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.

PHH Corp. over the last month has felt the pinch of being the largest mortgage banking business not associated with a depository institution as it faced some setbacks in lining up financing for its operations. The company this week priced a $220 million offering of 6.00 percent convertible senior notes that is being co-managed by JPMorgan Securities and BofA Merrill Lynch. That was up from the $150 million offering originally announced, and PHH gave the underwriters the option to purchase an additional $30 million. PHH will use the money to pay off $250 million of 4.00 percent convertible senior...

Mortgage insurer United Guaranty Corp. says it is offering lenders a high-quality, semi-automated independent file review as their first line of defense against rescission and loan buybacks. Dubbed CoverEdge, the product is essentially a second-look tool developed by UG to catch and fix underwriting errors and identify missing documents to avoid denial of payment claims on mortgages gone bad as well as repurchase demands. CoverEdge’s comprehensive credit and documentation analysis at loan origination and post-closing seeks to avoid misrepresentation and fraud. It also provides a repository...

The Federal Reserve is urging government policy makers to consider more aggressive responses to the housing debacle, including a government-backed program to transform much of the real estate owned overhang into rental housing. In a white paper sent to Congress, the Fed suggested that a government-facilitated REO-to-rental program can boost the housing market and improve loss recoveries on REO. Such a program could take many forms, the Fed noted. “The REO holder could rent the properties directly, sell the properties to a third-party investor who would rent the properties, or enter into a joint...

“The simple way to think about the long view is that we’re five years through a 10-year transition,” said Fannie Mae Chief Economist Doug Duncan during a housing conference sponsored by Fitch Ratings in New York this week. 2012 will be “the year of the political economy,” Duncan said. While the moniker partially refers to the election for the White House, as well as on Capitol Hill, it also points to the number of political decisions this year that will help to determine financial fortunes. Stateside, this year will see the expiration of a number of business and household taxes, from the payroll tax cut to...

It started last week with an unsolicited white paper outlining “a framework for thinking about certain issues and tradeoffs that policymakers might consider” and blossomed into a coordinated assault by the Federal Reserve on the housing slump that won’t go away. Having purchased over $1 trillion in mortgage securities in an effort to drive mortgage interest rates to all-time lows, the Fed appears to be using its speechmaking and paper-writing powers to try to get the rest of Washington moving on housing. In addition to the policy paper, Fed officials in the past week have made three speeches on...

A growing consensus is emerging among legal experts that someone will challenge in court President Obama’s contentious recess appointment of Richard Cordray as the first director of the Consumer Financial Protection Bureau. But a final outcome could take years and have no impact on the agency’s actions while the case is unfolding. “These appointments establish a dangerous precedent that threatens the confirmation process and undermines the system of checks and balances embedded in the Constitution,” a number of House Republicans said in a letter they fired off to the president after he made his...

Fed Governor Sarah Bloom Raskin late last week stumped for creating an effective enforcement system to deal with shortcomings in the mortgage servicing industry that have come to light since the foreclosure crisis, as state officials pressed to expand a potential settlement over past abuses. “The law is not a scarecrow where the birds of prey can seek refuge and perch to plan their next attack,” Raskin said in a speech to a group of attorneys. The Fed governor said it’s important for servicers to have transparent, enforceable and sensible rules, adding that deferring to “standard industry...

Mortgage industry groups are urging the U.S. Supreme Court to pay close attention to the wording of the Fair Housing Act – specifically phrasing that’s not in the 1968 law – in deciding whether fair lending charges can be brought on the basis of disparate impact. In an amicus brief filed in the case of Magner v. Gallagher, mortgage trade groups said the Fair Housing Act “requires proof of intentional discrimination and does not envision a violation based on disparate impact.” The brief was filed by K&L Gates on behalf of the Independent Community Bankers of America, the Consumer Mortgage...