October 31, Fed Chairman Bernanke spoke at a symposium on the future of mortgage finance in the United States and indicated that government support will likely continue to play a role in mortgage securitizations in times of economic turmoil. Chairman Bernanke also mentioned several alternatives to the current GSE model, including privatization of the GSEs, providing government-backed insurance for bond financings related to the mortgage market, employing covered bonds or more closely tying the GSEs to the government, with or without private ownership (possibly through restructuring the GSEs using a public utility model, consolidating the GSEs and the FHA, or cooperative ownership structures).  Bernanke’s Speech.

 

Treasury and FDIC Developments

On November 4, Treasury gave its First Tranche Report to Congress, as required by the Emergency Economic Stabilization Act. In this report, Treasury described measures taken under the Capital Purchase Program and noted both recent signs of market improvements and longterm credit market challenges. Treasury also indicated a willingness to establish additional programs under the TARP, particularly in connection with mortgage loan modifications.  Treasury Tranche Report. 

On November 7, Treasury posted a solicitation for equity, debt and warrants asset management services under the Capital Purchase Program. Submissions are due on November 13.  Treasury Press Release.

On October 31, Treasury released the form documentation for the Capital Purchase Program, including a term sheet, a form of Securities Purchase Agreement, a form of Letter Agreement between the participating institution and Treasury and forms of senior preferred stock and warrants.  CPP Documentation.

 The FDIC has extended the opt-out deadline for the Temporary Liquidity Guarantee Program to December 5, 2008, in order to provide institutions with additional time to review the Interim Rule and make a determination regarding participation. (Deadline for comments on the Interim Rule is November 13.)  FDIC Press Release.