Ohio Court Sides With Freddie in Pre-Crisis Shareholder Lawsuit. An Ohio federal court late last week tossed out a shareholder class action lawsuit that accused Freddie Mac of lying about its exposure to subprime loans prior to the 2008 financial crisis. The suit, filed in 2008 by the Ohio Public Employees Retirement System, claimed that Freddie artificially inflated the value of its common stock by making false public financial statements that obscured its subprime exposure.OPERS claimed it lost as much as $27.2 million as a result of Freddie’s alleged cover-up of its subprime exposure.

Fannie Mae and Freddie Mac reported a combined $6.0 billion in net income for the third quarter of 2014, up from $5.1 billion in the previous quarter. The two GSEs will send to the Treasury $6.8 billion as return on the government’s senior preferred stock. That will bring cumulative payments under the GSE conservatorships to $225.5 billion. Fannie and Freddie were given a total of $187.4 billion in government funds in order to stay in business.

Mortgage delinquency rates kept falling across the country in the third quarter of the year, according to data provided by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. The delinquency rate for mortgages on one- to four-unit residential properties declined 19 basis points, on a seasonally adjusted basis, to 5.85 percent of all loans outstanding as of Sept. 30, 2014, according to the MBA. This is the lowest level seen since the fourth quarter of 2007 and represents the sixth straight quarterly decrease, according to the trade group. In terms of product mix, the seasonally adjusted delinquency rate slipped 15 bps to 3.05 percent for prime fixed loans and decreased 45 bps to 4.83 percent for prime adjustable-rate mortgages. ...

The biggest decline has been in non-agency MBS holdings, mostly Alt A and subprime MBS that have been subject to fast liquidation rates.

In fact, it was the highest quarterly volume in new flow business for the MI sector since the second quarter of 2008.

Although Fannie Mae and Freddie Mac reported combined comprehensive income of $6.8 billion in the third quarter of 2014 – thanks in no small part to strong guaranty fee revenue – the two government-sponsored enterprises both said they’re keeping a wary eye on the precarious financial condition of private mortgage insurers. Fannie noted in its 10-Q filing with the Securities and Exchange Commission that although the financial condition of its primary MI counterparties approved to write new business has improved, there is still risk that they may fail to honor the GSE’s insurance claims. “If we determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer counterparties, or if we have already made that determination but our estimate of the shortfall increases, it could result...

Income documentation and other standards that have been in place since Fannie Mae entered conservatorship in 2008 will apply to the company’s new 3 percent downpayment product, and loan assessment by a private mortgage insurer will be crucial, according to a company spokesman. The spokesman said details will be announced shortly. Fannie Mae is working with the Federal Housing Finance Agency to design the government-sponsored enterprise’s revamped 97 percent loan-to-value product. Sources said previous requirements for a standard 97 LTV product, which Fannie offered until November 2013, are being considered. The FHFA announced...

Sources said previous requirements for a standard 97 LTV product, which Fannie offered until November 2013, are being considered.

HFA portfolio performance continues to strengthen, which will bolster future interest income.

The Fannie product also had less expensive mortgage insurance and allowed the borrower to cancel the policy once the LTV reached 80 percent of the home’s value.