The Federal Deposit Insurance Corp. recently filed a lawsuit against the auditors of Colonial Bank alleging that they could have prevented “enormous losses” suffered by the bank due to fraud by Colonial’s largest mortgage banking customer, Taylor Bean & Whitaker Mortgage. The lawsuit is the first by the FDIC post-crisis against the accountants of a failed bank. Colonial was closed in August 2009 by the Alabama State Banking Department and the FDIC was named as receiver and is now ...

Mortgage bankers posted record profits on their loan origination and secondary market activity during the third quarter of 2012, according to a new Inside Mortgage Trends analysis of earnings reports from a diverse group of 10 lenders. The group, which included the four biggest lenders in the industry and eight of the top 20, reported a combined $5.344 billion in net production income during the third quarter, a record for the group. Production and secondary marketing income ... [Includes one data chart]

A federal judge has allowed legal claims by current and former Fannie Mae employees over their employee stock ownership plan losses to proceed against several company directors including former CEO Daniel Mudd, as well as members of Fannie’s benefits plan committee. Lead plaintiffs Mary Moore and David Gwyer, who brought their claims against Fannie in 2009, seek compensation for losses on company stock that remained in employees’ retirement plans between April 2008 and May 2010. The government took over Fannie in September 2008 and put the GSE into conservatorship.

The Federal Housing Finance Agency so far continues to bat 1.000 in court in its multiple lawsuits against non-agency mortgage-backed securities issuers for allegedly misrepresenting deals that were sold to Fannie Mae and Freddie Mac. This week, Judge Denise Cote of the U.S. District Court for the Southern District of Manhattan rejected motions to dismiss by Goldman Sachs Group Inc. and Deutsche Bank, in the defendants’ latest effort to make the FHFA’s massive legal action go away. In separate motions, Judge Cote rejected Deutsche’s and Goldman’s claims that the FHFA’s allegations are inadequate to support the agency’s claims of fraud.

MGIC Investment Corp. announced last week it will pay Freddie Mac $267.5 million to settle their prolonged dispute over pool mortgage insurance coverage. The settlement was a condition set by the GSE to allow a new unit of MGIC to underwrite mortgages in seven states, though the MI said it won’t sign the deal until Freddie approves MGIC’s newly capitalized unit to write insurance.

The Federal Housing Finance Agency should “immediately withdraw” its proposal to impose additional, upfront guaranty fees on Fannie Mae and Freddie Mac mortgages in states that have unusually slow foreclosure timelines because it unfairly penalizes homeowners with higher costs for forces beyond their control, according to Connecticut’s congressional delegation. The Nutmeg State’s five congressmen and two senators dispatched a letter to the Finance Agency this week urging the FHFA to scrap its proposal issued in September targeting five states – Connecticut, Florida, Illinois, New Jersey and New York – for an additional, one-shot guaranty fee of between 15 and 30 basis points in 2013.

Democrat-sponsored, White House-approved legislation in the Senate to expand the Home Affordable Refinance Program has made the short list of bills to be considered during the post-election, lame-duck session of the 112th Congress. However, industry insiders say its final passage remains a tall order and the proposed HARP 3.0’s ultimate effectiveness is an open question.

Fannie Mae and Freddie Mac announced last week that servicers are permitted to suspend evictions and foreclosures for borrowers affected by Hurricane Sandy for 90 days in order to assess homeowners’ situations. Immediately following the Oct. 28-29 hurricane, the GSEs had reiterated their policy on mortgage relief to borrowers located in jurisdictions declared by the president to be major disaster areas.

Fannie Mae and Freddie Mac each emerged from the third quarter of 2012 with a healthy profit, reporting a combined $4.74 billion in net income, a 41.7 percent decline from the second quarter but still well enough into the black to forgo taxpayer assistance to stay solvent. Fannie’s third quarter net income of $1.81 billion compared to a net loss of $5.1 billion in the same quarter a year ago but much more in line with the $2.72 billion it earned during the first quarter of 2012.

Speculation abounds across Capitol Hill and within mortgage industry circles about how long the “temporary” head of the Federal Housing Finance Agency will remain at his post following the post-election shake out. However, it remains to be seen whether President Obama, flush from re-election, will seek a replacement for FHFA Acting Director Edward DeMarco, either by nominating a permanent agency director to the Senate or by the more politically problematic recess appointment.