The Federal Reserve’s Open Market Committee brought the latest installment in its quantitative easing programs to a conclusion this week, but the central bank will continue to reinvest principal payments back into agency MBS. The FOMC also reaffirmed the current 0 to 0.25 percent target range for the federal funds rate. “The committee anticipates … that it likely will be appropriate to maintain the 0 to 0.25 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.” And as usual, the Fed left...

The 12 Federal Home Loan Banks contributed some $300 million to affordable housing in 2013, according to a report by the Federal Housing Finance Agency. The report, issued last week, is part of the FHFA’s mandate to monitor and report annually on the FHLBanks’ support of their low-income housing and community development activities. In 2013, the Banks contributed approximately $297 million to the Affordable Housing Program, equal to 10 percent of their net earnings for the preceding year and up approximately 57 percent from 2012, noted the FHFA.

IG Recommends FHFA Upgrade Its Recordkeeping. The Federal Housing Finance Agency is in compliance with its recordkeeping procedures but the policy and infrastructure of its records management could do with an upgrade, concluded an evaluation by FHFA’s Inspector General last week. The IG said that the Finance Agency’s Division of Enterprise Regulation’s recordkeeping practices “have limitations that impede the efficient retrieval” of examination workpapers by agency staff and by IG auditors.

Industry observers expect that last week’s announced go-ahead to merge the Federal Home Loan Banks of Des Moines and Seattle will be a “one-off” as the remaining 10 FHLBanks are still in sound enough financial shape. Talk of a proposed merger between the FHLBank of Des Moines and the smaller, troubled FHLBank of Seattle was first made public in July and approved unanimously by both Bank boards last week.

Ginnie Mae has unveiled new plans for issuer standards as well as steps to boost liquidity in the mortgage servicing rights (MSR) market. Agency officials at a summit hosted by Ginnie Mae this week in Washington, DC, said both actions are designed to avoid issuer failures and to preserve residential mortgage servicing as an economically viable activity and MSRs as an attractive asset class. The officials said changes will be made to Ginnie’s mortgage-backed securities program to support the agency’s transformation from a pre-crisis bank-driven government MBS program to a post-crisis program where non-depositories and smaller financial institutions play a much bigger role. By the middle of next year, approximately a third of Ginnie MSRs will have changed hands over the previous four years, agency officials said. Many of the new owners of the servicing rights are ...

Ginnie Mae this week unveiled a position paper outlining its views and new strategies for its mortgage-backed securities program with greater emphasis on liquidity and on the preservation of servicing rights both as an activity and as an asset class. During a conference it sponsored this week, Ginnie announced a number of initiatives that would help the agency adapt its complex financial and operational structures to a post-crisis secondary mortgage market in which non-depository and smaller institutions are playing a bigger role. Ginnie underscored...

Hundreds of community banks, credit unions and community development financial intuitions within the Federal Home Loan Bank system will be adversely impacted and even face expulsion from the FHLBanks if a proposed Federal Housing Finance Agency rule change goes into effect, say rule opponents. The FHFA’s proposal, issued earlier this month, would change the FHLBank membership qualifications by imposing an ongoing asset test on FHLB members, requiring that they track and report on the mortgage-related assets they hold on their books.

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the second quarter of 2014, with a very slight decline from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted an increase within the FHLBank system during the three-month period ending June 30, 2014.

MBS industry observers had hoped that federal banking regulators would clear up any confusion about the treatment of collateralized mortgage obligations and real estate mortgage investment conduits when they finalized new liquidity coverage ratio rules last week. The regulators gave some hints, but did not spell out a position. The rubber will meet the road when examiners start going over individual banks’ portfolios for compliance with the LCR rule, which requires banks to maintain sufficient quantities of highly liquid assets to meet their cash needs in a financial emergency. The final rule classifies...

The few real estate investment trusts that currently have access to advances from the Federal Home Loan Banks would lose their ability to tap the attractive funding source under a proposal last week from the Federal Housing Finance Agency. The FHFA said the proposed rule is necessary because REITs with captive insurance companies pose risks to the FHLBank system. “FHFA is taking these actions to address supervisory concerns about certain institutions that are ineligible for FHLBank membership, but that are using captive insurers as vehicles through which they can obtain FHLBank advances to fund their business operations,” the federal regulator said.