The mystery surrounding how much Fannie Mae really earned in the fourth quarter – and full year – could be solved by the end of next week, as the Federal Housing Finance Agency softens its stance toward allowing the GSE to capture at least a portion of its $64 billion valuation allowance for deferred tax assets. Industry officials who claim to have knowledge of the matter said FHFA is actively working with the GSE to resolve the situation. One former Fannie Mae official said it’s likely the agency will allow both Fannie Mae and Freddie Mac to claim deferred tax assets over several quarters.
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Lawmakers of both parties in the House and Senate are talking like they are poised to finally ramp up their efforts to tackle housing finance reform, including disposition of the GSEs, but industry observers are skeptical that members will overcome differences and accomplish anything tangible. Last week, during hearings by the House Financial Services and Senate Banking, Housing and Urban Affairs committees, members spoke with more conviction about taking action, but said the devil is in the details. Some Republicans are pushing for a fully private housing finance system, while many Democrats desire some sort of government involvement to support originations of 30-year fixed-rate mortgages.
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The Federal Housing Finance Agency is warming up plans to launch a sales blitz for the successful but sun-setting Home Affordable Refinance Program. Last week, while testifying before the House Financial Services Committee, FHFA Acting Director Edward DeMarco said the agency will soon implement a nationwide marketing campaign for HARP “to let borrowers know this is a legitimate program. We want to see more borrowers refinance.”
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Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency, rolled out a new streamlined loan modification program designed to increase the number of mods and reduce the number of foreclosed loans owned or guaranteed by the GSEs – a move not without some risks, analysts say. Beginning July 1 and running through Aug. 1, 2015, servicers can send modification notices to eligible borrowers who are between 90 days and 24 months delinquent under the Streamlined Modification Initiative. Building on the principles of the FHFA’s Servicing Alignment Initiative, the new streamlined mod effort seeks to encourage servicers to resolve delinquencies earlier and in a more consistent and timely manner to keep more people in their home and minimize losses to the GSEs and taxpayers, according to FHFA Acting Director Edward DeMarco.
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Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the fourth quarter of 2012, with a slight decrease from the previous quarter, according to a new ranking and analysis by Inside The GSEs based on data from the Federal Housing Finance Agency. Ginnie Mae securities also posted a negligible decrease within the FHLBank system during the period ending Dec. 31, 2012. GSE MBS accounted for 72.3 percent of combined FHLBank MBS portfolios, down 1.1 percent from the third quarter. The Finance Agency’s data do not separately break out Fannie and Freddie securities.
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A spinoff product of the Federal Home Loan Banks’ Mortgage Partnership Finance Program experienced explosive growth in lender participation resulting in a record 2012, according to the FHLBank of Chicago. The MPF Xtra program, launched in 2008 to serve as a conduit for Fannie Mae loans, saw its volume increase from $2.8 billion overall during 2011 to $6.9 billion at year-end 2012, noted the Chicago FHLBank in its fourth quarter 2012 earnings report.
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The majority of financial institutions defending themselves against a massive litigation initiative by the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac for toxic mortgage-backed securities purchased by the GSEs launched a counteroffensive this week by urging a federal appeals court to intervene in their favor against the “unfair” trial judge. Fifteen banks, including JPMorgan Chase, UBS Americas, Citigroup, Deutsche Bank and Bank of America, filed a joint petition with the Second Circuit Court of Appeals in New York complaining that U.S. District Judge Denise Cote has engaged in a “one-sided” approach designed to force a settlement rather than “foster fair and reasonable determination of the issues.”
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Nearly two months after it shut down a plan by Fannie Mae to lower the costs of so-called “force-placed” insurance, the Federal Housing Finance Agency this week unveiled for public comment a plan that would ban the payment of lucrative commissions and reinsurance fees to banks in return for their purchase of lender-placed insurance policies. Under the FHFA proposal, seller/servicers would be prohibited from accepting sales commissions or fees related to the placement of force-placed insurance where a conflict of interest exists between them and the insurance providers and their affiliates. Fannie Mae and Freddie Mac may be affected by such costs where a servicer pays the higher premiums and is unable to recoup the cost from the homeowner or at a foreclosure sale. Consequently, explained the FHFA, the expense is passed along to the GSEs for reimbursement.
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The top Democrat on the House Committee on Oversight and Government Reform, who is a vocal critic of the head of the Federal Housing Finance Agency, is calling for a hearing to dissect recent reports by the FHFA’s official watchdog that the agency has been “inadequate” in its oversight of the GSEs. The committee’s Ranking Member, Rep. Elijah Cummings, D-MD, formally requested Committee Chairman Darrell Issa, R-CA, to hold a hearing with FHFA Acting Director Edward DeMarco on the hot seat and FHFA Inspector General Steve Linick, to discuss a new IG audit detailing the agency’s inattention to mortgage servicing complaints. “Another week has brought another sorry report from the FHFA Inspector General finding that FHFA and the GSEs have failed to take seriously their obligations to protect consumers,” said Cummings.
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The Ninth Circuit Court of Appeals ruled last week that a 2010 Federal Housing Finance Agency directive advising Fannie Mae and Freddie Mac not to purchase mortgages laden with certain first-priority lien obligations under the Property Assessed Clean Energy program falls within the FHFA’s purview as GSE conservator. A three-judge panel of the Ninth Circuit overturned a ruling last August by California Federal Judge Claudia Wilken that determined the FHFA was not acting as conservator but as regulator and had improperly exercised substantive regulatory oversight in violation of the Administrative Procedure Act when the agency halted GSE involvement with PACE programs.
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The GSEs continued to reduce their footprint in global debt markets during the fourth quarter of 2012, with debt outstanding and issuance down from the previous quarter and from the same period a year ago. Fannie Mae’s, Freddie Mac’s and the Federal Home Loan Banks’ combined debt outstanding was $1.867 billion during the period ending Dec. 31, 2012, down 2.5 percent from the third quarter and down 11.6 percent from the fourth quarter 2011, while the GSEs issued a combined total of $598.8 billion in new debt during the fourth quarter.
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