The Federal Housing Finance Agency’s Office of Inspector General is attempting to grow the Finance Agency and the OIG itself into a larger-than-necessary entity, and that is a questionable objective given Fannie Mae and Freddie Mac’s “uncertain long-term future,” the FHFA head told lawmakers last week.FHFA Acting Director Edward DeMarco, testifying before the Senate Banking, Housing and Urban Affairs Committee, noted the OIG’s “recurring conclusion” in its recent reports “that the FHFA is understaffed and that it should be more directly engaged day-to-day in the enterprises’ business activities.” That would include independently repeating and validating Fannie and Freddie’s business decisions and calculations.

The Federal Housing Finance Agency earlier this month issued a proposed rule to require the Federal Home Loan Banks to “monitor and assess the eligibility” of each Bank member for access to long-term advances through compliance with the Community Reinvestment Act and the member’s first-time homebuyer standards.To maintain access to FHLBank long-term credit and community investment products, Bank members are required to submit a community support statement to the FHFA every two years to document their CRA performance and record of lending to first-time homebuyers.

Major mortgage servicers are widely expected to agree to principal reduction for some struggling homeowners as part of the price of settling complaints over foreclosure practices brought by state attorneys general. That idea doesn’t sit well with some MBS investors, who are concerned that they will end up paying some of the cost of reducing principal as a way to keep distressed borrowers in their homes. The Association of Mortgage Investors warns that principal reduction of securitized loans would be akin to forcing the middle class to bear the settlement’s burden. In a statement, the AMI warned that principal reductions could...

ABS issuers are scrambling to get a handle on complex new rules to mitigate conflicts of interest in the structured finance market that are being developed by the Securities and Exchange Commission and federal banking regulators. “At the end of the day, we’ll spend lots of time figuring out how to comply,” said Bianca Russo, managing director and associate general counsel at JPMorgan Chase, during a seminar sponsored last week by the American Securitization Forum. “It’s going to be a challenge to comply, however the rules turn out.” Complexity and consistency are...

Legislative proposals for a TBA market backed by non-agency MBS as an alternative to a market driven by government-sponsored enterprises lack precedence and are full of unknowns, according to analysts. “While this is a laudable effort – and a necessary one in order to remove the government’s sup-port from the housing finance market – the extent to which private enterprise will be able to pick up the slack the GSEs leave behind is unknown,” said Benjamin Feldman, a housing policy analyst and advocate. Peter Wallison, an Arthur F. Burns fellow in financial...

A reduction to the Federal Home Loan Bank system’s advance business and investment portfolio would diminish Bank profitability, resulting in a credit negative for U.S. commercial banks, according to a recent report by Moody’s Investors Service. “Limiting access to FHLBank funding would reduce alternative liquidity for U.S. banks,” noted the Moody’s report “A Diminished Federal Home Loan Bank System Would Weaken U.S. Banks.”

For an all too brief moment last week there was bipartisanship on Capitol Hill as exasperated Democrats and Republicans took turns questioning and berating the CEOs of Fannie Mae and Freddie Mac and their regulator surrounding the issue of executive compensation at the two GSEs.Federal Housing Finance Agency Acting Director Edward DeMarco was called before the Senate Banking, Housing and Urban Affairs Committee and the House Committee on Oversight and Government Reform to explain some $13 million in performance bonuses to Fannie CEO Michael Williams and Freddie CEO Charles Haldeman and eight other senior executives at the taxpayer-subsidized firms.

Details about the revised Home Affordable Refinance Program revealed few surprises in the seller-servicer bulletins issued by Fannie Mae and Freddie Mac last week with only a modest expansion in program activity expected.Among the noteworthy revisions under HARP 2.0, Fannie and Freddie have eliminated the existing cap on loan-to-value ratio, relaxed representation and warranty stipulations and reduced loan-level price adjustments for most HARP loans.

Controversy regarding management bonuses at Fannie Mae and Freddie Mac was cited last week as a significant factor for lawmakers’ decision to reinstate temporary higher limits for mortgages insured by the FHA but not for loans backed by the GSEs.The “emergency” high-cost loan conforming loan limits enacted by Congress in 2008 for the GSEs and the FHA expired on Sept. 30, dropping the limit to $625,500 from $729,750.