Fannie Mae’s and Freddie Mac’s recent, unambiguous return to profitability will diminish an already waning urgency among Capitol Hill lawmakers to proceed with legislative GSE reform as the companies’ profits flow into the U.S. Treasury by the billions, industry experts warn. Fannie announced last week that the GSE expects to remain profitable “for the foreseeable future” after posting record-shattering quarterly and yearly earnings for the period ending Dec. 31, 2012. In the wake of Fannie’s announcement, the White House this week said that from January 2013 to the end of 2023 the two GSEs could send $183.3 billion to the Treasury.

Freddie Mac this week hired former Chase Home Finance CEO David Lowman to head its single-family division, where he will help shape the GSE’s policies and programs that affect seller/servicers. Lowman will officially take the post May 20, the company said. Lowman is joining Freddie at a time of rapidly improving earnings. But he also must deal with several key issues facing seller/servicers, namely tight underwriting standards, changing delivery requirements and continued griping over buybacks. One current colleague of Lowman’s amusingly quipped: “I wonder what he thinks about buybacks now?”

The Home Affordable Refinance Program will continue for another two years as the number of HARP refis for deeply underwater borrowers continued to represent a “substantial portion” of total HARP volume in January, the Federal Housing Finance Agency announced this week. HARP had been scheduled to expire at the end of this year before the FHFA’s directive to Fannie Mae and Freddie Mac to extend the program through Dec. 31, 2015. “FHFA determined that extending the program now will provide additional opportunities to refinance, give clear guidance to lenders, and reduce losses for Fannie Mae, Freddie Mac and taxpayers,” said the Finance Agency.

Although Fannie Mae posted stellar – and record – earnings last week, the best is yet to come thanks to a $58.9 billion allowance for “deferred tax assets” the GSE is likely to capture when it releases earnings for the first quarter of 2013, a number that will be revealed some time in May. In its 10-K filing for 2012, Fannie did not absolutely say it will move to capture the DTA allowance in the first quarter, but notes that “if and when the valuation allowance is released, it will be included as income.” The GSE said it did not take the DTA in 2012 because it has not been steadily profitable for a long enough period of time. It noted that the decision was “complicated.”

GSE single-family securitizations rose just under 1.0 percent during the first three months of 2013, compared to the previous quarter, yet it was the single highest level since the second quarter of 2009 as mortgage lenders delivered $355.8 billion in home loans to Fannie Mae’s and Freddie Mac’s securitization programs, according to a new Inside The GSEs analysis. Fannie and Freddie activity peaked in January with GSE volume declining slightly in both February and March. January’s huge increase compared to the previous month may reflect lenders’ intent to hold secondary market sales until the new GSE representation and warranties went into effect on Jan. 1.

The Federal Housing Finance Agency’s oversight of the 12 Federal Home Loan Banks’ growing amount of advances to insurance companies should be improved to include tighter coordination with state regulatory authorities, according to the agency’s official watchdog. The FHFA Office of Inspector General’s recent audit noted FHLBank advances to insurance company members have dramatically increased even as overall advances have declined in recent years. From 2005 through 2012, the volume of FHLBank advances to insurance companies increased “over fourfold” from $11.5 billion to $52.4 billion.

UBS Americas failed in its bid to shut down a lawsuit brought by the Federal Housing Finance Agency in connection with non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac, while in another case three former Freddie executives lost their own bid to dismiss a Securities and Exchange Commission securities fraud case against them. The Second Circuit Court of Appeals last week upheld a lower court’s ruling that denied UBS’ motion to dismiss the FHFA’s suit as time barred. In the summer of 2011, the FHFA filed 18 lawsuits in Manhattan federal court against UBS and other big banks on behalf of the GSEs, alleging violations of the federal Securities Act of 1933 for approximately $200 billion in non-agency MBS sold to Fannie and Freddie.

Fannie Mae and Freddie Mac each received high marks on a relatively easy performance test from the Federal Housing Finance Agency in the GSEs’ compliance with the FHFA’s Conservatorship Scorecard, both companies revealed in their fourth quarter 2012 financial filings with the Securities and Exchange Commission. In March 2012, the FHFA developed, with input from GSE management, the boards of directors and the companies’ compensation committees, a set of performance objectives and directed each firm to implement them. The three strategic goals of the scorecard called for the GSEs to build a new securitization infrastructure, contract Fannie’s and Freddie’s dominant marketplace presence and maintain foreclosure prevention activities and credit availability for new and refinance mortgages.

Mortgage banking remained hugely profitable during the fourth quarter of 2012, but it took a rebound in servicing income to boost overall earnings, according to the most recent quarterly performance report from the Mortgage Bankers Association. The MBA data show that average pretax income for a wide variety of mortgage companies rose 11.1 percent from the third to the fourth quarter of last year, hitting a record $4.71 million. That raised the average firm’s pretax income for all of 2012 to ...

Gain-on-sale margins for mortgage originations declined for lenders during the first quarter of 2013, according to industry analysts, but a number of factors appear likely to keep the margins this year well above historical levels. Core gain-on-sale margins for the major banks fell to 2.9 percent in the first quarter of 2013, according to estimates by Credit Suisse Securities, down from 3.3 percent in the previous quarter and from a high of 3.5 percent in the third quarter of 2012. The analysts warn ...