High-risk mortgages securitized by Fannie Mae and Freddie Mac continued to drag down earnings for the government-sponsored enterprises in the first quarter of 2011, forcing the two GSEs to go deeper into debt to the federal government. Fannie and Freddie lost a combined $13.0 billion on their mortgage-backed security guarantee programs during the first quarter, a significant deterioration from the $6.6 billion the GSEs lost during the previous quarter, according to the Federal Housing Finance Agency’s latest conservatorship report. Since the beginning of 2008 through the first quarter of 2011, Fannie and Freddie have burned through...

The nation’s top mortgage servicers had to submit remedial plans for their foreclosure practices this week as part of their consent agreements with federal banking regulators, after having been granted an extension from the original submission timeline. Some servicers told Inside Mortgage Finance their plans are confidential and couldn’t be released to the public. An official at the Office of the Comptroller of the Currency said there are no plans for the agency to release those plans or to summarize their contents. The affected servicers are...

The Department of Housing and Urban Development is working on a proposed regulation that seeks to harmonize existing standards for determining when a housing practice with a discriminatory impact violates the Fair Housing Act. The proposed rule would cover the liability standards in instances in which a racially neutral housing practice has a discriminatory effect. The disparate impact theory has been used in fair housing cases to allege discriminatory activity when the terms of a business policy are neutral toward protected classes but the policy is shown to have greater impact on minorities or other protected groups. There has been debate over...

A new Inside Mortgage Finance analysis reveals that the proposed qualified residential mortgage standard drafted earlier this year by federal regulators would affect individual mortgage originators in dramatically different ways. As the regulators acknowledged in their proposed rule, a significant share of Fannie Mae and Freddie Mac loans originated through 2009 would not meet new standards for loan-to-value ratios, borrower credit history, debt-to-income ratio and other factors. Most loans being sold to the government-sponsored enterprises under today’s pristine underwriting and pricing policies also would fail to meet the... [Includes one data chart]

Mortgages modified by Fannie Mae slightly outperformed those modified by Freddie Mac in the short term while Freddie’s loans performed moderately better a year after modification, even as the performance of mortgages serviced by the two GSEs improved during the first three months the year, according to the first quarter Mortgage Metrics report issued by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.Fannie loan mods had a 12.5 percent re-default rate three months after modification, while Freddie mods saw a 13.3 percent rate. At the six-month mark, the GSEs tied at 21.4 percent.

The former chairman and owner of Taylor, Bean & Whitaker was slammed with a 30 year prison sentence and ordered to forfeit approximately $38.5 million for his key role in orchestrating a $2.9 billion fraud scheme that led to the failure of TBW and Colonial bank and counted Freddie Mac as among its victims.

Freddie Mac late last week issued its own set of servicing guidelines in keeping with its mandate from the Federal Housing Finance Agency that mirror the guidelines that its fellow GSE Fannie Mae released in June.The FHFA’s Servicing Alignment Initiative, announced in late April, requires Fannie and Freddie to align their servicing requirements in four key areas: borrower contact, delinquency management practices, loan modifications and foreclosure timelines.

Freddie Nears Proposed TBW SettlementFreddie Mac and defunct mortgage servicer Taylor, Bean & Whitaker Mortgage Corp. have entered into a proposed settlement that would grant the GSE an unsecured claim of $1.022 billion that mostly represents past and future repurchase claims.The proposed settlement, filed with the Bankruptcy Court for the Middle District of Florida two weeks ago, would result in a distribution between $40 million to $45 million, which is less than the outstanding repurchase requests, according to Freddie Mac’s filing with the Securities and Exchange Commission.

Another bipartisan bill to overhaul the federal mortgage finance system introduced by two House members this week would eliminate but effectively merge Fannie Mae and Freddie Mac, replacing the two GSEs with a “secondary market facility” that would issue and guarantee mortgage-backed securities.The bill, H.R. 2413, the Secondary Market Facility for Residential Mortgages Act of 2011, would create a single entity, owned by the federal government, that would issue MBS. The MBS would have an explicit government guarantee paid for by a guarantee fee set by the Federal Housing Finance Agency.

Fannie Mae late last week notified its lenders that the GSE has modified its requirements for reporting notifications of mortgage insurance revisions, mortgage insurer-initiated cancellations and claim denials.