The Federal Housing Finance Agency should review the concerns of industry trade groups about Fannie Mae’s plans to reduce the cost of lender “force-placed insurance” and then facilitate a “collaborative resolution” that’s open and transparent, industry groups contend. In a letter to the FHFA earlier this month, the American Bankers Association warned that Fannie’s March 2012 request for proposal inviting insurance companies to compete for the GSEs lender-placed insurance business directly as a way to ensure a significant reduction in insurance costs is rife with unintended consequences to the industry. “The proposal, if adopted, effectively would allow Fannie Mae to pick winners and losers among insurers, would be potentially inconsistent with state insurance requirements and would dramatically alter existing servicing operations, contracts and costs,” noted the ABA. “Such a proposed major reform of the mortgage servicing market should be considered in the sunshine.”

Over the past few weeks mortgage consultants have been discussing a potentially lucrative “request for proposal” issued several months ago that requires outside vendors to aid the Federal Housing Finance Agency in carrying out its “Strategic Plan” for taking the GSEs to the next stage in their evolution. But according to these consultants, interviewed by Inside The GSEs, the fate of this RFP has gone dark with the agency declining to discuss the contract or anything tied to it. An agency spokeswoman told IGSEs that not all agency RFPs are public. A check by IGSEs found that the regulator/conservator of Fannie Mae and Freddie Mac posted just one RFP last year, a project that requires education and training services for what’s called an “executive leadership training” program. The reason the strategic plan RFP has created some buzz in the industry is that it may involve asking a vendor how it might go about merging Fannie and Freddie. However, a copy of the RFP in question – obtained by IGSEs – mentions nothing about a merger of the two, and is worded so generally that it might entail just about any duties.

Analysts at Keefe, Bruyette & Woods noted in a recent report they expect both Fannie Mae and Freddie Mac to sell their real estate-owned properties “more meaningfully” if the GSEs can do so at levels “that are in line with current carrying values on the companies’ balance sheets.” At the end of the third quarter, Fannie held approximately 107,000 REO properties, worth an estimated $16.1 billion, assuming a purchase price of $150,000 per property. Freddie held some 51,000 REOs, equivalent to $7.6 billion assuming the same purchase price. KBW observed that there is room for improvement in how Fannie and Freddie move their REOs. “We believe that the GSEs will be unwilling for political reasons to take meaningful upfront losses to sell REO properties, even if it makes longer-term sense from an economic perspective,” said KBW.

With the official opening of the 113th Congress and the Obama administration’s second term to commence next week, the two key congressional committees overseeing mortgage and housing issues are reorganizing their membership rolls. But it remains to be seen whether lawmakers will be any more successful at advancing legislative GSE reform than during the previous two-year session. As expected, Rep. Jeb Hensarling, R-TX, has assumed the gavel of the House Financial Services Committee, replacing the term-limited former chairman Spencer Bachus, R-AL, who will remain on the committee as chairman emeritus. Rep. Gary Miller, R-CA, will serve as vice chairman of the committee, while Rep. Lynn Westmoreland, R-GA, will serve in the newly created position of committee whip.

The federal judge in charge of overseeing the multiple lawsuits filed by the Federal Housing Finance Agency against non-agency mortgage-backed securities issuers for allegedly misrepresenting deals that were sold to Fannie Mae and Freddie Mac rebuffed yet another motion by one of the banks to shut down the legal action. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of Manhattan rejected a motion to reconsider her December decision allowing the FHFA to proceed on behalf of the GSEs with most of its fraud claims against Ally Financial. On Dec. 19, the judge denied most of Ally’s motion to dismiss, including the defendant’s request that the court strike the demand for punitive damages, finding there were sufficient factual allegations in the FHFA’s complaint to move forward with its fraud complaint.

The Consumer Financial Protection Bureau issued its final rule on mortgage servicing this week, with perhaps the most significant change from the proposed rule being tougher treatment on the servicing industry’s dual tracking practices. However, the bureau threw the industry a few bones along the way. The CFPB decided not to require a single point of contact for distressed borrowers, but will require servicers to have “dedicated staff” to handle borrower concerns with their mortgages, something the bureau refers to as “continuity of contact.” The final rulemaking also essentially pre-empts...

During the final three months of 2012, Fannie Mae and Freddie Mac securitized some $52.72 billion of single-family home loans that were covered by private mortgage insurance, according to a new Inside Mortgage Finance analysis. That total represented 14.4 percent of the business done by the two government-sponsored enterprises during the fourth quarter – although there was significant variation among the GSEs’ top sellers in terms of the share of their deliveries covered by PMI. Some $8.42 billion of PMI-insured mortgages were pooled...[Includes one data chart]

The residential mortgage servicing market continued its incredible shrinking act during the third quarter of 2012, falling below the $10 trillion mark for the first time since early 2006. The Federal Reserve reported that total single-family mortgage debt outstanding declined by 0.9 percent during the third quarter, drifting down to $9.926 trillion. The supply of mortgage servicing has been in a steady decline since peaking at $11.179 trillion in March 2008. The agency servicing market was...[Includes two data charts]

Investment bankers that ply their trade in mortgage finance expect 2013 could turn out to be a strong year for mergers and acquisitions as current players, flush with cash, look to expand their franchises. But according to interviews conducted by Inside Mortgage Finance, “outside” money – including private-equity capital and hedge funds – might finally take the plunge this year as well. “PE firms are definitely looking,” said Chuck Klein, managing partner of Mortgage Banking Solutions. But he also cautions that hedge funds are hardly pushovers as buyers. “Hedge funds do...

Inside Mortgage Finance Publications, Inc. announced this week that it has just settled a major copyright infringement dispute with a large national financial institution for more than one quarter of a million dollars. Without admitting any infringement, liability or wrongdoing, the financial institution agreed to pay IMFP to settle charges that it had violated federal copyright laws by making unauthorized copies of Inside Mortgage Finance. IMFP alleged that the financial institution had engaged in ongoing infringement, distributing infringing copies of dozens of registered issues to a group of non-subscribing employees. “We never like to pursue...