The Federal Reserve is calling for the design of a large-scale rental program of government-owned foreclosed properties as the best bet to moderate the inflow of unsold homes even as the Federal Housing Finance Agency shapes the eagerly awaited government REO reduction initiative.The Fed white paper, disseminated among the leaders of the Senate Banking and House Financial Services committees last week, recommends that the GSEs work to convert foreclosed properties into rental housing.The paper states that a government-facilitated REO-to-rental program could take many forms.

The Federal Housing Finance Agency is pondering a proposed principal-paydown plan to assist underwater homeowners holding Fannie Mae or Freddie Mac mortgages who have filed for Chapter 13 bankruptcy protection.The plan – based on a proposal pitched to the FHFA in November by Rep. Zoe Lofgren, D-CA, and the National Association of Consumer Bankruptcy Attorneys – would lower a borrower’s mortgage payments under a five-year bankruptcy repayment schedule.An FHFA spokesman confirmed to Inside The GSEs this week that “the NACBA proposal is under discussion” by the Finance Agency but offered no additional details.

Fannie Mae will soon begin offering loan-level data for its single-family mortgage-backed securities to help investors, the GSE announced last week.Fannie said it will post the data files on an enhanced version of PoolTalk, the GSE’s online disclosure application."The first release will provide at issuance loan-level data for newly issued single-family MBS,” explained Fannie. “Subsequent releases aim to enhance the at-issuance file by including additional data elements and to provide updated loan-level data on a monthly basis.” The initial information will be available at the end of the first quarter, followed by monthly reports featuring adjustable-rate mortgage statistics, fixed-rate mortgages, interest-only loans and MBS data, Fannie said.

The Federal Home Loan Banks continue to show an investment preference for Fannie Mae and Freddie Mac mortgage-backed securities during the third quarter of 2011, posting a modest increase from the previous quarter, according to a new analysis by Inside The GSEs based on data from the Federal Housing Finance Agency.Ginnie Mae securities, meanwhile, remained popular within the FHLBank system during the three-month period ending Sept. 30, 2011.GSE MBS accounted for 68.9 percent of combined FHLBank MBS portfolios, up 1.7 percent from the second quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

Congress’ 11th hour decision at the end of last year to fund a temporary tax cut with a decade-long hike in the guarantee fees that Fannie Mae and Freddie Mac charge to offset potential losses from bad loans will likely prolong the intended wind down of the GSEs, making it much harder to untangle the government from the mortgage market, say experts.Late last month, the Federal Housing Finance Agency directed Fannie and Freddie to increase g-fees on new mortgage products by 10 basis points starting April 1.The FHFA’s directive to the GSEs implements the Temporary Payroll Tax Cut Continuation Act of 2011, passed by the House and Senate and signed by President Obama on Dec. 23. The legislation mandates that Fannie and Freddie raise their single-family guarantee fees by “not less than” 10 bps. The provision is scheduled to sunset in 2021.

Banks reported a solid 9.6 percent increase in the volume of home loans sold by their mortgage banking operations during the third quarter, but activity remained at its lowest level since the financial crisis of late 2008. A new Inside Mortgage Trends analysis of call report data reveals that banks sold $248.8 billion of loans through their mortgage banking businesses during the third quarter, rebounding from an especially slow three-month period ending in June. Even with the gain in sales, the third quarter was the second-lowest three-month total since the end of 2008. On a year-to-date basis...

PHH Corp. over the last month has felt the pinch of being the largest mortgage banking business not associated with a depository institution as it faced some setbacks in lining up financing for its operations. The company this week priced a $220 million offering of 6.00 percent convertible senior notes that is being co-managed by JPMorgan Securities and BofA Merrill Lynch. That was up from the $150 million offering originally announced, and PHH gave the underwriters the option to purchase an additional $30 million. PHH will use the money to pay off $250 million of 4.00 percent convertible senior...

Mortgage insurer United Guaranty Corp. says it is offering lenders a high-quality, semi-automated independent file review as their first line of defense against rescission and loan buybacks. Dubbed CoverEdge, the product is essentially a second-look tool developed by UG to catch and fix underwriting errors and identify missing documents to avoid denial of payment claims on mortgages gone bad as well as repurchase demands. CoverEdge’s comprehensive credit and documentation analysis at loan origination and post-closing seeks to avoid misrepresentation and fraud. It also provides a repository...

The Federal Reserve is urging government policy makers to consider more aggressive responses to the housing debacle, including a government-backed program to transform much of the real estate owned overhang into rental housing. In a white paper sent to Congress, the Fed suggested that a government-facilitated REO-to-rental program can boost the housing market and improve loss recoveries on REO. Such a program could take many forms, the Fed noted. “The REO holder could rent the properties directly, sell the properties to a third-party investor who would rent the properties, or enter into a joint...

Demands to repurchase poorly performing mortgages have resulted in a spike in the number of mortgage fraud-related Suspicious Activity Reports (SARs) filed by banks in 2011, according to the Department of the Treasury’s Financial Crimes Enforcement Network. In its 2011 annual report, FinCEN said increased buyback demands by investors have forced large mortgage lenders to conduct additional reviews of loans they originated, resulting in higher SARs filings last year. A review of SAR filings in the first quarter of 2011 found that the number of mortgage fraud reports rose to 25,485, up 31 percent from...