The one-time funding vehicle of defunct and disgraced mortgage servicer Taylor, Bean & Whitaker Mortgage Corp. has asked a bankruptcy court for permission to investigate Freddie Mac and its regulator, the Federal Housing Finance Agency. According to documents filed earlier this month in U.S. Bankruptcy Court in Jacksonville, FL, Ocala Funding LLC wants to examine an $805 million transfer made to Freddie by TBW executives before the servicer collapsed with the goal of recovering assets for its creditors. TBW imploded in 2009 after federal authorities discovered that Taylor Bean defrauded Freddie, among others, to the tune of $3.0 billion. A number of TBW executives were convicted and sent to jail for their part in the fraud scheme, including former owner and CEO Lee Farkas, who was sentenced to 30-years in prison last year.

Fannie Mae is immune from punitive damage claims brought by a former staffer in her wrongful termination suit against the company as long as the GSE is under the conservatorship of the Federal Housing Finance Agency, a federal judge ruled last week. The ruling in the U.S. District Court for the District of Columbia is a major setback for Caroline Herron, a former Fannie vice president who left in 2007 but returned as a consultant in 2009. Herron filed suit against the GSE in June 2010, claiming she was wrongly fired for reporting what she said was Fannie’s mismanagement of the Obama administration’s housing rescue initiatives and grossly wasting public funds.

California remains the top source of new single-family mortgages for Fannie and Freddie, even as Fannie remains the dominant GSE in terms of production through the first half of the year, according to an Inside The GSEs analysis. A total of $132.2 billion of home loans on Golden State properties were securitized by the two GSEs during the first six months of 2012, accounting for 22.9 percent of their total business for the half year. That was up 46.7 percent from total California production during the first six months of 2011 as the overall GSE market rose 38.8 percent from a year ago.

The Federal Housing Finance Agency may pursue its residential mortgage-backed securities legal action against affiliates of Residential Capital LLC, Ally Financial’s defunct mortgage unit, a federal judge has ruled. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied ResCap’s request seeking an automatic bankruptcy stay of its numerous MBS lawsuits, including one filed by the FHFA last year. The FHFA, as GSE conservator, sued UBS Americas in July 2011 alleging that billions of dollars of MBS purchased by Fannie and Freddie were based on offering documents that contained “materially false statements and omissions.”

The Federal Housing Finance Agency should enhance its supervision of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks by taking better advantage of the FHFA’s call report system, a recent audit has concluded. The FHFA’s Office of Inspector General report noted last week that despite requiring the GSEs to enter data into the CRS, the Finance Agency has not “optimized its use of the system” to enhance oversight. “Two FHFA supervisory divisions rarely use CRS in their analysis and oversight of the enterprises,” explained the OIG audit. “Instead, they receive routine submissions of loan-level data and standard management reports containing relevant metrics and data.”

The Federal Housing Finance Agency must improve its risk assessments of Fannie Mae and Freddie Mac’s real estate-owned properties to provide more comprehensive coverage of GSE risk areas, according to an audit by the agency’s official watchdog. In risk assessments of Fannie and Freddie conducted between 2008 and 2011, the FHFA noted that the GSEs’ large REO inventories were a “critical concern” – the agency’s most severe rating. However, the OIG noted that the agency didn’t perform any targeted examinations of Fannie and Freddie’s management and marketing of REO until 2011. Earlier this year, the FHFA completed four targeted examinations focused on GSE REO risks. The first two examinations focused on risks arising from Fannie and Freddie’s use of vendors to manage REO and the other two examinations looked at their efforts to mitigate losses from “problematic properties,” noted the OIG.

The Federal Housing Finance Agency is exploring the possibilities of a streamlined lender-placed or “force-placed” insurance policy between Fannie Mae and Freddie Mac. “FHFA is keenly interested in costs associated with force-placed insurance and related impacts to borrowers, Fannie Mae, Freddie Mac and the taxpayer,” a Finance Agency spokesman told Inside The GSEs. “We are looking at policy related to force-placed insurance to see where there might be opportunities to reduce costs.” Some existing force-placed policies are controversial because they are sold by insurance companies owned by lenders or by insurers with which the lenders have a financial relationship.

Mortgage banking profits remained at very high levels during the second quarter of 2012, although about half the top lenders that have reported results so far said their income was down from the first three months of the year. In many cases, robust production income was offset by persistently high repurchase expenses. A new Inside Mortgage Trends analysis of earnings reports from 21 banks with significant mortgage banking operations revealed...[Includes one data chart]

Compliance management, consumer complaints, fair lending and unfair, deceptive business practices will receive the most scrutiny during supervisory exams of large banks and nonbank financial institutions, according to the Consumer Financial Protection Bureau. Lenders should reevaluate their current policies and procedures for consumer protection even before they are selected for a comprehensive audit by the CFPB, suggested Allison Brown, program manager for mortgage supervision within the bureau’s Office of Nonbank Supervision. Penalties for noncompliance are unclear but noncompliant institutions will be required...

Subsidiaries of Nationstar Mortgage Holdings announced last week that they intended to sell $100 million in senior notes to help fund future acquisitions and transfers of servicing portfolios, including the potential acquisition of certain servicing assets from Residential Capital. The notes were sold this week in a private placement. The notes are a “follow-on” issue to $275 million in senior notes the company issued in April, due in 2019. Nationstar said the additional notes were issued at an offering price of 105.500 percent, they have an effective yield of 8.396 percent and carry a coupon of 9.625 percent per annum, payable semi-annually in arrears, beginning in November 2012. In May, Nationstar announced that it would pay...