Fannie Mae and Freddie Mac have taken different positions on how to deal with new seller/servicers that haven’t been approved for very long. While Fannie has set purchase limits on how much production newly approved seller/servicers can sell to the GSE, Freddie Mac has shied away from such caps. A spokesman for Freddie told Inside The GSEs that it treats all its customers equally. “We don’t have a limit on new customers,” he clarified. Lenders must meet the net worth minimum, which is roughly $2.5 million. Fannie Mae, on the other hand, is tying loan sale volume to net worth. The lower a lender’s net worth, the less it can sell to Fannie. According to a recent message posted to Fannie’s website by executive vice president and chief risk officer John Nichols, Fannie placed limits on new customers –primarily nonbanks – because the company saw what it called a “significant shift in the composition of our customer base and the emergence of many new originating institutions with whom we have done little or no business.”

Municipalities determined to follow through with a proposal to use local government eminent domain powers to nullify existing mortgage contracts of underwater borrowers should expect a swift response from the government conservator of Fannie Mae and Freddie Mac, warns an industry insider. Last week, executives of San Bernardino County, CA, voted to reject a proposal to use eminent domain to seize mortgages with negative equity to affect a principal reduction for borrowers. The decision was reportedly based on expert warnings about the destabilizing effect on the housing market such a policy would have, as well as a conspicuous lack of public support.

Fannie Mae and Freddie Mac announced this week that they will further extend the suspension of foreclosure sales and eviction lockouts for borrowers impacted by Hurricane Sandy. Announced in consultation with the Federal Housing Finance Agency, the GSEs’ new 90-day extension applies to homeowners with properties or employment within the Federal Emergency Management Agency (FEMA) declared disaster area that are eligible for individual assistance.

The Federal Housing Finance Agency has settled the first mortgage-backed securities lawsuit with the smallest player in the FHFA’s massive litigation against non-agency MBS issuers and underwriters it says sold toxic MBS to Fannie Mae and Freddie Mac. In papers filed with the U.S. District Court, Southern District of New York, the FHFA “voluntarily dismisses with prejudice” its lawsuit against General Electric Co., ending the legal action in which the Finance Agency had claimed the firm had misled Freddie into purchasing some $549 million of toxic MBS. The terms of the settlement were not disclosed by the FHFA but the agreement also dismissed claims against Morgan Stanley and Credit Suisse as underwriters for the securities. “This settlement resolves the dispute between FHFA, and GE consistent with FHFA’s responsibilities as conservator of Freddie Mac,” said FHFA General Counsel Alfred Pollard in a statement. “FHFA is pleased this lawsuit has been resolved and appreciates the work of Freddie Mac on this matter.” The FHFA filed suit during the summer of 2011 against 18 financial institutions, including GE, alleging violations of the federal Securities Act of 1933. The Finance Agency seeks tens of billions of dollars in damages incurred by the GSEs on purchases of approximately $200 billion in non-agency MBS sold between 2005 and 2007. GE had the smallest legal exposure among the major firms named in the FHFA’s lawsuits as GE’s one-time subsidiary, WMC Mortgage, sold MBS only to Freddie.

New rules set to take effect next month that would permit eligible underwater homeowners holding Fannie Mae and Freddie Mac mortgages to leave behind the home and the remaining loan debt are designed to make the best out of a bad situation, say the GSEs. Starting March 1, GSE servicers will have expanded authority to approve a deed-in-lieu of foreclosure to non-delinquent Fannie or Freddie borrowers who can no longer stay in the home and can demonstrate a “hardship.”Although deed-in-lieu servicing guidelines were issued by Fannie and Freddie in November, a published report this week gave it renewed attention and speculation that the GSEs were letting borrowers off too easily.

The Federal Housing Finance Agency and other government regulators could “permanently enshrine” Fannie Mae, Freddie Mac and other government housing entities “as the only large-scale source of mortgage credit in our country” if they fail to design a new mortgage rule with care, says one senior Republican senator. Sen. Bob Corker, R-TN, a member of the Senate Banking, Housing and Urban Affairs Committee, in a letter last week urged federal regulators to “simplify and synchronize underwriting standards for new mortgage lending rules to avoid permanently regulating the private sector out of the housing finance business.” Corker, in his letter to the FHFA, Federal Reserve, Department of Housing and Urban Development, and the Securities and Exchange Commission, among other agencies, noted that the proposed, but yet to be finalized, “qualified residential mortgage” rule exempts loans sold to Fannie, Freddie and the Federal Housing Administration.

Fannie Mae and Freddie Mac dominated the residential mortgage market to a greater degree in 2012 than the GSEs ever had before, according to a new Inside The GSEs analysis. Fannie and Freddie issued a whopping $1.675 trillion of new single-family mortgage-backed securities last year, which equaled 75.7 percent of total market production. That was up from 72.1 percent in 2011 and just shy of the record 77.0 percent the GSEs recorded back in 2008. It was also the biggest annual output since 2009, when Fannie and Freddie issued $1.776 trillion in new MBS. Although part of the increase in GSE share of new MBS issuance last year resulted from the rapid growth of the Home Affordable Refinance Program, their peak market share for the year came early, during the first quarter. HARP activity was heaviest during the second and third quarters.

A senior House Democrat has again filed legislation seeking a Congressional investigation of Fannie Mae’s and Freddie Mac’s past and present management and decision making authority.Filed by Rep. Marcy Kaptur, D-OH, in mid-January, H.R. 234, The Fannie Mae and Freddie Mac Investigative Commission Act, would empower a Congressional body to “investigate the policies and practices engaged in by officers and directors at Fannie Mae and Freddie Mac responsible for making the decisions that led to the enterprises' financial instability and the subsequent Federal conservatorship” of the two GSEs. The Fannie Mae and Freddie Mac Investigative Commission would be composed of eight lawmakers – appointed by House and Senate leaders from both political parties – to examine the practices, decisions and policies of the two GSEs that affect the financial stability of the mortgage firms.

Mortgage lenders large and small continued to report strong earnings on their mortgage banking operations during the fourth quarter of 2012, but the year that likely will go down as the most profitable in the industry’s history ended on a downslope. A new Inside Mortgage Trends analysis of year-end earnings reports from 23 lenders reveals a staggering combined earnings of $32.74 billion for the full year of 2012. The same group posted an aggregate net income of $5.35 billion, a total ... [Includes one data chart]

There is reason to believe the mortgage banking industry’s record level of profitability may have peaked, as gain-on-sale margins have already begun to slip and more dark clouds appear on the horizon. “Mortgage banks have enjoyed record high gain-on-sale margins over the past several quarters,” analysts at Compass Point Research and Trading noted in a recent market review. They attributed this trend mostly to two primary factors: limited capacity in the mortgage market to handle increased demand and ...