The advance business for the 12 Federal Home Loan Banks continued to shrink again in 2011, dropping 12.6 percent from the previous year to $418.2 billion, according to preliminary figures released by the FHLBank Office of Finance. However, advances did increase slightly from the third to the fourth quarter. The overall 2011 decline came through “continued low demand by member institutions resulting from high levels of liquidity in the market, as well as high levels of deposits and low loan demand experienced at member institutions,” the OF explained.

The Federal Housing Finance Agency is proceeding with its initiative to dispose of GSE and government-held real estate-owned properties even as some within the industry question whether such a wide-spread REO program is necessary. Last week, the FHFA announced the first pilot transaction under its REO initiative, which is targeted to the country’s “hardest-hit” metropolitan areas, including Atlanta, Chicago, Las Vegas, Phoenix and parts of Florida.

Fannie Mae announced this week it will soon implement changes to its Lender-Placed Insurance requirements by overseeing the “forced-placed” policies itself instead of allowing banks and other financial institutions to do so. In a departure from current practices, Fannie said it would solicit proposals from insurance companies for its LPI business in an effort to “significantly reduce costs” to homeowners, taxpayers and to the GSE itself.

Fannie Mae said last week that it acted first to end its existing mortgage loan delivery contract with Bank of America because of delays in resolving repurchase issues. The GSE’s account in its quarterly filing with the Securities and Exchange Commission is at odds with BofA’s announcement two weeks ago where the bank announced in its own SEC filing that it has stopped selling to Fannie due to “increasingly inconsistent” repurchase requests by the enterprise compared to past practice.

A month after Congress voted to curtail bonus payments conferred to Fannie Mae and Freddie Mac executives, lawmakers have yet to close the deal and send a final bill to the president’s desk for signature. In early February, both the House and Senate overwhelmingly approved the Stop Trading on Congressional Knowledge Act of 2012, which would bar members of Congress and congressional staff from using non-public, inside information for private gain. While the House version of the STOCK Act is weaker than the Senate’s, both versions retained an amendment sponsored by Sens. John McCain, R-AZ and Jay Rockefeller, D-WV, to prohibit Fannie and Freddie executives from receiving multi-million dollar bonuses while the GSEs remain in federal conservatorship.

Commercial banks and their holding companies reported a small increase in mortgage banking income during the fourth quarter of 2011, but the industry earned far less for the year than it had in 2010. An Inside Mortgage Trends analysis of bank call report data shows that the industry reported $5.58 billion in mortgage banking income during the fourth quarter, up 2.0 percent from the previous three-month period. For the full year, banks posted a combined $5.21 billion in mortgage banking income – an amount that was actually less than the totals in both the third and fourth quarter. In the...(Includes one data chart)

The 12 Federal Home Loan Banks would see an expanded and enhanced role in a post-Fannie/Freddie mortgage market as envisioned by the National Association of Home Builders. The NAHB last week issued its blueprint for housing finance reform that would transition Fannie Mae and Freddie Mac to a new mortgage securitization system for single-family and multifamily conventional mortgages.

The outlook for the private mortgage insurers remains grim as MI companies continued reporting significant operating losses in 2011 and, unless positive factors come into play by mid-2012, time may soon run out for the sector, according to a Standard & Poor’s analysis. As the U.S. economy struggles in recovery, little hope remains for mortgage insurers to begin reporting operating profits by the end of this year, said S&P senior credit analyst Ron Joas. Sluggish employment growth and the depressed housing market have resulted in more delinquencies that pose further...(Includes one data chart)

Discover Financial Services is a few months away from having a residential mortgage component to augment its direct-to-consumer banking business model, thanks to its pending acquisition of LendingTree, a wholly-owned subsidiary of Tree.com Inc., for approximately $55.9 million. LendingTree, otherwise known as Home Loan Center, originates and processes residential mortgages in all 50 states and the District of Columbia, with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first mortgage loans that are secured by residential real...