Fannie Mae and Freddie Mac this week reported a combined $4.74 billion in net income during the third quarter, as the two government-sponsored enterprises avoided taking further draws from the Treasury Department by staying in positive earnings territory. The GSEs’ combined third-quarter income was down 41.7 percent from the previous three-month period, mostly because Fannie’s net income fell 64.6 percent from second-quarter earnings that were pumped up by a $3.04 billion recorded benefit on credit losses. Fannie’s $1.81 billion in third-quarter net income was much more in line with the $2.72 billion it earned in the first three months of the year, as well as Freddie’s recent performance. Freddie reported...

An adverse independent actuarial report on the FHA’s Mutual Mortgage Insurance Fund would set off another round of debate on higher downpayments, tighter credit and increased insurance premiums, along with dire warnings from lawmakers about a potential FHA taxpayer bailout, according to the Mortgage Bankers Association and other industry observers. The annual FHA actuarial review is expected to be released next week and reportedly has troubling news about the state of the MMI Fund, particularly its capital reserve ratio. The strength of the MMI Fund is conveyed through this capital reserve ratio, which has fallen far below its statutory mandate of 2 percent but has still remained positive in the past three annual actuarial reports. The Department of Housing and Urban Development reassured...

Three nonbank mortgage servicers moved to strengthen their positions in the market, but several of the top banks in the industry also showed no sign of backing off, according to the latest ranking by Inside Mortgage Finance. While a number of analysts have predicted that banks would flee from the servicing business because of rising operational costs, increased compliance scrutiny and proposed increases in capital requirements, Wells Fargo continued to grow its business. The company reported a total of $1.879 trillion in servicing as of the end of September, up 0.9 percent from the previous quarter. After absorbing Wachovia’s mortgage operations in the third quarter of 2008, Wells relied...[Includes one data chart]

In the past four years, Ocwen Financial has gone from the 24th-largest residential mortgage servicer with a declining portfolio of distressed mortgages to, on paper, the fifth largest servicer with a portfolio increasing in volume and product type. The growth of the nonbank has involved unique tactics, including a reliance on offshore employees and tax structures. Ocwen handled a $121.8 billion portfolio as of the end of the third quarter, including subservicing, but pending acquisitions of servicing from Residential Capital and Homeward Residential, will push that to $361.7 billion. And Ocwen is...

Mortgage market watchers should expect “business as usual” from a second Obama administration as the White House and Congressional Democrats are poised to preserve gains under the Dodd-Frank Act, including the Consumer Financial Protection Bureau. Both parties say they want to resolve the conservatorships of the government-sponsored enterprises, but experts say the necessity of addressing budget and tax issues will trump all other considerations next year. “Clearly a second term for the Obama administration would be business as usual as best they can,” explained Timothy McTaggart, partner at the Pepper Hamilton law firm during a pre-election webinar. “I don’t think Dodd-Frank will remain sacrosanct for all time. I think during a second term the [regulatory] agencies will get past the point of having to put the rules out, they will get some feedback and they will start making it known where they see gaps or deficiencies.” Karen Shaw Petrou, managing partner of Federal Financial Analytics, said...

MGIC Investment Corp. announced last week it has reached a tentative agreement with Freddie Mac “on substantially all terms of a settlement” of a simmering and prolonged dispute over pool insurance between the mortgage insurer and the government-sponsored enterprise. If MGIC and Freddie are able to agree on matters “significant to final resolution” involving payments to be made to the GSE, it would resolve a coverage dispute that threatened to prevent the MI from backing some loans. “The principal economic terms concerning the amount of payments in settlement of MGIC’s obligations under the policies at issue have been...

The three-month surge in agency MBS issuance appeared to run out of steam in October, as total agency securitization of single-family mortgages dropped 11.4 percent from the previous month, according to a new market analysis and ranking by Inside MBS & ABS. The sharpest decline was in Fannie Mae issuance. The government-sponsored enterprise cranked out $58.92 billion in single-family MBS last month, down 28.4 percent from September’s volume. It marked the lowest monthly production for Fannie since April, when the GSE issued just $46.12 billion in volume. Securitization activity at Freddie Mac was...

Non-agency MBS investors, issuers and the rating services appear to favor a new framework for representations and warranties that would incorporate provisions recently established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac MBS. The new agency framework includes standardized provisions with three-year sunsets for certain repurchase obligations. At the ABS East conference sponsored by Information Management Network in Miami last week, Rebecca Dorian, head of non-agency MBS and ABS trading at Morgan Stanley, said the FHFA’s rep and warrant framework could be scaled for the non-agency market. In fact, she said such standardization is necessary for non-agency MBS. Rep and warrant provisions in pooling and servicing agreements on outstanding non-agency MBS vary...

Look for quality control at both Fannie Mae and Freddie Mac to be a “critical” component of the recently unveiled GSE representation and warranty framework as the first, best method to curb prospective putbacks, a Federal Housing Finance Agency official advises. Maria Fernandez, the FHFA’s associate director of housing and regulatory policy, told attendees of an Inside Mortgage Finance webinar last week that the Finance Agency has heeded the pleas from the industry that QC needed to be done sooner to allow for a clearer understanding of the process.

With third-quarter earnings results right around the corner for Fannie Mae and Freddie Mac, the Federal Housing Finance Agency last week released a revised range of projected draw-downs the GSEs could take from the U.S. Treasury over the next three years. Fannie’s and Freddie’s total taxpayer cash infusion could top as much as $209 billion by the end of 2015 – a “savings” of more than $100 billion from similar projections one year ago, according to the Finance Agency.