Speculators have been driving up the price of Fannie Mae and Freddie Mac junior preferred stock, hoping that given the GSE’s rapidly improving fortunes they could make a killing down the road. One hedge fund official told Inside The GSEs that Fannie junior preferred shares that had an original face value of $50 are trading in the secondary market for $8 to $9 a unit. Stock originally priced at $25 can be had for $5 and change. Fannie common stock is now trading at $2.20 per share compared to a 52-week low of just 9 cents. Fannie and Freddie recently reported record quarterly profits of $63 billion, a large chunk of it tied to the recapture of deferred tax assets. But on a pure operating basis – minus the DTA – their combined earnings are in the range of $12 billion, which is almost $50 billion annualized.

The director of the Federal Housing Finance Agency would be able to review and revise the take-home pay of Fannie Mae, Freddie Mac and Federal Home Loan Bank executives should the director determine that a senior official’s compensation is “not reasonable or comparable” with the earnings of counterparts in similar businesses, under newly revised agency rule. An interim final rule, published by the FHFA in the May 14 Federal Register authorizes and clarifies the FHFA director’s authority to review and withhold executive compensation at Fannie, Freddie and the 12 FHLBanks in particular. “In view of FHFA’s statutory obligation to prohibit compensation to any executive officer that is not reasonable and comparable, prior review and non-objection rather than review after-the-fact can help set expectations and avoid the need for later remedial action,” explained the Finance Agency.

Banks and thrifts continued to generate very strong earnings from their mortgage banking operations during the first quarter of 2013, despite a slowdown in originations and loan sales. Banks and thrifts reported a total of $7.704 billion in mortgage banking income during the first three months of 2013, according to a new Inside Mortgage Trends analysis of recently released call-report data. That was up 15.5 percent from the previous quarter, and the early 2013 earnings fell just ... [Includes one data chart]

A New York federal judge has allowed the Justice Department to proceed with its civil fraud lawsuit against Bank of America in connection with the packaging and sale of mortgage-backed securities to Fannie Mae and Freddie Mac, but not before dismissing a significant portion of the government’s claim. U.S. District Judge Jed Rakoff dismissed claims for damages and penalties under the False Claims Act in an expedited ruling two weeks ago. In October 2012, the government filed suit against BofA, as successor to Countrywide, alleging BofA inherited and continued to operate Countrywide’s loan program known as the “Hustle.”

Although table-funding transactions fell slightly in terms of market share in the first quarter, prospects are looking up for mortgage brokers. According to the Bureau of Labor Statistics, 78,500 men and women were employed as full-time mortgage brokers in March, the highest reading since the summer of 2008, when the housing and mortgage markets were in a free-fall. Trade group officials who represent brokers report they are seeing more wholesalers engaged in table funding ... [Includes one data chart]

With minimal disruption to the mortgage finance system, Fannie Mae and Freddie Mac could be transformed into gsecuritization cooperativesh that would serve as gthe best possible structureh to deliver private capital and promote stability to the mortgage market, an expert told lawmakers last week. Testifying before the Senate Banking, Housing and Urban Affairsf Subcommittee on Securities, Insurance and Investment, Andrew Davidson, president of Andrew Davidson & Co., noted that Freddie began as an originator-owned cooperative whose goal was to grant its members access to the securitization market. Davidson suggested that senators look to the past as they grapple with a future role for the GSEs.

Mortgage underwriting standards have loosened slightly recently, though nowhere near levels seen during the subprime boom. Federal regulators are concerned that not enough lending is being directed toward borrowers with lower credit scores. In November 2012, the average credit score on newly closed loans was 750, according to Ellie Mae. Average scores have largely declined each month since then, to 742 in April. During that time, credit scores on conventional mortgage originations declined by ...

A Rhode Island software developer says it has taken mortgage application processing to another level with a new system that ensures loan approval and a “money-back” guarantee to the borrower if the application falls through. At the heart of the system is software called The Complete 1003, which generates a highly detailed application form to supplement the standard mortgage application form lenders use to collect a borrower’s financial information. The Complete 1003 is designed to ...

Fannie Mae and Freddie Mac this week directed servicers to inform homeowners reeling from the damage inflicted by the tornados that swept through Oklahoma and other states that they may be eligible for a temporary reprieve on their mortgage payments. The GSEs’ disaster relief policies are targeted to borrowers with homes in jurisdictions President Obama has declared to be Major Disaster Areas where federal Individual Assistance programs are being made available to affected individuals and households.

Limiting the maximum amount of cash-out refinances to 80 percent of the current value of a home could significantly decrease defaults, according to new research by the Federal Reserve. Such limits on refis are already in place in Texas, with the Fed economist suggesting that the restrictions could be put in place nationwide, along with recourse provisions, in an effort to limit defaults. Steven Laufer, an economist at the Fed, looked into mortgage performance on a sample of properties in Los Angeles County ...