Roughly one out of every 14 banks in the country suffered significant investment losses following the September 2008 government takeover of Fannie Mae and Freddie Mac, according to a new Federal Reserve discussion paper. The paper, When Good Investments Go Bad: The Constriction in Community Bank Lending After the 2008 GSE Takeover, details how financial institutions took a bath when the two companies were placed into conservatorship and dividend payments on common and preferred shares were suspended.

The Federal Housing Finance Agency expects to finish its latest assessment of principal reductions on Fannie Mae and Freddie Mac loans sometime this month against a backdrop of intensifying public debate over the issue. The Treasury Department this week fought back against claims that its proposed incentive payments to the government-sponsored enterprises, if they agree to principal reduction loan mods, would be a “backdoor bailout” for banks that service these loans. Treasury earlier this year offered to pay the GSEs the same incentives that other investors get for principal reduction loan mods under...

The Federal Housing Finance Agency is calling for Fannie Mae and Freddie Mac to conduct an analysis of the viability of each company’s multifamily operations without government guarantees, suggesting the possibility of separating the two government-sponsored enterprises’ multifamily and single-family businesses. The GSEs’ mandated review of their multifamily operations is part of the FHFA’s 2012 “conservatorship scorecard” unveiled two weeks ago, which outlines the specific objectives and timelines for the Finance Agency’s strategic plan for the conservatorships of Fannie and Freddie. The multifamily...

The Federal Housing Finance Agency is looking for two good chief executives who are willing to work a “thankless job” for substantially reduced pay and the chance to oversee the transition of Fannie Mae and Freddie Mac from private companies to government entities and perhaps eventually out of business altogether. Working closely with the two GSEs, the Finance Agency is in the midst of discussions with candidates to fill the CEO vacancies at both Fannie and Freddie, according to FHFA Acting Director Edward DeMarco.

The Home Affordable Refinance Program recorded a significant decrease in December despite the implementation of some new HARP 2.0 standards that took hold during the final month of 2011, according to the Federal Housing Finance Agency. The FHFA’s latest foreclosure prevention and refinance report released this week noted that all HARP refis fell 36 percent to 23,323 in December from 36,304 in November.

Unless Congress takes legislative action by the end of the year, Fannie Mae and Freddie Mac’s “unlimited” pipeline of cash support from the U.S. Treasury will be significantly dialed back, a paper by Deutsche Bank cautions. Although agency mortgage market observers have assumed that the Treasury will extend the taxpayers’ unlimited line of credit to the GSEs before the Dec. 31 deadline, a close reading of the authorizing legislation suggests that the Treasury may not be able to extend unlimited support without the approval of Congress, noted Deutsche Bank.

Although the Federal Housing Finance Agency has taken steps to ensure that the GSEs’ mortgage purchases conform to certain underwriting standards, the Finance Agency’s oversight of underwriting standards is limited and requires more attention, the FHFA’s official watchdog concluded this week. The FHFA’s Office of Inspector General found in its audit of FHFA oversight of Fannie Mae’s single-family mortgage underwriting standards that the agency lacks a formal process for reviewing underwriting standards and variances. Instead, it informally reviews and comments on Fannie’s proposed credit policy changes.

Fannie Mae, Freddie Mac and the Federal Home Loan Banks will now be prohibited from taking on mortgages “encumbered by certain types of transfer fee covenants and in certain related securities” under a final rule issued last week by the Federal Housing Finance Agency. The FHFA’s final rule, published in the March 16 Federal Register, generally applies, with some exceptions, to private transfer fee covenants created on or after Feb. 8, 2011, the publication date of the Finance Agency’s proposed rule.

Effective Sept. 1, Freddie Mac will assess a Reporting Noncompliance Compensatory Fee of up to $15,000 on servicers that fail to report on at least 75 percent of the loans they service by the fifth business day after the accounting cycle cutoff, the GSE noted in an alert to servicers last week. Freddie has upped the fine it will levy from $250 to $5,000 against any servicer that falls short of the GSE’s reporting rules. A second violation in one 12-month period will result in a $10,000 fine, previously $550.