With Republicans poised to have control of the White House and Congress early next year there were initially concerns that the incoming Trump administration might ponder the unthinkable: killing the government guarantee on mortgage-backed securities and eventually dismantling Fannie Mae and Freddie Mac. After all, many elected GOP officials blame the two GSEs for the housing crisis (a notion not universally shared, by any means) and would like to eliminate them. The fear was that the vehicle for GSE euthanasia might very well turn out to be a rewrite of Rep. Jeb Hensarling’s (R-TX) “The Protecting American Taxpayers and Homeowners Act” or PATH legislation. Hensarling is also chairman of the House Financial Services Committee.

Fannie Mae and Freddie Mac posted combined net income of $5.53 billion for the third quarter of 2016, representing their strongest cycle since the second quarter of 2015. Despite a mandated declining portfolio, the GSEs are beneficiaries of strong guarantee fees, which help drive income.Freddie more than doubled its net profit from the previous quarter to $2.33 billion. This was the company’s best performance since the $4.17 billion earned in the second quarter of 2015. Freddie attributed the gain to robust g-fee income and a steep reduction in hedging losses. Fannie’s net income was up for the quarter to $3.20 billion, also its strongest since earning $4.64 billion back in the second quarter of last year, and up from...

Freddie Mac’s plan to automate some appraisals next year as part of its representation-and-warranty relief is getting criticism from the Appraisal Institute, which said that it threatens risk-management practices. The GSE recently announced that it will broadly offer a no-cost automated appraisal alternative in early 2017 to “significantly” relieve mortgage lenders from buyback risks stemming from defects on appraisals. Currently, Freddie only offers collateral representation- and-warranty relief in select circumstances. But, in a letter penned to Federal Housing Finance Agency Director Mel Watt, the appraiser group warns, “Freddie Mac’s decision to veer away from fundamental risk management practices appears to harken back to the loan production-driven days in the years leading up to the 2007-2008 financial crisis.”

As home prices have recovered and the end of the year nears, there is talk of whether the conforming loan limits will change for 2017. BlackKnight Financial Services said there is a need for an increase and examined how it could affect mortgage origination volumes. The $417,000 loan limit has remained unchanged for the most part since 2006. The Housing and Economic Recovery Act of 2008 established the baseline loan limit at $417,000, and stipulated that after a period of price declines, the baseline loan limit can’t rise again until home prices return to pre-decline levels. Last November, the Federal Housing Finance Agency determined that the maximum loan limits for the GSEs would remain at existing levels throughout...

Promoting alignment between Fannie Mae and Freddie Mac and the programs offered, versus competition, is a balancing act, according to Bob Ryan, Federal Housing Finance Agency acting deputy director, division of conservatorship. He spoke about the single security during a housing panel sponsored by the Urban Institute and Core Logic last week. Ryan said that it’s important to consider what the implications might be for investors when deciding whether to have the GSEs align or compete in their programs and activities. Freddie is on track to implement the single security in the fourth quarter of 2017, he said. That change will put Freddie’s existing securities on the new platform.

Fannie Mae and SoFi introduced a new loan option last week that lets homeowners take advantage of low rates and use the equity in their home to pay down college loans. Under the Student Loan Payoff ReFi, homeowners can refinance mortgages and cash out while paying down an existing loan balance. Fannie estimates that just 1.8 percent of the cash-out mortgages it finances today are being used to pay off student loans. With cash-out refinances growing, Deutsche Bank said it expects to see refinance activity and mortgage-backed security issuance tick up. The new product is driven by cutting guaranty fees that usually accompany Fannie cash-out mortgages. GSE officials said they received approval...

Fannie Mae and Freddie Mac low-downpayment programs have been in the market for almost two years now but they haven’t been getting a lot of mileage. Although numbers picked up in the third quarter, some say the programs need to be simplified in order to promote more usage. The GSEs purchased $10.31 billion of purchase mortgages with loan-to-value ratios of 96 to 97 percent through Sept. 30, 2016, according to an Inside Mortgage Finance analysis of mortgage-backed securities data. However, nearly half of that came in the third quarter, which saw a 52.7 percent jump from the previous period. Fannie’s HomeReady program and Freddie’s Home Possible Advantage products were designed to help creditworthy, low- and moderate-income buyers.

Fannie Names RPL Winner: Fannie Mae announced this week that Towd Point Master Funding (Ceberus) is the winning bidder for its first reperforming loan sale. The sale included approximately 3,500 loans totaling $789.2 million in unpaid principal balance, split into two pools. Towd won both pools and the transaction is expected to close on Dec. 15, 2016. In collaboration with Citigroup Global Markets Inc., Fannie began marketing these loans to potential bidders on Oct. 11, 2016. The RPL sale is part of its efforts to reduce the size of the GSE’s balance sheet. Bob Ives, vice president of retained portfolio asset management, said, “We are pleased to see a high level of investor interest in our reperforming loans.”

Second-ranked AGNC Investment Corp. – formerly American Capital Agency Corp. – reported a 2.2 percent increase in its MBS holdings under a new management structure…