The Federal Housing Finance Agency seeks oversight of counterparties that provide services to Fannie Mae, Freddie Mac and the Federal Home Loan Banks, according to its 2017 annual report to Congress published this week. In addition to reporting examination activity, the FHFA offers legislative recommendations. The agency discussed the regulated entities’ heavy involvement with third parties who provide “critical services” supporting the secondary mortgage market. The agency said this includes nonbank mortgage servicers for Fannie Mae and Freddie Mac. And while oversight of these counterparties is important to the safety and soundness of the GSEs, the FHFA argued that oversight can only happen now through contractual provisions.

The GSEs recently released their plans to improve the mortgage process for borrowers who have a limited proficiency of English and some point to disclosures as being a critical element of the plan. The Federal Housing Finance Agency has asked Fannie Mae and Freddie Mac to identify language barrier obstacles for potential borrowers, and come up with possible solutions. The agency’s plan established milestones with start dates this year through 2020. Fannie and Freddie are spending the first half of 2018 defining roles and responsibilities for both a resource clearinghouse and a language access working group consisting of housing representatives to work with consumer groups that support LEP consumers.

GSE shareholder litigation activity continues into mid-year with two new cases being filed in the past week. Joshua Angel, a corporate restructuring lawyer and owner of junior preferred stock, filed a lawsuit this week to sue Fannie Mae, Freddie Mac and their respective board of director members who were serving on Aug. 17, 2012, when the Treasury sweep was formalized. Angel seeks to recover damages from the defendants for his pro-rated share of the $10 billion dividend entitlement loss he and other junior preferred shareholders have incurred to date.

Housing-finance reform may want to take some cues from the mortgage-finance system in Denmark, according to the Federal Reserve Bank of New York in a new report comparing and contrasting the two systems. In fact, the creditor-friendliness of the Danish system means that relatively more price risk is borne by the homeowner. One of the bases for NY Fed’s recommendation is that, unlike in the U.S., the Danish system remained stable and solvent during the 2007-2009 financial crisis. And, despite falling home prices, the Danish system didn’t require government intervention or funding. The authors chose that system because they said it’s most similar to the model in the U.S.

Treasury Official Sees Major Impact from Single Security. A key Treasury Department official suggested that issuers of non-agency MBS may someday participate in the common securitization platform being developed by Fannie Mae and Freddie Mac. Craig Phillips, counselor to the Treasury, said the industry has made a lot of progress toward the launch of the single security that is scheduled for June 2019. “Industry preparedness is about an eight or nine on a scale of 10,” he said during remarks at this week's secondary market conference sponsored by the Mortgage Bankers Association in New York. Phillips characterized the...

Sen. Bob Corker, R-TN, said passing legislation this year “evidently is not going to happen” and his sense is that Fannie Mae and Freddie Mac will stay in conservatorship “for some time.”

Many industry observers are bracing for significant change in the roles of Fannie Mae and Freddie Mac as Congress has failed again to tackle the problem. But some analysts believe the Trump administration will steer away from policy changes that would rile major business constituencies and slow down a major component of the economy.

The FHFA said reviews have helped align GSE prepayment speeds in the past few years while helping to make sure MBS investors’ interest are considered in the equation.

Mike Crapo, R-ID, chairman of the committee, said housing finance reform is one of his top priorities.

A key Treasury Department official suggested that issuers of non-agency MBS may someday participate in the common securitization platform being developed by Fannie Mae and Freddie Mac.