The supply of mortgage debt outstanding continued to decline in the second quarter of 2011, reaching levels not seen in nearly five years. The Federal Reserve reported that single-family mortgage debt totaled $10.396 trillion as of the end of June, down 0.5 percent from the end of the previous quarter. It marked the 13th consecutive quarterly decline in the mortgage servicing business, which has shrunk by $783.2 billion since peaking in the first quarter of 2008 at $11.179 trillion. The only sector of the market that’s growing is the Ginnie Mae program, where the supply of the agency’s single-family mortgage securities...(Includes one data chart)

The Federal Housing Finance Agency found itself on the defensive this week following a rapid-fire series of highly critical reports issued by its inspector general that questioned the agency’s capacity to oversee Fannie Mae and Freddie Mac effectively, as well as its decisions in specific cases. The FHFA Office of Inspector General said late last week that the FHFA’s examination program, the primary means by which it supervises and regulates the government-sponsored enterprises, faces “capacity and transparency shortfalls.” “The agency has too few examiners to ensure the efficiency and effectiveness of...

Mortgage lenders originated a significantly higher share of new loan applications in 2010 than the year before, helping to offset a steep decline in consumer demand for mortgage credit, according to an Inside Mortgage Finance analysis of recently released Home Mortgage Disclosure Act data. The total volume of mortgage originations reported under HMDA fell 10.2 percent from 2009 to 2010, ending with $1.576 trillion. Although refinance transactions accounted for 67.1 percent of total HMDA originations last year, the refi market bore the brunt of the downturn, with the dollar volume of refinance production...(Includes one data chart)

In a proposal that could reshape the economics and competitive landscape of the mortgage industry, the Federal Housing Finance Agency this week proposed two alternatives for servicing compensation on future Fannie Mae and Freddie Mac business that could end up being the model for the market beyond the government-sponsored enterprises.“As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions,” said FHFA Acting Director Edward DeMarco. “The goal of this joint initiative is to explore alternative models for single-family mortgage servicing compensation that...

Bank of America, in an effort to cut its losses from its 2008 acquisition of Countrywide Financial Corp., is looking to unload its correspondent mortgage business, and is said to be in talks with Nationstar Mortgage Holdings Inc., a unit of private-equity firm Fortress Investment Group. BofA has taken a deep look at its operations in the context of today's marketplace and decided to make some major strategic adjustments, including dumping the correspondent business…

More Needed to Reduce REO Inventory. The National Association of Realtors has called upon HUD, the FHFA and Treasury to create an advisory board to help them explore possible options for unloading real estate owned (REO) properties held by Fannie Mae, Freddie Mac and the FHA. “We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, RI. “This will help stabilize home prices and neighborhoods and help support the broader economic recovery.” The Realtors also recommended the agencies be more aggressive in having loans modified and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure.

New Jersey. In northern New Jersey, 8 percent of mortgages are in foreclosure – twice the share for the United States as a whole, according to a new regional mortgage brief prepared by the Federal Reserve Bank of New York. An additional 4 percent of northern New Jersey mortgages are at least 90 days delinquent, the point at which a foreclosure filing can be initiated. “Combined, 12 percent – or about one in eight mortgages – are seriously delinquent,” the Fed said. “By comparison, the pre-crisis share of mortgages seriously delinquent in this region was less than 2 percent.” But flows of mortgages into foreclosure and delinquency are down from their peak levels, although still considerably up from pre-crisis levels. However, the pool of mortgages already in foreclosure continues to grow because there are more loans entering the foreclosure process than there are loans completing the process each month. Foreclosures are lengthy, often taking many months or even years.

The Consumer Financial Protection Bureau may be making substantial progress on its integrated consumer mortgage disclosure form, but the land title sector is concerned the prototype products generated to date are inadequate when it comes to the disclosure of specific settlement costs. The American Land Title Association told the bureau that the CFPB’s Know Before You Owe project has successfully identified ways to improve the disclosure of loan costs by making them more transparent. However, suggestions for how to disclose some settlement costs, in particular title insurance and attorney fees, have not reached a desired level of transparency and lack the necessary flexibility to avoid consumer confusion.

The U.S. Department of Labor’s Occupational Safety and Health Administration has ordered Bank of America to rehire a Countrywide Financial Corp. employee who led internal investigations that revealed “widespread and pervasive wire, mail and bank fraud involving Countrywide employees” and was later dismissed. The employee alleged that those who attempted to report fraud to Countrywide’s employee relations department suffered persistent retaliation. The employee was fired shortly after Countrywide’s acquisition by BofA.

Among the sensitivities associated with the mortgage industry’s foreclosure struggles, none is more fraught with headline risk and the potential for political pressure than foreclosing on an active-duty servicemember of the U.S. military, a top industry attorney told compliance officials this week. “It’s bad enough when you get it wrong on a regular foreclosure action, but when you get it wrong for one of our servicemembers, that’s really where you’re going to have a reputation killer,” Leah Getlan, assistant general counsel at Capital One, told attendees this week at the Mortgage Bankers Association’s annual regulatory compliance conference in the nation’s capital. “I have seen it from time to time, but thankfully, not that often.”