The Federal Housing Finance Agency’s own data prove that reducing the principal owed on underwater Fannie Mae and Freddie Mac loans would actually save taxpayers money, contrary to the agency’s position that writedowns are against taxpayer interests, according to House Democrats. In a letter last week to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, labeled the agency’s report justifying its policy against principal reduction as “seriously deficient and misleading.” “We understand that the FHFA is not part of the Obama administration, and that you do not take...

The Department of Housing and Urban Development is going all out to bolster FHA’s capital reserves with budgetary proposals to increase annual premiums beyond the 10-basis points hike authorized by Congress late last year. The proposed premium increases are expected to complement the $1 billion that Bank of America has agreed to pay to resolve claims against the bank and its subsidiary, Countrywide Financial Corp., for alleged underwriting and mortgage origination fraud. The BofA settlement, half of which is a penalty paid directly to the FHA, is part of a $25 billion agreement among 49 state...

The Consumer Financial Protection Bureau is on course to spend nearly half a billion dollars in 2013, half of which is projected to be devoted to supervision and enforcement, according to the budget proposal released by the Obama administration this week. The CFPB breaks down its expenditures into three categories, the largest of which is devoted to supervision, enforcement, fair lending and equal opportunity (SEFLEO), with projected funding to exceed the other two categories combined. After spending approximately $60 million in 2011, the SEFLEO bucket is budgeted at $214 million for 2012 and $261...

The already formidable task of replacing the outgoing CEOs at Fannie Mae and Freddie Mac got a little harder this week following swift congressional action to cut compensation levels at the GSEs down to size.Both the House this week and the Senate have approved by overwhelming margins the Stop Trading on Congressional Knowledge Act of 2012, which would bar members of Congress and congressional staff from using non-public, inside information for private gain.While the House version of the STOCK Act is weaker than the Senate’s, both versions retained an amendment sponsored by Sens. John McCain, R-AZ and Jay Rockefeller, D-WV, to prohibit Fannie and Freddie executives from receiving multi-million dollar bonuses while the GSEs remain in federal conservatorship.

A proposed rule by the Federal Housing Finance Agency to require Federal Home Loan Banks to verify a member’s Community Reinvestment Act (CRA) rating, as well as to be responsible for overseeing members’ compliance with the FHFA’s first-time homebuyers standards, would be an unnecessary and unwelcome change, according to public commenters.Issued in November, the proposal would replace the current practice in which members submit to the Finance Agency the community support statement.Instead, FHLBanks would review a member’s CRA rating using publicly-available information from the Federal Financial Institutions Examination Council or from the member’s federal banking regulator.

Fannie Mae and Freddie Mac’s debt issuance would be accounted for in the calculation of the federal debt under legislation passed by House Republicans this week.Members approved H.R. 3581, the Budget and Accounting Transparency Act of 2012, sponsored by Rep. Scott Garrett, R-NJ, by a 239 to 181 vote. Garrett’s bill is part of a comprehensive package of 10 reform bills House GOP members are pushing to enforce spending controls and oversight of federal spending.“Off-budget liabilities such as government-sponsored enterprises Fannie Mae and Freddie Mac threaten any progress we make towards deficit and debt reduction,” said Garrett, who is vice chairman of the Budget Committee, as well as chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises.

The second most senior Democrat on the House Financial Services Committee has filed a bill that would require Fannie Mae and Freddie Mac to reduce the principal on loans they own or guarantee.The Principal Reduction Act of 2012, H.R. 3841, sponsored by Rep. Maxine Waters, D-CA, would prevent foreclosure of, and provide for the reduction of principal on, mortgages held by the GSEs.Specifically the bill would require Fannie and Freddie to reduce principal to a 90 percent loan-to-value ratio. It would protect taxpayers by requiring shared appreciation of one-third of the profits if the home is sold and it would allow the GSEs to recapture any reduced funds if the loan subsequently defaults and enters foreclosure.

Congress should consider changing the mandate of the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac to address a “conflict of interest” that inhibits the Finance Agency’s supervision of the GSEs, a housing economist told senators this week.Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Columbia School of Business Professor Christopher Mayer said a significant problem with the ongoing operation of the GSEs has been the failure to adequately address operational conflicts.“The evidence suggests that the conflict of interest between the businesses of providing mortgage guarantees and managing a large retained portfolio of mortgages and [mortgage-backed securities] has led to obstacles to normal credit conditions,” said Mayer.

House Democrats doubled down on their ongoing feud with the head of the Federal Housing Finance Agency this week as they demand answers from the GSE regulator about a previously unknown 2010 Fannie Mae pilot program to forgive borrower’s mortgage debt that was shelved due to what Dems say was a philosophical opposition to loan writedowns.In a letter to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, of the House Committee on Oversight and Reform, accused the agency head of being less than forthright in his response to lawmakers justifying the FHFA’s position against the writedown of underwater GSE mortgages.“The single most significant revelation in your letter to Congress is that, even based on your own questionable assumptions and data, principal reduction programs serve the taxpayer interests even when compared to your preferred alternative of forbearance,” said Cummings and Tierney.

The Federal Housing Finance Agency has made a number of minor but important changes to its existing Freedom of Information Act regulations.On Jan. 31, the Finance Agency published in the Federal Register updates to its FOIA regulations to include the FHFA Office of Inspector General. The FHFA-OIG, which came into existence in October 2010, did not exist when FHFA’s original FOIA regulations were issued in 2009.The FHFA final regulation lists the various revisions to the agency’s 2009 FOIA regulation, as well as describes what information is exempt from disclosure.