The Consumer Financial Protection Bureau is on course to spend nearly half a billion dollars in 2013, half of which is projected to be devoted to supervision and enforcement, according to the budget proposal released by the Obama administration this week. The CFPB breaks down its expenditures into three categories, the largest of which is devoted to supervision, enforcement, fair lending and equal opportunity (SEFLEO), with projected funding to exceed the other two categories combined. After spending approximately $60 million in 2011, the SEFLEO bucket is budgeted at $214 million for 2012 and $261...

The already formidable task of replacing the outgoing CEOs at Fannie Mae and Freddie Mac got a little harder this week following swift congressional action to cut compensation levels at the GSEs down to size.Both the House this week and the Senate have approved by overwhelming margins the Stop Trading on Congressional Knowledge Act of 2012, which would bar members of Congress and congressional staff from using non-public, inside information for private gain.While the House version of the STOCK Act is weaker than the Senate’s, both versions retained an amendment sponsored by Sens. John McCain, R-AZ and Jay Rockefeller, D-WV, to prohibit Fannie and Freddie executives from receiving multi-million dollar bonuses while the GSEs remain in federal conservatorship.

Fannie Mae and Freddie Mac’s debt issuance would be accounted for in the calculation of the federal debt under legislation passed by House Republicans this week.Members approved H.R. 3581, the Budget and Accounting Transparency Act of 2012, sponsored by Rep. Scott Garrett, R-NJ, by a 239 to 181 vote. Garrett’s bill is part of a comprehensive package of 10 reform bills House GOP members are pushing to enforce spending controls and oversight of federal spending.“Off-budget liabilities such as government-sponsored enterprises Fannie Mae and Freddie Mac threaten any progress we make towards deficit and debt reduction,” said Garrett, who is vice chairman of the Budget Committee, as well as chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises.

The second most senior Democrat on the House Financial Services Committee has filed a bill that would require Fannie Mae and Freddie Mac to reduce the principal on loans they own or guarantee.The Principal Reduction Act of 2012, H.R. 3841, sponsored by Rep. Maxine Waters, D-CA, would prevent foreclosure of, and provide for the reduction of principal on, mortgages held by the GSEs.Specifically the bill would require Fannie and Freddie to reduce principal to a 90 percent loan-to-value ratio. It would protect taxpayers by requiring shared appreciation of one-third of the profits if the home is sold and it would allow the GSEs to recapture any reduced funds if the loan subsequently defaults and enters foreclosure.

Congress should consider changing the mandate of the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac to address a “conflict of interest” that inhibits the Finance Agency’s supervision of the GSEs, a housing economist told senators this week.Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Columbia School of Business Professor Christopher Mayer said a significant problem with the ongoing operation of the GSEs has been the failure to adequately address operational conflicts.“The evidence suggests that the conflict of interest between the businesses of providing mortgage guarantees and managing a large retained portfolio of mortgages and [mortgage-backed securities] has led to obstacles to normal credit conditions,” said Mayer.

House Democrats doubled down on their ongoing feud with the head of the Federal Housing Finance Agency this week as they demand answers from the GSE regulator about a previously unknown 2010 Fannie Mae pilot program to forgive borrower’s mortgage debt that was shelved due to what Dems say was a philosophical opposition to loan writedowns.In a letter to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, of the House Committee on Oversight and Reform, accused the agency head of being less than forthright in his response to lawmakers justifying the FHFA’s position against the writedown of underwater GSE mortgages.“The single most significant revelation in your letter to Congress is that, even based on your own questionable assumptions and data, principal reduction programs serve the taxpayer interests even when compared to your preferred alternative of forbearance,” said Cummings and Tierney.

Industry insiders are cautiously expressing optimism about widespread reports that the Federal Housing Finance Agency is having second thoughts about implementing its proposed overhaul of mortgage servicing compensation in the face of massive lender pushback.Numerous published reports have fueled the industry’s expectation that the FHFA is working to tactfully back away from proposed alternatives for a government-sponsored enterprise compensation model intended to benefit servicers, consumers and investors.The Finance Agency’s September discussion paper set out two alternatives for changing the current 25 basis-point minimum fee compensation method for mortgage loan servicers. One alternative would reduce the minimum-servicing fee to as low as 12.5 bps payment with a 5 bps reserve fund, and the second alternative would institute a fee-for-service method whereby the loan servicer would be compensated with a flat fee per month for each performing loan they service.

Both Fannie Mae and Freddie Mac retained sizeable shares of mortgage securities with a not insignificant bump during the fourth quarter of 2011, according to a new Inside The GSEs analysis.The GSEs issued a combined $261.6 billion in MBS in the fourth quarter, a 13.0 percent increase from the third quarter.Fannie and Freddie dropped to $852.8 billion in MBS issued for the year, an 11.1 percent decrease in MBS issuance during the January to December period. The GSEs’ issuance represented 72.1 percent of total MBS produced during 2011.Between the two companies, Fannie and Freddie registered an ample 77.1 percent share of new MBS issued during the quarter that ended Dec. 31, 2011, up from the 69.1 percent the two companies held during the third quarter and surpassing the 74.8 percent share both GSEs held during the first quarter.

A Federal judge in Chicago tabled for the moment the Federal Housing Finance Agency’s hopes of a speedy ruling in its favor of its lawsuit to exempt Fannie Mae and Freddie Mac from the city’s new vacant building ordinance, although the judge appears open to hearing the FHFA’s jurisdictional argument.Last month, U.S. District Court Judge Joan Lefkow denied the FHFA’s request for summary judgment in its lawsuit against Chicago while she ordered the city to file its response to the Finance Agency’s litigation.Filed in December, the FHFA’s lawsuit on behalf of the two GSEs seeks to prevent the city from enforcing the ordinance which requires mortgagees to pay a $500 registration fee for vacant properties and requires monthly inspections of mortgage properties to determine if they are vacant.

The five large mortgage servicers that agreed to a $25 billion settlement with 49 state attorneys general this week have already established more than enough reserves to cover their costs, analysts say. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial agreed to pay $20.0 billion in financial relief to homeowners and $5.0 billion to federal and state governments, of which $1.5 billion will be used to compensate some borrowers who have gone through foreclosure. Both the Federal Reserve Board and the Office of the Comptroller of the Currency levied separate monetary penalties...