Reducing monthly payments to a sustainable level for distressed borrowers who are significantly underwater on their mortgages may require principal reductions, in addition to interest rate concessions and loan term extensions, but pursuing such a policy is not without significant drawbacks, according to a Federal Reserve analysis. In a white paper sent to the banking committees on Capitol Hill last week, the Fed dove into the controversial issue of whether Fannie Mae and Freddie Mac should be taking more aggressive steps like principal reduction to help distressed borrowers and shore up...

Despite lower mortgage rates, MBS prepayment speeds slowed across the board in December, particularly for the recent low coupons, while speeds for higher coupons were up slightly, according to securitization analysts. Researchers varied slightly in their estimates, saying speeds for 30-year Fannie Mae securities slowed 2-6 conditional prepayment rate for the recent low coupons (3.5-4.5 percent from 2011 and 2010). Barclays Capital analysts attributed the slowdown to reduced refinancing activity during the December holiday season. The weighted average CPR for all Fannie Mae MBS declined to...

In a major shake-up of the executive suite, Fannie Mae chief executive Michael Williams announced his resignation this week, effective as soon as the company’s board chooses a successor.Williams’ resignation follows last October’s announcement by Freddie Mac CEO Charles Haldeman that he would step down from the company sometime in 2012.Williams spent 21 years at Fannie in a variety of capacities, most notably as the executive responsible for overseeing the company’s financial restatements, and accounting and control reforms pre-conservatorship and as chief operating officer. In April 2009, he was named CEO.

Fannie Mae and Freddie Mac issued $261.59 billion in single-family mortgage-backed securities during the fourth quarter of 2011, a booming 47.6 percent improvement from a modest third quarter that followed two straight quarterly declines during the first six months of 2011.The recently completed October-December cycle represented the highest quarterly production level of the year, but it still came up 21.2 percent short of the volume generated during the fourth quarter of 2010.For the year, GSE single-family securitizations were down 12.7 percent from the volume generated during 2010.

The Federal Reserve is calling for the design of a large-scale rental program of government-owned foreclosed properties as the best bet to moderate the inflow of unsold homes even as the Federal Housing Finance Agency shapes the eagerly awaited government REO reduction initiative.The Fed white paper, disseminated among the leaders of the Senate Banking and House Financial Services committees last week, recommends that the GSEs work to convert foreclosed properties into rental housing.The paper states that a government-facilitated REO-to-rental program could take many forms.

The Federal Housing Finance Agency is pondering a proposed principal-paydown plan to assist underwater homeowners holding Fannie Mae or Freddie Mac mortgages who have filed for Chapter 13 bankruptcy protection.The plan – based on a proposal pitched to the FHFA in November by Rep. Zoe Lofgren, D-CA, and the National Association of Consumer Bankruptcy Attorneys – would lower a borrower’s mortgage payments under a five-year bankruptcy repayment schedule.An FHFA spokesman confirmed to Inside The GSEs this week that “the NACBA proposal is under discussion” by the Finance Agency but offered no additional details.

Fannie Mae will soon begin offering loan-level data for its single-family mortgage-backed securities to help investors, the GSE announced last week.Fannie said it will post the data files on an enhanced version of PoolTalk, the GSE’s online disclosure application."The first release will provide at issuance loan-level data for newly issued single-family MBS,” explained Fannie. “Subsequent releases aim to enhance the at-issuance file by including additional data elements and to provide updated loan-level data on a monthly basis.” The initial information will be available at the end of the first quarter, followed by monthly reports featuring adjustable-rate mortgage statistics, fixed-rate mortgages, interest-only loans and MBS data, Fannie said.

The Federal Home Loan Banks continue to show an investment preference for Fannie Mae and Freddie Mac mortgage-backed securities during the third quarter of 2011, posting a modest increase from the previous quarter, according to a new analysis by Inside The GSEs based on data from the Federal Housing Finance Agency.Ginnie Mae securities, meanwhile, remained popular within the FHLBank system during the three-month period ending Sept. 30, 2011.GSE MBS accounted for 68.9 percent of combined FHLBank MBS portfolios, up 1.7 percent from the second quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

Congress’ 11th hour decision at the end of last year to fund a temporary tax cut with a decade-long hike in the guarantee fees that Fannie Mae and Freddie Mac charge to offset potential losses from bad loans will likely prolong the intended wind down of the GSEs, making it much harder to untangle the government from the mortgage market, say experts.Late last month, the Federal Housing Finance Agency directed Fannie and Freddie to increase g-fees on new mortgage products by 10 basis points starting April 1.The FHFA’s directive to the GSEs implements the Temporary Payroll Tax Cut Continuation Act of 2011, passed by the House and Senate and signed by President Obama on Dec. 23. The legislation mandates that Fannie and Freddie raise their single-family guarantee fees by “not less than” 10 bps. The provision is scheduled to sunset in 2021.