Wall Street believes that housing/GSE reform legislation should provide for the creation of a single agency MBS.

Wells Fargo, JPMorgan Chase and Flagstar are all working on large servicing deals, but as sellers. Meanwhile, HUD is worried about lower GSE loan limits.

After a long period of inertia, Senate leadership from both sides of the aisle have seized the initiative in the effort to reform mortgage finance with the first of a series of hearings this week aimed at crafting a comprehensive, bipartisan bill by year’s end. Meanwhile, a largely partisan House Republican bill that would seal the fate of Fannie Mae and Freddie Mac has been shut out of the floor vote schedule this fall amid significant opposition from industry trade groups.Last month, at the direction of Senate Banking, Housing and Urban Affairs Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, senior staffers met with various industry “stakeholders” to get field reform input in advance of the hearings.

Vacant foreclosed properties with mortgages backed by Fannie Mae and Freddie Mac are not subject to the City of Chicago’s registration ordinance, according to a recent ruling from the U.S. District Court for the Northern District of Illinois. The ordinance, which took effect in November 2011, requires mortgage lenders to register vacant properties with the city and pay a $500 registration fee. The ordinance also directs lenders to secure and maintain vacant buildings in accordance with city requirements.

Fannie Mae is starting to market a risk-sharing mortgage-backed security that would require investors to bear some of the financial risk if mortgages default. The company, which is reportedly getting ready to launch a “road show” to debut its new risk-sharing mortgage bond within the next two weeks, is following up on Freddie Mac’s $500 million Structured Agency Credit Risk bond, which the GSE priced in July. The Federal Housing Finance Agency’s Strategic Plan calls for both Freddie and Fannie to establish loss-sharing arrangements, in which private investors bear some or all of the credit risk.

The official watchdog of Fannie Mae’s and Freddie Mac’s regulator wants to know what’s the holdup with the GSEs’ implementation of new accounting practices to write off overdue single-family residential mortgages. Last month, the Federal Housing Finance Agency’s Office of Inspector General dispatched a “management alert” to the FHFA seeking answers as to why an advisory bulletin directing the GSEs to classify any single-family residence loan delinquent for 180 days or more as a “loss” has yet to be implemented. OIG issued the bulletin in April 2012, but the FHFA has given Fannie and Freddie until Jan. 1, 2015, to fully implement it.

A widely-expected reduction in conforming loan limits in 2014 by the Federal Housing Finance Agency will likely be confined to a handful of states, but that’s not stopping industry stakeholders and advocates from worrying about the implications of tighter credit for middle-income homebuyers in high-priced markets. Currently, Fannie Mae and Freddie Mac loans are capped at $625,500 in high-cost areas and it’s been stuck at $417,000 for everywhere since 2006. According to an analysis by Barclays Capital, the FHFA currently has the authority absent additional legislation to lower the base GSE conforming loan limit under the Housing and Economic Recovery Act of 2008. Lowering the conforming limit would in turn reduce the high-cost limit.

Large parts of the Bay Area and Southern California qualify for the top high-cost limit, while other California markets such as San Diego ($546,250) and Sacramento ($474,950) have intermediate high-cost limits.

The letter to members of Congress is notable for which trade groups didn't sign on, including the American Bankers Association and Mortgage Bankers Association.

Loan standards are not loosening on conventional mortgages, but in the jumbo space the story is entirely different.