Fannie Mae Executives in Line for Big Bonuses, TooIn the wake of the AIG uproar, mortgage giant Fannie Mae intends to pay four of its top executives retention bonuses ranging from $470,000 to $611,000, according to its SEC filing in February.
The troubled mortgage lender's executive vice presidents Kenneth Bacon, David Hisey, Michael Williams and Thomas Lund will receive those bonuses. Kenneth Bacon oversees community development; David Hisey is Fannie Mae's deputy chief financial officer, Williams is COO and Lund supervises the single-family mortgage business.
Of Fannie Mae's two top executives, CFO David Johnson received no bonus on top of his salary of $625,000, and CEO Herb Allison received no compensation or bonuses in 2008 or 2009. The mortgage giant was taken over by the government and is overseen by the Federal Housing Finance Agency. The FHFA says the bonuses were necessary to keep Fannie's most experienced executives working to reverse the effects of the mortgage crisis. FHFA says it would have been catastrophic to lose the next layers down and other experienced employees.
Between Fannie Mae and Freddie Mac, the two mortgage giants bought more than 70 percent of all mortgages originated in 2008. They are key players in Making Homes Affordable plan to help millions of homeowners.
Fannie Mae's executives receiving bonuses may face the same fire and criticism that AIG and its employees have been under since Sunday, when it news came that AIG was giving more than $165 million in bonuses despite taking $170 billion in bailout loans from the government.
Two key senators announced plans this week to impose heavy taxes of up to 90 percent on retention bonuses paid to executives of companies that received federal bailout money or where taxpayers have at least 50 percent equity interest.
Fed Goes On Buying Debt Buying Spree
The Federal Reserve yesterday committed to double the purchase of mortgage debt and buy treasuries. This move by Federal Reserve Chairman Ben Bernanke shows he's willing to pump as much cash into the economy to avert a slide into depression and end the economic crisis.
The Fed will buy up to $300 billion of long term treasuries and more than double its mortgage debt purchases to $1.45 trillion to keep mortgage rates lower. The Fed also kept the interest rate at nearly zero and says it make keep it there for an extended time.
Bernanke, who is a student of the history of the Great Depression, is seen as the right person for the job by analysts and economists. They say he understands the problems and will take the right actions with the right answers.
Long-term treasuries dropped on the news that the Fed was taking, and the dollar dropped against the euro by end of day trading. With these purchases, Bernanke and the Federal Reserve are using their powers to open credit markets and lower borrowing costs. Mortgage Applications Up
Mortgage applications were up last week, as lower interest rates jumped last week, spurring homeowners to seek refinancing.
The Mortgage Bankers Association says its weekly application index climbed 21.2 percent for the week ending March 13. The index was 876.9, up from 723.4 a week earlier. The MBA says the index rose 20.7 percent.
More than 70 percent of applications came from borrowers seeking to refinance home loans, not purchase homes. The refinance rate was up from 67.9 percent in the prior week.
Interest rates have dropped dramatically after the Federal Reserve announced in November it would buy up to $500 billion in mortgage-backed securities in an effort to bolster the long-suffering housing market. The average rate for traditional, 30-year fixed-rate mortgages dipped to 4.89 percent from 4.96 percent a week earlier, says the MBA.