Fannie Mae’s short list to replace its outgoing chief executive has been narrowed down to two finalists – one leading candidate from within and another from outside the company. A source familiar with the inner workings of the company confirms published reports that Timothy Mayopoulos, Fannie’s chief administrative officer and general counsel, is the leading candidate among the GSE’s CEO search party.The company is also looking at S.A. Ibrahim, CEO of Philadelphia-based mortgage insurer Radian Group, as a strong contender for the top job.

It’s far too early for lawmakers to entertain another expansion of the Home Affordable Refinance Program given that the most recent tweak to the program, HARP 2.0, only just recently became fully active, according to the Federal Housing Finance Agency. The FHFA has maintained that HARP 2.0 remains a work in progress given the revamped program’s graduated rollout of changes, but this week the Finance Agency said a proposed bill in the Senate to create HARP 3.0 would only get in the way. “The initial results on the enhanced HARP program show that it is working, and new legislation at this time would slow down that progress,” said FHFA Senior Associate Director for Housing and Regulatory Policy Meg Burns.

The watchdog agency charged with overseeing the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks said it has conducted numerous audits and evaluations of the Federal Housing Finance Agency over the past half-year with more to come in the pipeline. In its semi-annual report to Congress, the FHFA’s Office of Inspector General reiterated its actions during the six-month period ending March 31, including issuing eight audit, evaluation survey and white paper reports, as well as reviewing and commenting on proposed FHFA rules. In keeping with its mandate since it was activated in October 2010, FHFA-OIG said it is “following an ongoing strategy of identifying vulnerabilities and risk areas” in the FHFA and the government-sponsored enterprises.

Eight members of California’s congressional delegation, both Republicans and Democrats, have filed a bill to preclude Golden State foreclosed homes owned by Fannie Mae from being sold to large investors under a fledgling pilot program championed by the GSE’s regulator. Filed last week by Republican Rep. Gary Miller, H.R. 5823, the Saving Taxpayers from Unnecessary GSE Bulk Sale Programs Act of 2012, would prohibit the Federal Housing Finance Agency from implementing its initiative to sell Fannie’s real estate-owned properties to California institutional investors. The bill has the strong backing of both the California Association of Realtors and its Washington, DC-based affiliate, the National Association of Realtors.

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the first quarter of 2012, with a modest increase from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted a decline within the FHLBank system during the first three months of the year. GSE MBS accounted for 70.7 percent of combined FHLBank MBS portfolios, up 2.3 percent from the fourth quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

The Government Accountability Office has cited “opportunities for improvement” in the Federal Housing Finance Agency’s internal controls in a recent report, including a still pending recommendation to beef up the FHFA’s information security controls. Mandated by the Housing and Economic Recovery Act of 2008, the GAO said its audit of the Finance Agency’s fiscal years 2011 and 2010 revealed that the FHFA had not fully implemented its information security program as per GAO’s recommendations in previous reports, resulting in “several new information systems vulnerabilities” over the last year.

A bill filed in the Senate two weeks ago would require mortgage servicers to respond to a short-sale offer within 30 days and make a final decision on acceptance within 60 days of receiving a purchase offer. The Stopping Ongoing Lender Delays (SOLD) Act, S. 3177, sponsored by Sen. Dean Heller, R-NV, would amend the Truth in Lending Act to require servicers to provide prompt responses to homeowners seeking to refinance or “for other purposes” including short sales. “By placing a shot clock on these decisions, it will reduce the amount of time it takes to sell a property, improve the likelihood that the transaction will close, and reduce the number of foreclosures in Nevada and across the country,” Heller said in a Senate floor speech on May 15. “Stability in the housing market is critical for long-term growth.”

Banks earned a record $7.96 billion on their mortgage banking activities during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of bank call reports. First-quarter earnings from mortgage banking were up a whopping 42.8 percent from the fourth quarter of 2011, and they more than double the amount banks earned during the first three months of last year. One factor contributing to the big increase in mortgage banking income was the expansion of the universe of financial institutions that complete the bank call report to include thrifts. The now obsolete...(Includes two data charts)

The housing market remains the one big drag for the overall economy, but home prices may have finally bottomed out in the first quarter of the year and pent-up demand will eventually bring market forces to a decisive tipping point at which time a quick turn-around might occur, according to one analyst. In the current market, challenges remain, perhaps most notably the big disconnect between housing affordability and market demand. “Despite record low mortgage rates, housing demand remains weak,” said Christopher Flanagan, managing director and head of U.S. securitized product research for Bank of...