Fannie Mae and Freddie Mac should remain intact, albeit smaller, as a hedge against future market uncertainty and to ensure further destabilization does not occur, according to a white paper issued last week by the Community Mortgage Lenders of America. The CMLA, the first industry trade group to unambiguously endorse retaining the GSEs, made its recommendation in a letter sent to Federal Housing Finance Agency Acting Director Edward DeMarco and Treasury Secretary Timothy Geithner as well as to senior Congressional Democrats and Republicans. “The CMLA believes that the housing industry and the public at large are best served through sensible and calculated reformation of the enterprises that reduces their footprint in the industry while at the same time allowing them to serve their historically critical functions,” said the letter.

The Federal Housing Finance Agency has announced a new senior officer tasked to be the Finance Agency’s point person regarding its strategic plan for Fannie Mae and Freddie Mac. FHFA Acting Director Edward DeMarco two weeks ago appointed Wanda DeLeo as deputy director leading the agency’s newly created Office of Strategic Innovations. The new division will oversee and coordinate the FHFA’s strategic plan for GSE conservatorships. Unveiled in February, the FHFA’s plan outlines the next phase of Fannie and Freddie conservatorships.

Fannie Mae demonstrated measurable progress during 2011 while conditions at Freddie Mac neither worsened nor improved significantly but both GSEs have ample room for improvement, according to a report issued this week by the Federal Housing Finance Agency. The FHFA’s fourth annual Report to Congress deemed the two GSEs “critical supervisory concerns” last year with “continuing credit losses” coming primarily from loans originated during the years 2005 to 2007. The report identified “key challenges facing each company, including the ongoing stress in the nation’s housing markets, the challenging economic environment and the uncertain future facing the enterprises,” noted the FHFA. “However, management and the boards were responsive throughout 2011 to FHFA’s findings and challenges and took appropriate steps to begin resolving identified issues.”

The Federal Housing Finance Agency this week said it is still deliberating writedowns on Fannie Mae and Freddie Mac mortgages as industry insiders aren’t sure what to make of the agency’s recent thumbs up to GSE participation in two state principal reduction programs. Last month, the GSEs – with the FHFA’s blessing – opted to participate in principal reduction programs in California and Nevada. Both programs will use part of the $7.6 billion Hardest Hit Fund to pay down the loans Fannie and Freddie own or guarantee. The FHFA noted that critical directives issued by the GSEs last year cleared the way for participation in such programs as long as the servicers or the GSEs would not have to match those funds.

Berkshire Hathaway and other new bidders are circling around the assets of Residential Capital, setting the stage for a showdown at the Southern District of New York Bankruptcy Court after the court approved the current way the mortgage unit is operating in bankruptcy. In a turn of events that has shaken the stability of ResCap’s initial bankruptcy plan that includes $8.7 billion to settle MBS investor lawsuits, Berkshire Hathaway objected to the current sale procedures in place, which have yet to be approved in court, in lieu of its own offer. The Nebraska-based conglomerate set the wheels in motion...

The Federal Housing Finance Agency should continue projects already underway to create more uniformity in Fannie Mae and Freddie Mac operations and extend those efforts to reduce the liquidity gap in the MBS issued by the two government-sponsored enterprises, a key Wall Street group said. Giving priority to the alignment of Fannie and Freddie operations will “set the stage for the longer-term future of the enterprises and mortgage finance in this country more broadly, including non-agency securitization,” said the Securities Industry and Financial Markets Association. Recent FHFA projects to standardize...

The Department of Housing and Urban Development will sell an estimated 5,000 nonperforming mortgages on the brink of foreclosure in September under an expanded FHA loan-sale program aimed at preventing further growth of the agency’s massive inventory of real estate owned properties. How the deals under the Distressed Asset Stabilization Program will be structured and priced is still not clear. The details are being worked out, said a HUD spokesman. The DASP is an expansion of an FHA pilot program, the Mortgage Acquisition and Disposition Initiative, which began in 2010 and has resulted in the purchase...

The Federal Housing Finance Agency this week proposed to reduce the affordable housing goals for Fannie Mae and Freddie Mac through 2014. The low-income housing goal would be lowered from the current 27 percent to 20 percent, and the very-low-income target would drop slightly, from 8 percent of the government-sponsored enterprises’ business to 7 percent. The agency has not yet calculated the GSEs’ performance on their 2011 affordable housing goals, although un-verified calculations by both companies show that they missed several targets last year. That was also the case in 2010. In 2010, the...

While modifications through the Obama administration’s Making Home Affordable programs have slowed in pace, the now-implemented “Tier 2” expansion may soon increase activity. New activity in the program was down in every category during the first quarter of 2012, according to an Inside Mortgage Finance analysis of Treasury Department data. The number of new trial modifications fell 9.0 percent from the fourth quarter, while new permanent mods were down 21.2 percent. Because a major servicer in January revised the number of trial mods it had offered since the program began, it’s...(Includes one data chart)

Members of Congress are leaning on the Department of Housing and Urban Development to loosen FHA underwriting standards for condominiums, echoing trade group concerns, although most financing for these properties is provided by Fannie Mae and Freddie Mac. The letter from 69 congressmen, which included members from both sides of the aisle, asked HUD to relax guidelines on owner-occupancy limitations which require that at least 50 percent of a building’s units be occupied for borrowers to be eligible for FHA financing. They also want the FHA to ease up on delinquent assessment standards and certification...